2017 (8) TMI 111 - AT - Service Tax

CENVAT credit - suppression of facts - whether the appellant had availed inadmissible credit of ₹ 16,27,181/- during the period 2006-2007 to 2009-2010, by suppressing and/or mis-declaration of facts? - extended period of limitation - Held that - even though they have availed credit against various input services, namely, jetty charges, wharfage charges etc., but the same was mentioned under the category of input . Needless to mention inputs and input services are separate categories under which cenvat credit is admissible under the Cenvat Credit Rules, 2004. No plausible and convincing explanation has been furnished in this regard. Cumulatively, considering all these facts, there cannot be any doubt that to escape from the notice of the department, the appellant had taken credit of the service tax paid on various input services, but intentionally the declared it under the heading input in the relevant ST-3 returns. Therefore, the inadmissible credit has been availed by mis-declaration of facts, hence, recoverable from them with interest. As far as carrying out audit on the records and no discrepancies was noticed by the Department, therefore larger period of limitation cannot be invoked. No evidence has been brought on record to show that the visiting audit party had been specifically made aware of the fact of availing of credit on input services which were used in providing trading activity of imported goods. Therefore, the authorities below had rightly confirmed the demand invoking larger period of limitation. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Whether the appellant availed inadmissible credit by suppressing facts.
2. Whether the demand is barred by limitation.
3. Validity of penalty under Section 78 of Finance Act, 1994.

Analysis:

Issue 1:
The appellant, engaged in trading and providing storage services, availed credit on input services for trading activity but utilized it for service tax liability on storage services. The contention was whether there was suppression in availing credit. The appellant argued no suppression as credit was reflected in returns. However, the Tribunal found mis-declaration as credit was wrongly categorized under 'input'. The judgment cited precedents to support the conclusion that intentional mis-declaration led to inadmissible credit, thus recoverable with interest.

Issue 2:
Regarding limitation, the appellant claimed the demand was time-barred since no irregularity was pointed out during an audit in 2006. The Revenue argued intentional availing of credit and mis-declaration warranted invoking the extended period. The Tribunal held that lack of evidence showing audit awareness of credit availed for trading supported invoking the extended period. Citing a Bombay High Court judgment, it rejected the limitation defense.

Issue 3:
The penalty under Section 78 of the Finance Act, 1994 was challenged for not being alleged in the notice. The Tribunal agreed, setting aside the penalty as it was not properly notified. The judgment highlighted the necessity of proper allegations for imposing penalties. Consequently, the penalty under Section 78 was revoked, and the appeal was partly allowed on this ground.

In conclusion, the Tribunal upheld the demand for inadmissible credit due to intentional mis-declaration, rejected the limitation defense, and revoked the penalty under Section 78 for lack of proper notification. The judgment emphasized the importance of accurate categorization and disclosure of credits in returns to avoid misinterpretation and penalties.