CA Bimal Jain
In the instant case, Tamilnadu Petroproducts Ltd. (Respondent) was manufacturer of various organic and inorganic chemicals. Upon gathering intelligence, a surprise inspection was conducted in January, 2006 and it was found that the Respondent had used Cenvat credit for payment of the Service tax prior to January 1, 2005 on GTA services. Even though there was no liability for payment of Service tax on transportation services prior to January 1, 2005. Thereafter, the Department has issued SCN proposing to recover the amount representing the Cenvat credit wrongly availed along with interest and also for imposing a penalty by alleging that the only course open to the Respondent was to claim refund and not to make use of Cenvat credit.
The Hon’ble High Court of Madras has held that if, upon a misconception of the legal position, the assessee had paid the tax that he was not liable to pay and such assessee also happens to be an assessee entitled to certain Cenvat credit, the availing of the said benefit cannot be termed as illegal. Hence, the above case was decided in the favour of the Respondent.