2019 (4) TMI 166 - AT - Central Excise

CENVAT Credit - ineligible credit or not - trading activity - time limitation - no suppression of facts - Held that - The appellant has disclosed entire credit availed by them. The ST-3 returns also reflect these details. Therefore, the appellants cannot be saddled with guilt of intention to evade payment of tax. Further, an earlier show-cause notice has been issued invoking the extended period which overlaps with the period involved in the present show-cause notice. The Hon ble Supreme Court in the case of M/s. Nizam Sugar Factory 2006 (4) TMI 127 - SUPREME COURT OF INDIA has held that when all relevant entries were within the knowledge of department while which issuing the first show-cause notice, the second show-cause notice invoking extended period cannot sustain. The confirmation of demand or penalties or interest invoking the provisions not contained in the show-cause notice also cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of Cenvat credit for trading activity.
2. Time-barred show-cause notice.
3. Invocation of extended period for demand.
4. Imposition of penalties and late fees.

Eligibility of Cenvat credit for trading activity:
The appellants, traders of timber wood, were registered for service tax under various categories. The department alleged that the appellants, engaged in trading, had wrongly availed Cenvat credit for input services amounting to a significant sum. The department argued that trading being deemed exempted service, the appellants were ineligible to avail any input tax credit. The original authority and Commissioner (Appeals) upheld the demand, citing the clear provisions of the law. The learned counsel for the appellant contended that the show-cause notice was time-barred and highlighted that the appellant had disclosed all credit availed during the relevant period. The Assistant Commissioner noted that the appellants had maintained proper books of accounts, reflecting the credit availed, and concluded that the demand was time-barred, succeeding on the limitation issue.

Time-barred show-cause notice:
The appellant argued that the show-cause notice was time-barred, pointing out that an earlier notice for a different period had already been issued and settled. The present notice, issued for an overlapping period, invoked the extended period alleging wrong credit availed. The Assistant Commissioner acknowledged that the appellant had disclosed all credit availed, and following the decision in a relevant case, held that the demand was time-barred. The appeal succeeded on the limitation ground.

Invocation of extended period for demand:
The appellant raised concerns regarding the invocation of the extended period for the demand. The Assistant Commissioner noted that the period covered by the present show-cause notice overlapped with a previous notice, and the appellant had maintained proper records, disclosing all relevant details. Citing a Supreme Court case, it was held that the second show-cause notice invoking the extended period could not sustain when all relevant entries were within the knowledge of the department during the first notice.

Imposition of penalties and late fees:
The Assistant Commissioner confirmed the demand under specific provisions of the Finance Act and CGS Act, along with interest, penalties, and late fees. However, it was observed that the show-cause notice did not invoke the provisions of the CGS Act. Therefore, the confirmation of demand, penalties, and interest based on provisions not mentioned in the notice could not be sustained. The impugned order was set aside, and the appeal was allowed with consequential reliefs.

Conclusion:
The judgment addressed the issues of eligibility of Cenvat credit for trading activity, the time-barred nature of the show-cause notice, the invocation of the extended period for demand, and the imposition of penalties and late fees. The appellant succeeded on the limitation ground, with the Tribunal ruling in favor of the appellant due to the time-barred nature of the notice and the proper disclosure of credit availed by the appellant.