2018 (7) TMI 273 - AT - Service Tax

Time Limitation - period involved is from 9/2004 to 3/2009. The Show cause Notice is dt. 09.04.2009 - whether the appeal is time barred? - penalty - CENVAT Credit - common input services used for trading activity - Held that - The appellant was fully aware that they are not eligible for credit on trading activities and did not maintain separate accounts. Therefore, they are not eligible for the credit. They have suppressed the fact that input services were used for trading activity. Taking note of the amendment brought forth in the definition of exempted service w.e.f. 01.04.2011, we cannot deny the fact that there was much confusion as to whether credit can be availed in respect of trading activities. The issue was mired in litigation - also, there is no evidence bringing out any positive act of suppression on the part of the appellants to evade payment of duty - extended period cannot be invoked - For the very same reasons, the penalty relating to the demand for the normal period cannot sustain - demand for the normal period upheld. Appeal allowed in part.

Summary

Issues:
- Eligibility of Cenvat Credit on common input services used for trading activity
- Invocation of the extended period for demanding service tax
- Allegation of suppression of facts by the appellant

Analysis:

Eligibility of Cenvat Credit:
The appellant, engaged in trading LPG cylinders under their brand name, claimed credit on common input services used for trading, storage, and packaging activities. The Original Authority confirmed the recovery of excess Cenvat Credit, alleging the credit availed for trading was ineligible. The appellant argued that confusion existed pre-2011 regarding trading as an exempted service, citing precedents favoring credit eligibility. The Tribunal noted the ongoing litigation and the 2011 amendment clarifying exempted services. Consequently, the demand for the extended period was set aside, as no evidence of intentional evasion was found.

Invocation of Extended Period:
The period under scrutiny ranged from September 2004 to March 2009, with a Show Cause Notice issued in April 2009. The appellant contended the extended period was wrongly invoked due to the eligibility issue. The Tribunal acknowledged the relief granted for services provided to BPCL but emphasized the confusion surrounding credit for trading activities. Given the lack of evidence of deliberate suppression, the extended period demand was deemed unsustainable and set aside.

Suppression of Facts:
The appellant was accused of suppressing the use of input services for trading activities, leading to the imposition of penalties. The appellant argued no intent to evade payment existed, as all details were disclosed to the Department. The Tribunal, considering the interpretational nature of the issue and absence of deliberate evasion, set aside the penalties related to the normal period but upheld the demand for the normal period.

In conclusion, the Tribunal partially allowed the appeal by setting aside the demand for the extended period and penalties for the normal period, while sustaining the demand for the normal period. The decision highlighted the confusion surrounding credit eligibility for trading activities and the absence of evidence supporting intentional evasion.