2017 (10) TMI 786 - AT - Central Excise

CENVAT credit - input services - management consultancy services - extended period of limitation - Held that - the management consultancy service was taken for all the plants but one of the plant i.e. ARP was abandoned on 01/03/2011 and during the audit in 2010-11, an objection was raised by the Department that the appellant has availed irregular credit but thereafter no show-cause notice was issued till 01/08/2014, which is beyond the period of limitation of one year. The CENVAT credit once rightly availed is indefeasible and subsequent development of abandoning of plant will not make the appellant liable to reverse the CENVAT credit which was rightly availed by them. Further, the appellants have been filing the ER1 returns regularly in which they were showing the CENVAT credit availed by them and invoking the extended period of limitation in the facts and circumstances of this case is not legal and unsustainable - The credit was rightly availed during the period 2005-07 for the purpose of availing the management consultancy service received by the appellant during the said period. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of demand for irregular CENVAT credit availed under CCR read with CEA.

Analysis:
The appellant, engaged in manufacturing Titanium Dioxide, Sulphuric Acid, and Potassium Titanate, availed CENVAT credit on input services. The Commissioner confirmed a demand of ?7,48,587 out of ?50,58,381 for wrongly availed credit on input services. The appellant argued that consultancy services for plant modernization were eligible for credit as per CCR, 2004. They contended that the credit was correctly taken and utilized, and expenditure for the Acid Recovery Plant related to the parent plant. The appellant cited precedents to support their position.

The appellant further argued that subsequent developments after availing the credit should not affect the credit already taken, citing legal precedents. They claimed no suppression as they regularly filed ER-1 returns. The appellant opposed the extended period of limitation invocation, stating the demand was based on an audit objection from 2010-11, with no intention to evade tax. They argued that provisions for remission of duty were not applicable.

The Revenue reiterated findings that the project was abandoned due to financial crisis, and the appellant suppressed this fact. They justified invoking the extended period of limitation due to suppression by the appellant. The Revenue claimed the appellant failed to reverse the service tax credit upon project abandonment.

After considering submissions, the Tribunal found the demand time-barred, as the credit was rightly availed during 2005-07, and subsequent developments did not invalidate it. The Tribunal held that the appellant's regular filing of ER1 returns and the lack of intention to evade tax made the extended limitation period unsustainable. The Tribunal set aside the impugned order, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, holding the demand as time-barred and unsustainable in law, setting aside the Commissioner's order.