2019 (2) TMI 22 - AT - Service Tax

CENVAT Credit - input service - rent-a-cab service - period between April 2012 to September, 2015 - appellant has also not made pre-deposit - Section 35F of the Central Excise Act - Held that - Referring to clarification on mandatory pre-deposit, while filing appeals, vide F. No. 15/CESTAT/General/2013- 14 dated 28.08.2014 containing instructions that mandatory deposit of duty confirmed can be made from CENVAT credit account, he has given his finding that appellant had failed to produce any evidence of reversal of the same amount of ₹ 5,78,923/- and failed to produce protest letter to substantiate the same. These findings appear contradictory to each other as reversal of CENVAT credit was affirmatively stated to have been made and evidencing the same, a chart showing CENVAT credit including closing balance filed vide Annexure-6 was produced. No reason was forthcoming as to why the same was not accepted by the Commissioner (Appeals) as sufficient proof that such mount by way of reversal of CENVAT credit was available that was to be treated as sufficient compliance to mandatory pre-deposit. Therefore, the finding of Commissioner (Appeals) in respect of non-compliance of provision contents in Section 35F is erroneous. Pre-deposit is a mandatory requirement for admission of appeal and not for its dismissal after the appeal has been admitted, heard and taken up for orders - In the instant case, the Commissioner (Appeals) though dismissed the appeal on the ground of noncompliance of pre-deposit provision, he also discussed the merit of the appeal in holding that the appellant is not entitled to avail such benefit w.e.f. 01.04.2012. This finding itself indicative of the fact that compliance of provision for pre-deposit was subconsciously accepted by the Commissioner (Appeals). Extended period of limitation - penalty - Held that - It cannot be said that only because audit party had found some credit availed as inadmissible, suppression of fact is made out. It cannot also be established that appellant had any malafide intention to suppress its duty liability from the department. Therefore, CAG Audit cannot form the basis for invocation of extended period since audit normally goes from old period to new period and not in the reverse gear as supposed to be done to invoke extended period when abnormality is noticed in respect of non-payment or short payment during scrutiny of returns/records of the normal period. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of duty demand against allegedly inadmissible CENVAT credit on rent-a-cab service.

Analysis:

1. Background and Allegations:
The appellant, engaged in construction, availed CENVAT credit on input services. The audit found rent-a-cab service and telephone charges inadmissible. A show-cause notice demanded recovery of &8377; 5,78,923/- along with interest and penalty. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals).

2. Appellant's Arguments:
The appellant argued non-compliance was the main reason for appeal rejection. They claimed rent-a-cab service credit was valid for arranging site visits. Case laws were cited to challenge the exclusion clause introduced in Rule 2(I) of CENVAT Credit Rules, 2004. They contended the adjudication order exceeded the show-cause notice scope and was time-barred.

3. Department's Response:
The Assistant Commissioner supported the Commissioner (Appeals)'s decision, emphasizing the exclusion of rent-a-cab service from CENVAT credit post-April 2012.

4. Court's Findings:
The Commissioner (Appeals) rejected the appeal for non-compliance with pre-deposit requirements. However, discrepancies were noted in the findings regarding the reversal of CENVAT credit. The court deemed the non-compliance finding erroneous.

5. Pre-Deposit Requirement and Penalty Imposition:
Pre-deposit is mandatory for appeal admission. The Commissioner's dismissal based on non-compliance was questioned. The penalty imposition was based on alleged suppression of facts and misuse of CENVAT credit, which the appellant refuted.

6. Audit and Extended Period Invocation:
The appellant argued against the invocation of extended period based on CAG Audit findings. They contended the audit did not establish malafide intent or suppression of duty liability. The court highlighted the purpose and nature of CERA and EA audits.

7. Final Order:
The court allowed the appeal, setting aside the duty demand, interest, and penalty upheld by the Commissioner (Appeals). The judgment was pronounced on 25.01.2019.