2013 (7) TMI 188 - AT - Central Excise

Cenvat Credit - input service - manufacturer having one factory and setting up the second factory - Period of limitation - Credit was taken in unit-1 whereas service was received in unit-2 Credit denied Held that - In any case it cannot be said that there was suppression of facts since the assessee was not required to intimate these details - As regards misdeclaration there is no intention to evade duty as emerging from the facts and circumstances of the case - on the ground of limitation the demand for CENVAT credit cannot be sustained and consequently the impugned order also cannot be sustained.Decided in favor of Assessee.

Summary

Issues involved:
1. Admissibility of CENVAT credit on service tax for works contracts and consultancy fee.
2. Correct unit for availing CENVAT credit.
3. Invocation of extended period for issuing show-cause notice.
4. Consideration of merits by lower authorities.
5. Time limitation for issuing show-cause notice.

Analysis:

Admissibility of CENVAT credit:
The appellant, engaged in manufacturing CRGO transformer core, availed CENVAT credit on service tax for works contracts and consultancy fee. The issue arose when it was questioned if the credit should have been taken in unit-2 instead of unit-1. The appellant argued that the credit could have been taken in unit-1 as well, as the definition of 'input service' allows for credit on services used for setting up a factory. The Tribunal noted that the appellant utilized the services for setting up unit-2 and could have correctly taken credit in unit-1 due to having one factory and setting up a second one. The lower authorities did not consider the issue properly, leading to confusion regarding the correct unit for availing the credit.

Invocation of extended period:
The extended period for issuing the show-cause notice was invoked based on the denial of admissibility of credit by the lower authorities. However, it was argued that there was no intention to evade duty, and the show-cause notice was issued beyond the permissible time limit. The Tribunal emphasized that the show-cause notice was time-barred as the credits were taken in June and October 2008, while the notice was issued in March 2010. The invocation of the extended period was deemed unsustainable due to the lack of suppression of facts or intention to evade duty.

Consideration of merits:
The lower authorities did not properly consider the issue of admissibility of credit in relation to the manufacture of final products or the construction of the factory. The Tribunal highlighted that the service used for setting up unit-2 should have been credited to that unit, even though the appellant had two factories with separate registrations. The failure to analyze the situation correctly led to confusion regarding the correct unit for availing the credit.

Time limitation for show-cause notice:
The Tribunal concluded that the demand for CENVAT credit could not be sustained due to the time limitation for issuing the show-cause notice. As the notice was time-barred, the impugned order was set aside, providing relief to the appellants. It was clarified that if the credit was reversed in unit-1 and taken in unit-2, no further action by the Revenue would be necessary.

In conclusion, the judgment focused on the correct unit for availing CENVAT credit, the invocation of the extended period for issuing the show-cause notice, the proper consideration of merits by the lower authorities, and the time limitation for issuing the notice. The Tribunal emphasized the importance of adhering to the legal provisions and timelines while determining the admissibility of credit and providing relief to the appellants based on the limitations of the law.