2019 (2) TMI 943 - HC - Central Excise

CENVAT Credit - input services - Banking, Auditing, Security services etc. - denial of credit on the ground that the specified services were exclusively under for traded goods - interpretation of statute - no intent to evade - extended period of limitation - period pertaining to November, 2006 to August, 2008 - Held that - The trading was neither a service, nor exempted service during the material time and therefore the appellant was not covered by CENVAT credit scheme with reference to such activity. It cannot therefore be said that Rule 6 of CENVAT Credit Rules, 2004 would not apply for account maintenance. Extended period of limitation - Held that - The Tribunal in our view has rightly relied on its earlier judgement in HCL Infosystem Limited 2014 (7) TMI 76 - CESTAT NEW DELHI and held that there is no scope for any interpretational misconception on this aspect. Invocation of extended period was, therefore, held to be without any error. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of CENVAT Credit Rules, 2004 regarding denial of credit for input services used in trading activity.
2. Applicability of extended period for demanding payment under Central Excise Act based on intention to evade duty.

Analysis:
1. The appeal questioned the denial of CENVAT credit for input services like Banking, Auditing, Security services used in trading activity prior to 1.4.2011. The respondent alleged the appellant wrongly availed credit amounting to ?51,66,116/- in contravention of CENVAT Credit Rules, 2004. The appellant argued that the trading activity was not notified as an exempted service during the relevant period and thus, Rule 6 read with Rule 9 did not apply until the amendment introduced by notification no.3/2011 dated 1.3.2011. The appellant maintained that the nature of input services used in both manufacturing and trading activities could not be differentiated. The Tribunal upheld the demand, emphasizing the responsibility of the assessee to comply with CENVAT Credit Rules, 2004 and the inapplicability of Rule 6 for account maintenance due to trading not being a service or exempted service at that time.

2. Regarding the extended period of limitation, the appellant contended that it was a bonafide interpretation error and thus, the extended period was not justifiable. However, the Tribunal held that until the introduction of the legal fiction on 1.4.2011 declaring trading as an exempted service, the input services availed by the appellant for trading activities could not be considered for CENVAT credit. The Tribunal cited precedent to support the application of the extended period due to the nature of the appellant's actions. The Court agreed with the Tribunal's decision, dismissing the appeal and upholding the invocation of the extended period for demanding payment.

In conclusion, the High Court dismissed the appeal, affirming the denial of CENVAT credit for input services used in trading activity before 1.4.2011 and the application of the extended period for demanding payment under the Central Excise Act based on the appellant's actions. The Court concurred with the Tribunal's interpretation and application of the relevant legal provisions and precedents in the case.