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2022 (3) TMI 802 - AT - Service TaxCENVAT Credit - demand alongwith interest and penalty - appellant was providing taxable as well as the exempted service but was not maintaining a separate account nor was paying the amount as determined under sub-rule 3 A of Rule 6 of Cenvat Credit Rules, 2004 - October, 2008 to April, 2011 - contravention of Notification No.1/2006-ST dated 1.3.2006 as amended vide Notification No. 34 dated 25.4.2011 - HELD THAT - The bare perusal of Section 67 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 makes it clear that the demand confirmed is out of the scope of the SCN. Law is settled that the SCN is the basis of the litigation arising with respect to the proposal contained therein and the adjudicating authorities have to remain within the four bounds of the said SCN. The perusal of extract from the orders of adjudicating authorities shows clear acknowledgement that the appellant has reversed the entire Cenvat Credit alongwith with the interest. The findings confirming the demand of said amount are contrary to their own observations and thus are liable to be set aside. These finding are sufficient in addition to hold that the confirmation of demand of Cenvat Credit of ₹ 5,93,384/- is not only beyond the scope of SCN but is also contrary to the findings of the adjudicating authorities. Appeal allowed - decided in favor of appellant.
Issues:
1. Scope of demand in Show Cause Notice 2. Confirmation of Cenvat Credit demand 3. Compliance with Cenvat Credit Rules 4. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules Scope of demand in Show Cause Notice: The appeal contested an order confirming a Cenvat Credit demand despite the Show Cause Notice proposing a different service tax demand. The appellant argued that the demand confirmed was beyond the SCN's scope, emphasizing that the major service tax demand had been dropped due to the reversal of Cenvat Credit. The Tribunal acknowledged that the confirmed demand was outside the SCN's purview, stating that adjudicating authorities must adhere to the SCN's proposals. Confirmation of Cenvat Credit demand: The Adjudicating Authority confirmed a Cenvat Credit demand of ?5,93,384 along with interest and penalty. However, both the Adjudicating Authority and the Commissioner of Appeals recognized that the appellant had reversed the entire Cenvat Credit with interest. The Tribunal found the confirmation of the demand contradictory to the authorities' own observations and beyond the SCN's scope. Consequently, the Tribunal set aside the order, allowing the appeal. Compliance with Cenvat Credit Rules: The Commissioner of Appeals noted that the appellant failed to provide documentary evidence to support their claim of maintaining separate records for input services used in taxable and exempted services. The appellant also did not reverse the proportionate credit attributed to exempted services as required by Rule 6(3) of the Cenvat Credit Rules. The appellant's non-compliance with Rule 6 of the Cenvat Credit Rules led to the inadmissibility of the Cenvat Credit availed. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules: Regarding the penalty under Rule 15(2) of the Cenvat Credit Rules, the Commissioner of Appeals found that the appellant deliberately and wrongly availed and utilized the Cenvat Credit without disclosing relevant facts to the department. The appellant's failure to comply with the procedures outlined in Rule 6 of the Cenvat Credit Rules led to the imposition of the penalty. The Tribunal's analysis highlighted the deliberate non-disclosure of material facts by the appellant, justifying the penalty imposition. This detailed analysis of the judgment covers the issues raised in the appeal comprehensively, addressing each point in depth and highlighting the key legal aspects and findings of the adjudicating authorities.
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