2019 (6) TMI 795 - AT - Service Tax

Recovery of Refund already allowed with interest and penalty - Excess utilisation of CENVAT credit on Service Tax beyond the limit of 20% - extended period of limitation - HELD THAT - In the instance case Appellants had utilised the CENVAT credit on the tax paid on the services extended by it which was subsequently held by the Hon ble High Court not included in the category of the definition of services as prevailing them and the activities carried out by the Appellant was not tobe equated with mining service which was included in the taxable entry w.e.f. 1-6-2007 - Going by the Order-in-Original of refund application number ST/58/11 it can very well be noticed that documents of the Appellant including copies of ST-3 returns for the relevant period April to September 2007 along with ST-2, Invoice reflecting amount of Service Tax charged, Service Tax paid through CENVAT credit were produced before him and he analysed/ scrutinised the same and allowed the refund claim of the Appellant partly as well as refused a part of it on the basis of his assessment and analyse of claim of the refund. Extended period of limitation - HELD THAT - Putting the Appellant under notice that it had wilfully suppressed the fact of excess utilisation of CENVAT credit way back in 2007 would bring an inference that Appellant had knowledge of such order to go in its favour in 2010, appears illogical and beyond once s comprehension. Therefore, invocation of extended period in making duty demand against utilisation of CENVAT credit which had become excessive subsequent to such payment is irrational, contrary to the law and without any legal basis - in the instant case, when no suppression etc. is made out, extended period is not invocable and therefore interest on duty cann t also be enforced. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of duty demand, interest, and equivalent penalty against excess utilization of CENVAT credit on Service Tax refunded to the appellant.

Analysis:
1. The appellant, engaged in offshore logistic services, paid Service Tax under protest for charter hire contracts with ONGC. A new taxable entry "mining service" caused confusion, leading to a refund claim after the Hon'ble Bombay High Court ruled the activities were not taxable under mining service.
2. The appellant's refund was partly allowed, rejecting the CENVAT credit refund. An audit suggested restricting CENVAT credit utilization to 20%, leading to a duty demand, interest, and penalty. The Commissioner confirmed the duty demand, prompting the appeal.
3. The appellant argued that no lapsing provision existed for unutilized CENVAT credit, citing relevant case laws and circulars. The Department contended that the credit utilization should have been restricted to 20% under Rule 6(3)C of the CENVAT credit Rule 2004.
4. The Tribunal noted the unique circumstances of the case where the High Court ruling deemed the appellant's activities non-taxable. The refund was allowed based on this ruling, and the utilization of CENVAT credit was analyzed in detail in the refund order.
5. The Tribunal found the Department's invocation of the extended period for duty demand illogical, as the appellant couldn't have known about the High Court order beforehand. Recovery of excess credit through a show cause notice was deemed legally baseless.
6. The Tribunal referred to the decision in Idea Cellular Ltd., stating there is no bar on unutilized CENVAT credit, and no lapsing provision exists for the balance. The existence of circular no. 137/72/2008 was crucial, as it clarified the utilization of accumulated credit post-repeal of Rule 6(3)(c) CCR 2004.

In conclusion, the Tribunal allowed the appeal, setting aside the Commissioner's order, emphasizing that the extended period was inapplicable, and interest on duty could not be enforced in the absence of suppression.