2022 (3) TMI 932 - AT - Central Excise

CENVAT Credit - credit availed by the Appellant on the strength of invoices issued by its Head Office as ISD - whether loading services availed by the Appellant is eligible for credit - denial of credit on the ground that the subject input service for loading is not eligible for credit under the Credit Rules - time limitation - HELD THAT - The credit has been denied merely on the ground that goods against which loading services have been availed have not been received by the Appellant in their factory. It is also found that the authorities have taken an erroneous view that in order to avail credit of service tax paid on loading services, the goods in respect of which such loading services have been availed, should have also been physically received in the factory of the Appellant which is not correct inasmuch as there is no such condition prescribed in the Credit Rules. The case would have been different had the credit of central excise duty been availed by the Appellant without bringing the goods in the factory which is not the case herein. Moreover, it is admitted in the facts of the case, that the goods in respect of which loading services have been availed have been duly exported outside the country. Even otherwise, in that case also, the appellant would have been eligible for claiming refund of input service under Rule 5 of the Credit Rules subject to compliance with the conditions prescribed therein. In the instant case, instead of availing refund of input service, the appellant has availed the credit under the Credit Rules for payment of output excise duty on excisable goods cleared form the factory - there are no reason to deny the credit. Time limitation - HELD THAT - SCN has been issued in August 2016 by invoking extended period of limitation. Apart from the general aversion, there is no evidence to show that credit has been wrongly availed by way of fraud or suppression. Hence, the impugned demand is also barred by limitation and hence, not sustainable on that count also. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of Cenvat Credit for loading services availed by the appellant.

Analysis:
The appellant, a manufacturer of sponge iron and allied products, filed an appeal against the denial of Cenvat Credit amounting to ?9,60,443 for the period from March 2011 to July 2011. The denial was based on the issuance of invoices by the Head Office as 'ISD' for loading services provided by M/s. Prithavi Associates. The authorities alleged that the loading services were not related to the manufacturing operations at the unit where the credit was availed. The key issue revolved around whether the loading services availed by the appellant were eligible for credit under the Credit Rules.

During the proceedings, arguments were presented by both parties. The authorities had denied the credit on the grounds that the goods for which the loading services were availed had not been physically received by the appellant in their factory. However, the Member (Judicial) found this reasoning flawed as there was no such condition prescribed in the Credit Rules. It was clarified that the appellant would have been eligible for a refund of input service under Rule 5 of the Credit Rules if the goods had been exported, but in this case, the appellant had rightfully availed the credit for payment of output excise duty on goods cleared from the factory.

The judgment highlighted that there was no evidence of fraud or suppression in availing the credit, and the demand was also deemed barred by limitation. Therefore, the impugned demand was not sustainable on that ground. Consequently, the appeal was allowed, and any consequential relief was granted. The decision was pronounced in the open court on 01.10.2021 by the Member (Judicial) at the Appellate Tribunal CESTAT KOLKATA.