2022 (4) TMI 200 - AT - Service Tax

CENVAT Credit - whether appellants have utilized excess credit i.e. more than the limit prescribed under Rule 3(5) of Service Tax Credit Rules, 2002 (for the period April, 2004 to August, 2004) and Rule 6(3) of the Cenvat Credit Rules, 2004 during the period September, 2004 to September, 2007? - HELD THAT - There are material contradictions in the order of the Adjudicating Authority and the same also have been repeated in the impugned orders. On the one hand it has been recorded that the credit register was not produced but at the same time it has also been recorded that although both the register is produced but it is self attested and not attested by any Chartered Accountant therefore it cannot be looked into. At some place in the order of the lower authority it is also recorded that although the appellant has produced the register before them but since they failed to produce it at the time of investigations, therefore, it cannot be looked into during Adjudicating proceedings. According to me, the aforesaid view of the Adjudicating Authority is not correct. Not only that, the Adjudicating Authority also recorded the findings that the major portion of the demand is from September, 2004 to March, 2005 (it has been wrongly mentioned as March, 2004 in the order) whereas the assessee has given copies of input tax register from April, 2005, which is completely wrong as the letter dated 17/02/2009 by the appellant to the department specifically mentioned about submission of copies of records maintained by them for the period June, 2003 to January, 2004 and April, 2004 to March, 2005. The orders of the Authorities below are liable to be set aside and the matter needs to be remanded for de novo adjudication. Admittedly the appellant has also not raised the ground about the applicability of the circular dated 21/11/2008 issued by CBEC before the authorities below, although it is very material, as according to learned Counsel prior to 01/04/2008 restriction was only for utilization of credit and not for taking of credit per se and therefore even if service tax is paid by utilizing credit in excess of restrictions prescribed under Rule 3(5) or Rule 6(3) it cannot be demanded again. Appeal remanded to the Adjudicating Authority for de novo adjudication for deciding all the issues afresh including the issue of limitation after giving a proper opportunity of hearing to the appellants - appeal allowed by way of remand. Appeal allowed by way of remand.

Summary

Issues Involved:
- Whether the appellants have utilized excess credit beyond the prescribed limits under Rule 3(5) of Service Tax Credit Rules, 2002 and Rule 6(3) of the Cenvat Credit Rules, 2004 during specific periods?

Detailed Analysis:

Issue 1: Utilization of Excess Credit
The appeal challenges an order rejecting the appeal and upholding the demand for excess credit utilization by the appellants. The Revenue contends that despite providing taxable and exempted services, the appellants used credit beyond prescribed limits without separate accounts. A Show Cause Notice was issued, leading to confirmation of demand by the Adjudicating Authority. The appeal argues that separate accounts were maintained and credit utilized lawfully. The appellant's submission on the admissibility of credit despite restrictions under Rule 3(5) and Rule 6(3) is supported by circulars and case law. The Adjudicating Authority's findings were questioned due to contradictions in the order regarding credit register production and periods under scrutiny.

Issue 2: Adjudication Errors
The Tribunal noted discrepancies in the Adjudicating Authority's order, including contradictions on credit register submission and periods covered. The lower authorities' failure to consider the circular dated 21/11/2008 and the appellant's argument on credit utilization restrictions before 01/04/2008 were highlighted. The Tribunal found the lower authorities' decisions flawed, lacking independent assessment, and endorsed findings without proper scrutiny. Consequently, the matter was deemed fit for remand for fresh adjudication, emphasizing the importance of addressing all issues, including limitation, with a fair hearing for the appellants.

Conclusion:
The Tribunal set aside the lower authorities' orders, remanding the case for de novo adjudication by the Adjudicating Authority. The appellant was directed to provide all relevant documents for proper consideration. The Tribunal acknowledged the significance of the circular dated 21/11/2008 and the appellant's argument on pre-2008 credit restrictions, necessitating a fresh review. The appeal was allowed for remand, emphasizing the need for a comprehensive reevaluation of all issues with due process.