2022 (1) TMI 971 - AT - Service Tax

CENVAT Credit - input services - Airport services - Passenger Service Fee (PSF) - User Development Fee (UDF) - appellant is claiming to have admitted and reversed the entire credit confirmed by the impugned order - extended period of limitation - penalty - HELD THAT - To verify the claim of reversal made by the appellant in their miscellaneous application, revenue authorities are directed. The verification report submitted by the revenue through authorized representative is without any merits. The fact that was required to be verified from the ST-3 returns was vis a vis the reversal entries reflecting in the ST-3 return. To verify the reversal made the authorities have sought to verify the invoices against which the credit was taken. The futile exercise of verification of invoice undertaken by the revenue, cannot certify the reversal entries made. The reversal entry cannot be corroborated back to the invoices. It is not to be verified whether the credit has been taken against the proper invoices/ documents evidencing the payment of tax. The matter needs to be relooked by the adjudicating authority vis a vis the claim of reversal made by the appellant. Extended period of limitation - penalty - HELD THAT - When the appellant is claiming to have admitted and reversed the entire credit confirmed by the impugned order, there are no merits in the submissions made by the appellant vis a vis the invocation of extended period of limitation. However in remand proceeding adjudicating authority should consider the said letter for taking into account this letter for establishing bonafides, for purpose of penalty imposed. The matter needs to be relooked into by the adjudicating authority for verification of the following Amount of credit reversed by the appellant as claimed on the basis of ST-3 return filed by them; In case on verification, if appellant is able to substantiate their claim no further action is required; In case the some amount is not found to be reversed, consequences as per law follows; Issue needs to examine afresh for bonafides in view of exhibit 15. Appeal allowed by way of remand.

Issues Involved:
1. Wrong availment of CENVAT credit on Passenger Service Fee (PSF) and User Development Fee (UDF).
2. Demand and recovery of inadmissible CENVAT credit.
3. Payment of interest on the inadmissible CENVAT credit.
4. Appropriation of amounts already deposited against the demand.
5. Imposition of penalty under Rule 15(3) of CCR 2004 read with Section 78 of the Finance Act.
6. Verification of reversal of CENVAT credit by the appellant.
7. Invocation of extended period of limitation and bonafides of the appellant.

Detailed Analysis:

1. Wrong Availment of CENVAT Credit on PSF and UDF:
The audit revealed that the appellant, a service provider in the category of “transport of passengers by air” and “transport of goods by air,” had taken inadmissible CENVAT credit on services such as Passenger Service Fee (PSF) and User Development Fee (UDF), classified under “Airport Services.” The Commissioner confirmed the demand for inadmissible CENVAT credit amounting to ?31,95,39,496 under Rule 14 of the CCR 2004 read with the proviso to Section 73(1) of the Finance Act, 1994.

2. Demand and Recovery of Inadmissible CENVAT Credit:
A Show Cause Notice dated 22.10.2013 was issued, demanding recovery of the wrongly taken CENVAT credit amounting to ?37,76,07,022. The Commissioner confirmed the demand for ?31,95,39,496, and the appellant was ordered to pay this amount forthwith.

3. Payment of Interest on the Inadmissible CENVAT Credit:
The Commissioner also ordered the payment of interest under Rule 14 of CCR 2004 read with Section 75 of the Finance Act, 1994, on the confirmed amount of ?31,95,39,496 from the date of wrong availment to the date of payment.

4. Appropriation of Amounts Already Deposited Against the Demand:
The Commissioner appropriated ?22,87,851 deposited by the appellant against the confirmed liability and ?7,19,071 deposited against the interest liability.

5. Imposition of Penalty:
A penalty amounting to ?31,95,39,496 was imposed on the appellant under Rule 15(3) of CCR 2004 read with Section 78 of the Finance Act.

6. Verification of Reversal of CENVAT Credit by the Appellant:
The appellant claimed to have reversed the entire amount of CENVAT credit availed in respect of PSF and UDF, which was reflected in the ST-3 Return filed on 24th April 2015. The appellant provided a Chartered Accountant Certificate dated 30th November 2021, confirming the reversal of ?31,71,51,646. The Tribunal directed the revenue authorities to verify the claim of reversal from the ST-3 returns. The verification report submitted by the revenue was found to be without merit as it focused on verifying invoices rather than the reversal entries in the ST-3 returns.

7. Invocation of Extended Period of Limitation and Bonafides of the Appellant:
The appellant argued that there was no suppression of facts and that the extended period of limitation should not be invoked. They referred to a letter dated 15.12.2008, allegedly submitted during an audit, which mentioned availing CENVAT credit on PSF. The Commissioner found this letter insufficient to establish a proper disclosure and held that there was suppression and willful misdeclaration with an intention to defraud the revenue, justifying the invocation of the extended period and penal provisions.

Conclusion:
The Tribunal allowed the miscellaneous application and remanded the matter back to the original authority for verification of the reversal of CENVAT credit as claimed by the appellant. The adjudicating authority was directed to decide the matter within three months, considering the reversal entries in the ST-3 returns and the bonafides of the appellant. The appeal filed by the appellant was allowed, and the matter was remanded for re-examination as per the directions provided.

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