2017 (9) TMI 1784 - AT - Central Excise

CENVAT credit - expenses incurred to avail input service - eligible to credit or not - sub-section (7A) in Section 11A of CEA - Held that - Perusal of sub-section (7A) of Section 11A and the scheme thereof indicates that a proceedings can be initiated under that section for a particular period for which show cause notice was issued but not for other period. Each period being recognized by law separately for adjudication on its own facts, there cannot be compendium approach by adjudicating authority making a summary approach to act at his will and pleasure - appeal allowed.

Summary

Issues:
1. Eligibility of Cenvat credit for expenses incurred on input services.
2. Validity of show cause notice.
3. Interpretation of sub-section (7A) of Section 11A of the Central Excise Act, 1944.

Analysis:
1. The appellant contended that expenses incurred to avail input services, subject to service tax, are eligible for Cenvat credit. However, the Revenue denied this claim. The Tribunal observed that the show cause notice lacked substance to form a basis for adjudication. Citing precedents like Ballarpur Industries Ltd. and Champdany Industries, the Tribunal emphasized that an ill-founded adjudication results if the show cause notice fails to establish a foundation for the case.

2. The Revenue argued that the Central Excise Act, 1944, was amended to include sub-section (7A) in Section 11A. This sub-section mandates that any subsequent statement issued for a period should be read in conjunction with the show cause notice. The Tribunal analyzed sub-section (7A) and highlighted that proceedings under this section can only be initiated for the specific period mentioned in the show cause notice. Each period is treated distinctly for adjudication purposes, and the adjudicating authority cannot take a summary approach at their discretion. The purpose of sub-section (7A) is to ensure that subsequent statements for the relevant period are considered along with the initial show cause notice to provide a fair opportunity for defense. In this case, the Tribunal found the Revenue's argument baseless as it did not align with the provisions of sub-section (7A).

3. Consequently, the Tribunal allowed the appeal, indicating that the Revenue's contentions were unfounded based on the interpretation of the relevant legal provisions. The decision was dictated and pronounced in open court, bringing the matter to a close with a favorable outcome for the appellant.