2018 (5) TMI 1506 - AT - Central Excise

CENVAT credit - input service distribution - common input services for manufacturing and trading activity - non-maintenance of separate records - Extended period of limitation - Held that - Hon ble Madras High Court in the case of FL Smidth Pvt. Ltd. 2014 (12) TMI 699 - MADRAS HIGH COURT has also upheld the decision of the Tribunal invoking the extended period of limitation on the ground that the assessee has not disclosed the availment of input service credit in respect of trading activities. Hon ble Madras High Court in the case of Ruchika Global Interlinks 2017 (6) TMI 635 - MADRAS HIGH COURT has held that inclusion in explanation to Rule 2(e) viz. trading was without doubt only clarificatory but the same is applicable retrospectively. Appeal dismissed - decided against appellant.

Summary

Issues: Extended period of limitation for raising demand, eligibility of input service tax credit on trading activities, suppression of facts by the appellant, retrospective application of clarificatory amendments.

Extended period of limitation: The appellant argued that the demand raised beyond the normal limitation period was not sustainable, citing judgments from the Madras High Court and previous tribunal decisions. The appellant contended that there was no suppression of facts, and the Department wrongly invoked the extended period. However, the Department defended the invocation, stating that the appellant suppressed facts detected during an audit. The Tribunal found no infirmity in invoking the extended period, supported by the Madras High Court's decision in a similar case and previous tribunal rulings.

Eligibility of input service tax credit on trading activities: The appellant acknowledged that trading was considered an exempted service, even before a specific amendment. The appellant argued that the demand related to a period before the amendment and the show-cause notice was time-barred. The Department argued that trading could not be considered a service or an exempted service, citing tribunal decisions. The Tribunal upheld the Department's view, stating that until the amendment, trading was not an exempted service, and the extended period was correctly invoked due to the appellant's use of input service credit for trading activities.

Suppression of facts: The Department claimed that the appellant's use of input service credit for trading activities amounted to a suppression of facts, justifying the extended period of limitation. The Tribunal agreed with the Department, emphasizing that trading activities did not fall under taxable or exempted services until the relevant amendment. The Tribunal cited previous decisions to support the view that trading was not considered a service or an exempted service, leading to the dismissal of the appellant's appeal.

Retrospective application of clarificatory amendments: The Tribunal referenced the Madras High Court's decision, stating that the inclusion of trading in the explanation to Rule 2(e) was clarificatory and applied retrospectively. The Tribunal also highlighted previous tribunal decisions supporting the view that trading could not be considered a service or an exempted service before the relevant amendment. Based on these interpretations, the Tribunal upheld the impugned order and dismissed the appellant's appeal.