2012 (5) TMI 733 - AT - Central Excise

Summary

Issues involved: CENVAT credit availed by Unit-I for service tax paid on 'Consulting Engineers Service' used for setting up Unit-II, denial of credit by department, suppression of facts, time-barred recovery.

CENVAT credit availed by Unit-I: The appeal was filed by the department challenging the CENVAT credit taken by Unit-I for service tax paid on input service used for setting up Unit-II. The original authority and Commissioner (Appeals) had allowed the credit to Unit-I, but the department objected, arguing that the credit should have been claimed by Unit-II as it was an independent registered manufacturer. The Tribunal found that Unit-I should not have claimed the credit without being a registered input service distributor, and held that the credit was wrongly availed by Unit-I. The nexus between the input service and setting up Unit-II was acknowledged, leading to the conclusion that Unit-II could rightfully claim the CENVAT credit.

Suppression of facts and time-barred recovery: The department issued a show-cause notice in 2009 to recover the CENVAT credit taken by Unit-I in March and May 2007, alleging suppression of facts. The assessee denied the allegation and argued that the demand was time-barred. The original and appellate authorities did not consider the plea of limitation as they had allowed the credit on merits. However, the Tribunal, having ruled against the assessee on merits, directed the original authority to examine the limitation issue and make a decision in accordance with the law and principles of natural justice. The orders of the lower authorities were set aside, and the appeal was remanded for this purpose.