2018 (7) TMI 1131 - AT - Service Tax

CENVAT Credit - common input services used for providing taxable as well as exempt services - non-maintenance of separate records - Held that - The clear and literal interpretation when read with Rule 6 (1) and Rule 6(2) CCR is that when the inputs are used for rendering exempted services no Cenvat Credit is allowed. It may however happen that the imports are used in rendering both exempted as well as taxable services, in which event if the register as required is maintained credit, can be taken for quantity of the imports used in rendering the taxable services if records are not maintained, as required, the duty is to be paid in terms of Rule 6(3) - Where the assesse has categorically by way of intimation opted for option provided under 6(3)(ii), CCR then the Revenue cannot insist the assesse to opt for Rule 6(3)(i) - the Adjudicating Authority has failed to interpret Rule 6(3) CCR properly while confirming the impugned demand. Time Limitation - the impugned demand pertains to the period for April, 2009 to September, 2010 and the SCN is dated 19.04.2014 - Held that - The facts were very much in the notice of the Department at least since the admitted letter but as proven on record since the prior letter of 01.05.2009 - there is no apparent suppression of facts or fraud committed on part of appellant as is alleged - Otherwise also, appellant is a public sector bank, there seems no motive to have malafide intentions to evade the payment of service tax - extended period cannot be invoked. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Original confirming demand, interest, and penalty due to non-maintenance of separate records for exempted services and availing cenvat credit.

Analysis:

1. Non-Maintenance of Separate Records:
The appellant, a public sector bank, was providing both taxable and exempted services without maintaining separate accounts for input services. The Department alleged a contravention of Rule 6 Sub Rule 2 (iii) of Cenvat Credit Rules, 2004. The appellant argued that they had intimated the Department about their option under Rule 6(3A) of CCR through a letter dated 01.05.2009. They contended that the Department cannot impose a particular option on them. The Adjudicating Authority confirmed the demand, leading to the present appeal.

2. Interpretation of Rule 6 CCR:
The Department argued that the appellant failed to maintain separate accounts for inputs used in both taxable and exempted services, necessitating payment under Rule 6(3) of CCR. However, the appellant had exercised the option under Rule 6(3) in the absence of proper records. The Tribunal noted that the appellant had the liberty to choose the option, citing precedents where the assesse's choice was upheld. The Tribunal found that the Adjudicating Authority misinterpreted Rule 6(3) CCR, leading to an erroneous confirmation of the demand.

3. Limitation and Suppression of Facts:
The Department issued the Show Cause Notice beyond the prescribed one-year period, invoking the extended limitation period. The Tribunal observed that there was no suppression of facts or fraud by the appellant, as they had intimated the Department about their option well within time. The Tribunal held that the Department was unjustified in invoking the extended limitation period, as there was no apparent malafide intent to evade service tax. Consequently, the Show Cause Notice was deemed time-barred.

Conclusion:
The Tribunal found errors in the Adjudicating Authority's interpretation of the evidence and statutory provisions, ruling in favor of the appellant. The Department's reliance on previous cases was deemed inapplicable, as the alleged suppression of facts was not adequately explained. The Order under challenge was set aside, and the Appeal was allowed, emphasizing the appellant's right to choose the option under Rule 6(3) CCR.