2011 (2) TMI 187 - AT - Service Tax

Demand - Commercial or Industrial Construction Services - rule 6(3)(c) of Cenvat Credit Rules, 2004 - it is seen that the issue of non-taxability of laying down of water pipelines was raised for the first time by the appellant s jurisdictional superintendent under the cover of his letter dated 16-1-2006, as a result of audit objection - No other evidence has been adduced in the show-cause notice regarding non-maintenance of the separate accounts - If no separate account was maintained it was not possible to find out as to how much credit stands availed in respect of the project under consideration - Held that Cenvat credit accounts were being maintained project-wise and in which case, the question of invocation of rule 6(3)(c) of the Cenvat Credit Rules does not arise - the appeal filed by the revenue is rejected

Summary

Issues:
1. Taxability of services provided by the appellant under the category of Commercial or Industrial Construction Services.
2. Validity of invoking the extended period of limitation for raising a demand.
3. Maintenance of separate accounts for utilization of Cenvat credit under rule 6(3)(c) of the Cenvat Credit Rules, 2004.

Issue 1: Taxability of services provided by the appellant under the category of Commercial or Industrial Construction Services:
The appellant, engaged in providing various services including Commercial and Industrial Construction Services, was awarded a contract to lay pipelines for a government project. The revenue contended that laying down pipelines for a government entity charging subsidized rates did not qualify as a taxable service. The Commissioner upheld this view, leading to a demand for excess Modvat credit availed by the appellant. However, the appellant argued that similar services by other assessees were considered taxable by the revenue, creating inconsistency. The appellant highlighted that they had paid service tax and filed returns, with audit objections raised and later closed. The appellant also referred to a Board Circular indicating doubts on taxability, questioning the invocation of the extended period of limitation for the demand.

Issue 2: Validity of invoking the extended period of limitation for raising a demand:
The appellant contended that the demand raised beyond the limitation period was unjustified, as they had paid service tax, filed returns, and responded to audit objections during the relevant period. The Tribunal agreed, finding no evidence of mala fide intent to evade duty payment. The Tribunal emphasized that the demand within the limitation period needed to be confirmed, while the penalty was set aside due to the absence of mala fide actions by the appellant.

Issue 3: Maintenance of separate accounts for utilization of Cenvat credit under rule 6(3)(c) of the Cenvat Credit Rules, 2004:
The Commissioner found that the appellant maintained separate project-wise accounts, as evidenced by the clear mention of Cenvat credit details in the show-cause notice. The Tribunal upheld this finding, noting that the revenue had extracted credit information from project-specific accounts. As separate accounts were maintained, rule 6(3)(c) of the Cenvat Credit Rules, limiting credit utilization to 20%, was deemed inapplicable. Consequently, the appeal filed by the revenue on this matter was rejected.

In conclusion, the Tribunal ruled in favor of the appellant on the limitation issue, set aside the penalty, and rejected the revenue's appeal regarding the maintenance of separate accounts for Cenvat credit utilization. The judgment highlighted the importance of consistent tax treatment by the revenue and the need for clear evidence to support demands raised beyond the limitation period.