2019 (7) TMI 488 - AT - Central Excise

CENVAT Credit - input service - compensation granted for providing services for building and bringing into commercial operations services as that of fabrication installation errection and commissioning services for various plants machineries - extended period of limitation - HELD THAT - Hon ble Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE CUSTOMS VERSUS MDS SWITCHGEAR LTD. 2008 (8) TMI 37 - SUPREME COURT has affirmed the decision of Hon ble Tribunal observing that the recipient is entitled to the credit of duty paid - In this case the allegation against the assessee was that the semi-finished goods received from their sister concern was over-valued in order to pass on Modvat credit. The Department denied the credit taken at the recipient s end. However the Hon ble Tribunal held in favour of the assessee and also observed that there was no loss of revenue vide its decision reported as MDS SWITCHGEAR LTD. VERSUS COMMR. OF C. EX. CUS. AURANGABAD 2001 (4) TMI 130 - CEGAT MUMBAI . Hon ble Supreme Court upheld the judgment of Hon ble Tribunal. Department also in a Circular No. 1014/2 dated 1st February 2016 has clarified that the Cenvat Credit of CVD paid voluntarily is admissible as it is a settled position that a buyer is entitled to avail cenvat credit of duty paid by the supplier - Similar is the situation in the present case as far as the impugned compensation is concerned. Also there is no apparent mensrea on the part of the appellant to evade any duty rather the fact remains is that the duty stands already paid. The Cenvat Credit thereof cannot be disallowed. Extended period of limitation - HELD THAT - The SCN should not have been issued or if issued it should have been within one year of the fact being into notice of the Department - The Department in the present case has invoked the extended period of limitation alleging suppression or misrepresentation on part of the appellant. As already held that there is absence of malafide intent/mensrea the Department is held not entitled to invoke the said extended period of limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat Credit on compensation paid to service provider for delayed services.

Analysis:
The appellant, engaged in manufacturing lead, zinc concentrates, zinc cathode, and Sulfuric Acid, availed Cenvat Credit on Service Tax paid for compensation to a service provider for delayed services. The Department issued a show cause notice proposing recovery of the availed credit along with interest and penalty. The appellant contended that the compensation was for enhanced value of services received, and the service provider had already discharged the liability. Citing relevant case laws, the appellant argued for eligibility of Cenvat Credit and challenged the time-barred notice. The Department argued that the compensation was not part of the service contract, thus denying the credit.

The Tribunal referred to the decision in CCE vs. MDS Switch Gear Ltd., where the recipient was entitled to credit of duty paid. It was noted that Circular No. 1014/2 clarified the admissibility of Cenvat Credit when duty is paid by the supplier. Relying on settled law, the Tribunal held that once duty is paid, credit cannot be denied, and assessment cannot be reopened at the recipient's end. The compensation was viewed as an escalated price in the supplementary invoice. Citing the Thyssenkrupp case, the Tribunal emphasized that the appellant was entitled to credit based on the supplementary invoice.

Concluding, the Tribunal found no intent to evade duty and held that the Cenvat Credit could not be disallowed. The show cause notice, invoking extended limitation, was deemed invalid due to absence of malafide intent. Therefore, the order under challenge was set aside, and the appeal was allowed.