2019 (1) TMI 903 - AT - Central Excise

CENVAT Credit - input services - services used in the employee hostel and other repairs and maintenance in the plant - Held that - Major part of the credit relates to repair and maintenance which is definitely admissible as cenvat credit and is not excludible under the exclusion clause Rule 2(l) for the purpose of civil construction - credit allowed. Validity of SCN - invocation of extended period of limitation - Held that - From the allegations in the show cause notice it is evident that the appellant had maintained proper records, filed timely returns no case of concealment or contumacious conduct is made out - the extended period of limitation is not invocable - penalty also set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the show cause notice was rightly issued invoking the extended period of limitation.
- Admissibility of Cenvat Credit for input services.
- Applicability of interest on the amount not utilized.
- Upholding of demand and invoking extended period of limitation.
- Reduction of penalty based on proper record maintenance.

Analysis:
1. Extended Period of Limitation:
The issue revolved around the correctness of invoking the extended period of limitation in the show cause notice. The appellant contended that the transaction was duly recorded in their books of accounts, and they had maintained proper records and filed timely returns. The judge held that there was no concealment or contumacious conduct on the part of the appellant, and thus, the extended period of limitation was not applicable. Consequently, the penalty imposed under Rule 15 of CCR 2004 was set aside.

2. Admissibility of Cenvat Credit:
The appellant had taken Cenvat Credit of input services for employee hostel and plant repairs and maintenance. The audit raised objections, and the appellant reversed the credit. The show cause notice alleged inadmissible credit utilization and intent to evade payment of Central Excise Duty. However, the judge found that a major part of the credit related to repair and maintenance, which is admissible as Cenvat credit and not excludable under the exclusion clause. Therefore, the demand was not upheld, and the extended period of limitation was deemed inapplicable.

3. Applicability of Interest:
The appellant argued against the applicability of interest on the amount not utilized, citing a ruling of the Hon'ble Karnataka High Court. The Ld. Commissioner (Appeals) held in favor of the appellant, stating that interest was not applicable as the amount had not been utilized. This decision was upheld by the judge, providing relief to the appellant on this issue.

4. Upholding of Demand and Invoking Extended Period of Limitation:
The Ld. Commissioner (Appeals) upheld the demand and the invoking of the extended period of limitation. However, considering the proper record maintenance by the appellant, the penalty was reduced to 50%. The appellant, being aggrieved, appealed to the Tribunal, where the judge further examined the contentions and ruled in favor of the appellant, setting aside the penalty imposed under Rule 15 of CCR 2004.

In conclusion, the judgment favored the appellant on multiple grounds, including the inapplicability of the extended period of limitation, the admissibility of Cenvat Credit for repair and maintenance services, and the non-applicability of interest on the unutilized amount. The reduction of penalty based on proper record maintenance further supported the appellant's case, resulting in the appeal being allowed with consequential benefits.