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2018 (10) TMI 1376 - HC - Service TaxCENVAT Credit - ineligible availment of CENVAT Credit - Rule 6 (3B) of the CENVAT Credit Rules, 2004 - no suppression of facts - extended period of limitation - invocation of Section 73(1) of the Act of 1994, read with Rule 14 of the CENVAT Credit Rules, 2004. Held that - The allegation of suppression contained in the impugned show- cause notice against the petitioners, for the purpose of invoking the extended period of limitation, requires consideration. It is a fact which constitutes the assumption of jurisdiction by the respondents. Notwithstanding the existence of statutory alternative remedy, a writ petition directed against a show cause notice is maintainable, if it can be established, after taking the statements made in the impugned show-cause notice to be true and correct, that the same do not constitute requisite facts to assume jurisdiction by the authority issuing the impugned notice. In the facts of the present case, the issue of jurisdiction is a pure question of law. The facts stated in the impugned show-cause notice have to be assumed as correct for the purpose of deciding the issue of jurisdiction. The issue of limitation has to be adjudicated on the same principles, so far as this case is considered. The period of time for which the impugned show-cause notice has been issued overlaps with the period of time for which either a proceeding is pending or stands concluded. The department cannot be allowed to revisit the same issue under the garb of exercise of powers under Section 73 of the Act of 1994. The petitioners are not guilty of omitting or failing to disclose wholly or truly all materials required for verification of the assessment under Section 71. Facts constituting the assumption of jurisdiction under Section 73 of the Act of 1994 are lacking. The impugned show-cause notice is, therefore, without jurisdiction. Petition allowed.
Issues Involved:
1. Validity of the show-cause cum demand notice dated October 18, 2016. 2. Alleged inappropriate availing of CENVAT credit by the petitioners. 3. Invocation of the extended period of limitation by the department. 4. Maintainability of the writ petition in the presence of an alternative statutory remedy. 5. Jurisdiction of the authority issuing the impugned show-cause notice. Detailed Analysis: 1. Validity of the Show-Cause Cum Demand Notice: The petitioners challenged the show-cause cum demand notice issued by the Principal Commissioner of Service Tax-I Commissionerate, Kolkata, dated October 18, 2016. They argued that they had not availed CENVAT credit inappropriately and that their accounting treatment was known to the authorities through various proceedings. They contended that the department could not invoke the extended period of limitation due to the absence of any suppression of facts. 2. Alleged Inappropriate Availing of CENVAT Credit: The petitioners argued that they had complied with Rule 6 (3B) of the CENVAT Credit Rules, 2004, by taking credit to the extent of net 50% of the Service Tax, which was utilized, and reversing the balance 50% credit. The department, however, held that the petitioners were required to pay an amount equal to 50% of the CENVAT credit availed each month, independent of input service, and that the petitioners' contentions were unsubstantiated without supporting proof. 3. Invocation of the Extended Period of Limitation: The respondents invoked the extended period of limitation, alleging that the petitioners intentionally suppressed the fact of Service Tax not paid and irregular CENVAT credit availed. The petitioners contended that the department had knowledge of their accounts through multiple proceedings, and therefore, the invocation of the extended period was unwarranted. The court noted that the allegation of suppression required consideration as it constituted the assumption of jurisdiction by the respondents. Citing previous judgments, the court emphasized that suppression must be willful and with intent to evade duty. 4. Maintainability of the Writ Petition: The respondents argued that the writ petition should not be entertained due to the existence of an alternative statutory remedy. However, the court held that a writ petition is maintainable if it can be established that the impugned show-cause notice lacks jurisdictional facts. The court found that the petitioners had disclosed all materials required for verification under Section 71 of the Finance Act, 1994, and that the period for which the impugned notice was issued overlapped with periods covered by other proceedings. 5. Jurisdiction of the Authority Issuing the Impugned Show-Cause Notice: The court concluded that the facts constituting the assumption of jurisdiction under Section 73 of the Finance Act, 1994, were lacking. The petitioners were not guilty of omitting or failing to disclose all materials required for verification. Consequently, the impugned show-cause notice was deemed to be without jurisdiction. Conclusion: The court quashed the impugned show-cause notice and allowed the writ petition. The authorities were permitted to proceed with the pending proceedings in accordance with the law, without any prejudice from the observations made in this judgment.
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