2016 (7) TMI 896 - AT - Central Excise

Extended period of limitation - Suppression of facts - Demand based on subsequent department audit - Cenvat Credit - input services - credit of service tax availed on construction service of staff quarters, school building and hospital building during 2008-09 to 2010-2011 - Nexus with manufacturing activity - Held that - Even if it is so, if the appellant take credit, which is disputable, that by itself, will not form basis for invoking fraud, etc. Further, two different audits have been conducted. Initially, certain service tax credits for the year 2008-09 were sought to be denied. Thereafter, based on another audit report, further service tax credits were sought to be denied which covered the said period also. The earlier demand was on the maintenance of these buildings whereas the latter demand was on construction of these buildings. The credits taken by the appellants were reflected in the statutory records. If such credits were not available in the records, the question of their being pointed out by the audit does not arise. Further, ld. Commissioner (Appeals) examined the question of time bar with reference to time period between the knowledge of the department and issue of demand and held that knowledge of the department is not relevant to decide the relevant date. As mentioned earlier, the demand for the period 2008-2009 to 2010-2011 has been issued on 10.12.2012.On this basic fact, which is not disputed, the time bar has to be applied. No tenable reason has been recorded by the lower authorities for invoking extended period of demand in this case. In the present case, the appellant availed credits under the belief that these are rightly eligible to them. No element of fraud or suppression or mis-statement could be brought out by the Revenue in the present case. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Eligibility of service tax credit on construction services.
2. Invocation of extended period of demand under Section 11 A of the Central Excise Act, 1944.

Analysis:
1. The appellants, engaged in manufacturing aluminum, availed cenvat credit on construction services of staff quarters, school building, and hospital building. The Original Authority confirmed the demand and imposed a penalty, upheld by the Commissioner (Appeals). The appellant contended eligibility for service tax credit on these transactions and raised a strong objection on the grounds of time bar under Section 11 A. The appellant argued that the demand was beyond the normal period, lacking justifiable reasons for invoking the extended period. It was highlighted that regular statutory returns were filed, audits conducted, and no material facts were suppressed. The department alleged that the appellants knowingly took ineligible credit, justifying the extended period. The AR reiterated the findings, asserting the credits were not available to the appellants, and the invocation of the extended period was legally correct.

2. The Tribunal examined the time limit prescribed under Section 11 A as the primary issue. The appellants maintained regular statutory returns and filed cenvat credit registers, with audits pointing out alleged ineligible credits. The department initiated proceedings based on audit reports, including a Special Audit Report from earlier. To invoke the extended period, evidence of fraud, collusion, willful misstatement, or suppression of facts must be provided. The Tribunal found a lack of tangible evidence supporting any of these elements, rendering the demand barred by limitation. The show cause notice failed to substantiate the grounds for invoking the extended period, and the Commissioner (Appeals) incorrectly assessed the time bar, leading to the appeal being allowed on the grounds of limitation.

3. The Tribunal referenced legal precedents emphasizing that mere failure to declare does not constitute willful misdeclaration or suppression. It was highlighted that suppression of facts entails deliberately withholding correct information to evade duty payment. In the present case, the appellant believed the credits were rightly eligible, and no element of fraud, suppression, or misstatement was proven by the Revenue. Citing relevant case law, the Tribunal concluded that the demand against the appellant was hit by limitation, setting aside the impugned order solely on this ground and allowing the appeal.