2018 (5) TMI 1522 - AT - Service Tax

CENVAT credit - provision of service to SEZ - it was alleged that the appellant irregularly availed CENVAT credit on input service - time limitation - Held that - the entire demand in the present case is time barred. The demand has been confirmed by invoking the extended period. Penalty imposed under Section 78 of the Finance Act was set aside after observing that there is no finding by the original authority that there was any intent to evade payment of service tax by the appellant. In view of this clear cut finding of the Commissioner(Appeals), the extended period cannot be invoked in the present case. Demand barred by limitation - appeal allowed - decided in favor of appellant.

Issues:
1. Appeal against dropping of penalty under Section 78 but upholding demand under Finance Act, 1994.
2. Allegations of irregularly availing CENVAT credit on input service.
3. Invocation of extended period for confirming demand.
4. Appellant's argument on limitation and absence of wilful suppression.
5. Commissioner(Appeals) observations on intent to evade payment of service tax.
6. Appellant's reliance on legal precedents.
7. AR's argument on penalty cancellation and extended period demand.
8. Tribunal's decision on time-barred demand.

Analysis:
1. The appeal was filed against an order dropping the penalty under Section 78 of the Finance Act, 1994, while upholding the demand of specific amounts along with interest. The Commissioner(Appeals) also set aside a portion of the demand related to service tax provision to SEZ for further verification.

2. The case involved allegations of irregularly availing CENVAT credit on input service by the appellants, who were engaged in providing security agency services. The audit raised objections during the period from February 2012 to March 2013, leading to a show-cause notice for violation of Finance Act, 1994 provisions and proposed penalties.

3. The original authority confirmed the demand by invoking the extended period, which was contested by the appellant on grounds of limitation and lack of wilful suppression. The Commissioner(Appeals) modified the original order but did not address the invocation of the extended period explicitly.

4. The appellant argued that the demand was time-barred as there was no wilful suppression, fraud, or intent to evade payment of service tax. Citing legal precedents, including a Supreme Court decision, the appellant contended that the extended period cannot be invoked without specific allegations in the show-cause notice.

5. The Commissioner(Appeals) observed that there was no evidence of intent to evade payment of service tax by the appellant, leading to the dropping of the penalty under Section 78. This finding was crucial in determining the applicability of the extended period for confirming the demand.

6. The appellant relied on legal precedents and decisions, including a Tribunal case, to support the argument that demand under the extended period must be based on clear evidence of intent to evade duty, and failure to do so renders the demand time-barred.

7. The Assistant Commissioner argued that penalty cancellation and the demand under the extended period are separate issues that should be addressed distinctly. Citing specific decisions, the AR contended that misinterpretation of law or wordings should not lead to the demand being considered time-barred.

8. After considering both sides' submissions and the record, the Tribunal held that the entire demand was time-barred. Relying on the Commissioner(Appeals)'s finding of no intent to evade payment of service tax, the Tribunal concluded that the extended period could not be invoked, setting aside the demand and allowing the appeal of the appellant.

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