2016 (7) TMI 1143 - AT - Central Excise

CENVAT credit on construction activities denied - denial is only for the road which extends beyond the plant area and upto the main public road - Extended period invoked - Held that - As find that these are inter-connected roads on which the appellants spent money for construction and accordingly, had bonafide belief of eligibility of credit on such activity without the distinction for inside the plant and or outside the factory gate. In such circumstances, the allegation of suppression or willful misstatement etc. cannot survive. Further, it is an admitted fact the credits availed were all entered in their records and were figuring in the statutory returns also. The lower authorities have also allowed substantial portion of credit on the same activity insofar as it relates to the road inside the factory gate. Considering the above factual position and legal interpretation involved in this case, find that the demand for extended period cannot be sustained. Accordingly, the impugned order is set aside on this ground. - Decided in favour of assessee.

Summary

Issues: Appeal against denial of cenvat credit on service tax paid for construction of bitumen road connecting factory gate to main public road and time bar issue.

Analysis:
1. Issue of cenvat credit denial: The appellant, engaged in manufacturing lead zinc concentrates, zinc cathode, and sulphuric acid, availed cenvat credit on input services, including service tax paid for constructing a bitumen road inside and outside the factory premises. The Revenue contended that cenvat credit of ?4,25,091/- for the road connecting the factory gate to the main public road was not eligible. The Original Authority allowed credit of ?3,09,893/- but denied the remaining amount, imposing a penalty. The Commissioner (Appeals) upheld the original order, leading to the appellant's appeal. The appellant argued that the connecting road was essential for their operations and fell under the definition of "Input Services" as per Rule 2(l) of Cenvat Credit Rules, 2004. The Tribunal found the appellant's case arguable, ruling that the denial of credit based solely on the time bar was not justified. The lower authorities had allowed credit for the road inside the plant area, and the denial for the road connecting to the public road was not sustainable, as both roads were inter-connected and the appellant had a genuine belief in the eligibility of credit for the construction activities.

2. Time bar issue: The Tribunal noted that the denial of cenvat credit based solely on the time bar was not valid. The appellant had recorded all credits in their records and statutory returns, indicating no suppression or willful misstatement. The lower authorities had also allowed a significant portion of credit for the same activity related to the road inside the factory gate. Considering the factual and legal aspects of the case, the Tribunal concluded that the demand for an extended period could not be upheld. Consequently, the impugned order was set aside, and the appeal was allowed.

In summary, the Tribunal allowed the appeal, overturning the denial of cenvat credit on the service tax paid for the construction of a bitumen road connecting the factory gate to the main public road. The decision was based on the inter-connected nature of the roads, the appellant's genuine belief in the eligibility of credit, and the lack of justification for the denial based solely on the time bar.