2021 (7) TMI 199 - AT - Central Excise

CENVAT Credit - input services - Commercial and Industrial Construction Services - time limitation - HELD THAT - These are not related to Commercial Construction Service rather they are input services received in the course of day-to-day running of the plant, operation and maintenance of STP plant, drain cleaning and scrap collection work, putting up of safety signage in the plant area and also for earth work and excavation work etc. at the wet gas plant - These services are allowable as input services as no production can happen without carrying out the essential operation in the plant or factory of the appellant of the dutiable finished products. Time limitation - HELD THAT - So far as the dispute before the Tribunal is concerned, the last voucher is dated 11.01.2012 and therefore show cause notice dated 30.03.2015 is also bad on the ground of limitation. Accordingly, Appeal is allowed both on merits regarding the amount of ₹ 4,29,051/- and also on the ground of limitation. The penalty imposed are also set aside. The invoices are of April to August, 2012 relating to raising of height of jerosite pond and repair and maintenance of the factory. Learned Counsel points out that jerosite pond is essential for carrying out manufacturing of dutiable final products. Secondly, repair and maintenance is a continuous process in this type of industry where the raw mineral is processed, and the process is called beneficiation for obtaining enriched ore for further processing. The show cause notice is misconceived as these services are not classifiable as commercial construction service, being in the nature of repair and maintenance in the course of day to day business of the appellant. It is further found that the last invoice is issued on 21.08.2012 whereas the show cause notice has been issued after more than twelve months on 14.12.2015. Thus, the demand is also barred by limitation. The appellant is entitled to cenvat credit. The penalties imposed are set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over disallowance of cenvat credit on certain input services; Issuance of show cause notices beyond the normal period of limitation.

Analysis:
1. The dispute in the appeals revolves around the disallowance of cenvat credit on input services not considered allowable under Rule 2(l) of the Cenvat Credit Rules. An Audit Note highlighted that the appellant wrongly claimed credit for service tax on 'Commercial and Industrial Construction Services,' excluded from the definition of input service post an amendment. The appellant disagreed with the Audit's view, leading to a request for recovery of the credit by the Adjudicating Authority.

2. It is acknowledged that the appellant possesses invoices for the input services in question, duly recorded in their accounts and statutory records. The appellant disclosed the credit amount in their returns to the Department, complying with requirements.

3. Show cause notices were issued well beyond the standard limitation period in both Appeal No. E/50346/2019 and E/50347/2019, raising concerns about the validity of the notices.

4. In Appeal No. E/50346/2019, the appellant surrendered and accepted the disallowance of a portion of the credit, while contesting the remainder. The Commissioner (Appeals) allowed a partial credit and disallowed the balance. The Tribunal found the disputed services essential for the appellant's manufacturing operations, and the show cause notice was deemed invalid due to time limitation. Consequently, the appeal was allowed on both merit and limitation grounds, with penalties set aside.

5. In Appeal No. E/50347/2019, the disputed services related to 'jerosite pond' heightening and factory repair, crucial for the manufacturing process. The Tribunal concluded that these services did not fall under commercial construction services but were integral to the day-to-day operations. Additionally, the show cause notice exceeded the limitation period, rendering the demand invalid. Hence, the appeal was allowed, entitling the appellant to cenvat credit and nullifying the penalties.

6. In conclusion, both appeals were allowed, granting the appellant consequential benefits.