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2019 (2) TMI 874 - AT - Service TaxCENVAT Credit - common input services used for both exempted and taxable services - non-maintenance of separate records - Rule 6(3)(ii) of the CCR - Held that - The Commissioner(Appeals) has only confirmed the demand for the period 01/04/2011 to 31/03/2012 by invoking the extended period of limitation under Section 73(1) of the Act. Further, in the present case invoking the extended period of limitation is not justified as the appellants have been filing the returns regularly and the show-cause notice was issued only on the basis of the internal audit conducted by the Department wherein they had examined all the documents furnished by the assessee - No material has been brought on record to show that there was an intention to evade payment of service tax on the part of the appellant. Therefore, the entire demand is barred by limitation. Appeal allowed - decided in favor of appellant.
Issues:
- Demand confirmation under Rule 14 of CENVAT Credit Rules, 2004 and Section 73(1) of the Finance Act, 1994 - Imposition of interest and penalty under Rule 14 of CCR and Section 75 of the Act, and Rule 15(3) of CCR read with Section 78 of the Act - Maintenance of separate accounts for input services used for exempted and taxable services - Demand calculation for the period from 01/04/2008 to 31/03/2011 - Applicability of Rule 6(3)(ii) of CCR - Appeal against Order-in-Original confirming demand, interest, and penalty - Interpretation of trading as an exempted service prior to 01/04/2011 - Applicability of extended period of limitation under Section 73(1) of the Act - Justification for invoking extended period of limitation Analysis: The appeal challenged the impugned order confirming a demand of ?1,08,807 for the period 2011-12 under Rule 14 of CENVAT Credit Rules, 2004, and Section 73(1) of the Finance Act, 1994. The Commissioner(Appeals) upheld the demand, interest, and penalty while dropping the demand for the period 2008-09 to 2010-11. The appellant, engaged in servicing motor vehicles, was found to provide both taxable and exempted services without maintaining separate accounts for input services. The Department demanded ?8,16,181 for non-reversal of CENVAT credit attributable to exempted services. The appellant argued that trading was not considered an exempted service before 01/04/2011 and had reversed credit for the period post the amendment. They contended that the demand was time-barred, as they regularly filed returns and cooperated during the audit. The appellant's counsel argued that the impugned order failed to consider the legal aspects and misinterpreted the facts. They emphasized that trading was not classified as an exempted service pre-2011 and cited relevant legal precedents. The counsel highlighted that Rule 6 of CCR mandates payment only for inputs used in both dutiable and exempted goods or services. They asserted that the demand was unjustified due to timely return filings and lack of evidence of tax evasion. In contrast, the AR defended the order, claiming trading was always an exempted service. The Tribunal noted that the demand for 2008-09 to 2010-11 was dropped, as trading was not exempted pre-2011. The extended limitation period was deemed unjustified, given the appellant's compliance and lack of intent to evade taxes. Consequently, the Tribunal set aside the impugned order, allowing the appeal with appropriate relief. In conclusion, the Tribunal's judgment revolved around the proper interpretation of trading as an exempted service, the requirement of maintaining separate accounts, the calculation of demand, and the justification for invoking the extended limitation period. The decision emphasized the importance of legal clarity, adherence to rules, and the absence of evidence indicating tax evasion to determine the validity of the demand and penalties imposed.
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