2018 (1) TMI 473 - AT - Central Excise

CENVAT credit - input services - services used for construction of their factory, by way of expansion - time limitation - Held that - even though the audit was conducted in 2011 and November 2012 and the statement was recorded in May 2013, the department took almost four years to issue the show cause notice in January 2016 - the Commissioner (Appeals), while rejecting the assessee s plea on the point of limitation, did not refer to and examine the various monthly returns filed by the assessee, which according to the Advocate, were placed before him - matter remanded to the original adjudicating authority for verifying the above contention of the assessee and to re-decide the issue - appeal allowed by way of remand.

Summary

Issues: Confirmation of service tax demand by disallowing cenvat credit for construction services; Appeal on the point of limitation regarding the availment of credit.

Analysis:
1. The judgment revolves around the confirmation of a service tax demand amounting to approximately ?8.77 lakhs against the appellant due to the disallowance of cenvat credit for services used in the construction of their factory for expansion between April 2011 to February 2012. The denial of credit was based on an amendment in the definition of input services effective from 1.4.2011, excluding certain services like construction services.

2. The appellant's advocate accepted that the credit was not available post the amendment but contested the order on the grounds of limitation. The appellant claimed that they availed the credit with the knowledge of the Central Excise authorities and properly reflected it in their monthly returns for construction activities. They argued that no mala fides could be attributed to them to invoke a longer period for demand.

3. The Revenue's representative countered the appellant's arguments by referring to the findings of the Commissioner (Appeals). The Commissioner upheld the demand for the extended period under Section 11A of the Act, stating that the audit revealed the construction activities only in November 2012, leading to the issuance of a show cause notice in January 2016. The Commissioner deemed the demand not hit by limitation as the Department was unaware of the construction activities until the audit.

4. The appellate authority acknowledged that the audit uncovered the wrongful credit availed by the appellant based on their records. However, it noted a delay of almost four years from the audit to the issuance of the notice. The authority highlighted that the appellant reflected the credit in their statutory records and returns, indicating no intention to suppress or misstate information. The judgment emphasized that the lower authorities failed to examine the monthly returns submitted by the appellant, leading to the remand of the matter for further verification and redetermination by the original adjudicating authority.

5. Consequently, the appeal was allowed by way of remand, emphasizing the need for a thorough examination of the appellant's contentions regarding the proper reflection of credit in their records and returns. The judgment underscored the importance of considering all relevant evidence before making a decision on the limitation aspect of the case.