2017 (9) TMI 444 - AT - Central Excise

CENVAT credit - outward transportation of waste chemical - Held that - From the audit report it is very clear that the audit team had under taken audit of CENVAT credit availed by the appellant in the case in hand means would includes the period wherein disputed CENVAT credit was availed i.e., May, 2010 to July, 2010. There is no audit objection raised on the point of availment of CENVAT credit of tax paid on outward transportation under GTA services - reliance placed in the decision in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-I Versus MTR FOODS LIMITED 2012 (10) TMI 165 - KARNATAKA HIGH COURT , where it was held that In the returns it is clearly mentioned that they availed credit under the aforesaid rules. The audit partly accepted the same - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of CENVAT credit on service tax paid for outward transportation of waste chemical during manufacturing of sulphuric acid.

Analysis:
The appeal challenged the denial of CENVAT credit on service tax paid for outward transportation of waste chemical arising during the manufacture of sulphuric acid. The Central Excise Department observed the credit was not entitled to the appellants, leading to the denial of credit and imposition of a penalty. The First Appellate Authority upheld this decision after due process, prompting the appeal. The appellant argued that the denial of credit was not valid as they cleared waste from the manufacturing process, not finished goods, and thus the credit should be allowed. Additionally, the appellant contended that the show cause notice was time-barred, as the audit objection leading to it was based on a subsequent audit, not the initial audit where no objections were raised.

Upon careful consideration, the appellate tribunal focused on the issue of limitation. The audit reports indicated that the audit team had reviewed the records, including the period in question when the disputed CENVAT credit was availed. The first audit did not raise any objections to the credit availed on outward transportation under GTA services. The tribunal agreed with the appellant's argument that the show cause notice, relying on the second audit note for the extended period, was time-barred. Citing a judgment of the Hon'ble High Court of Karnataka, the tribunal emphasized that when returns were promptly filed, and the mistake was noticed only in a subsequent audit, the conditions to extend the limitation period were not met. Therefore, the impugned order denying the credit and imposing a penalty was deemed unsustainable and set aside. The tribunal allowed the appeal, overturning the earlier decisions.