2022 (11) TMI 325 - AT - Service Tax

CENVAT Credit - common input services - time barred demand for the period April to September 2008 - Explanation 1 (d) to Rule 6(3D) of the CCR for computing exempt service pertaining to trading in securities is not applicable for the period prior to 01.04.2011 - extended period of limitation - HELD THAT - It is quite evident that the appellant had submitted the entire information in respect of the input services and their use in the exempted output services. Further it is also evident that Commissioner has failed to point out even a single information which was relevant for determination of the issue in question. Can there be any specific reply without a specific query. When the appellant had submitted the voluminous information as has been accepted by the Commissioner in the impugned order it is for the revenue authorities to scrutinize the same and arrive at the conclusions in a time bound manner. Failure to make any inquiry specific to availment of CENVAT Credit on taxable and exempted services by the department cannot be ground for invocation of extended period of limitation by alleging charge of suppression against the appellant. For its own failure to make inquiry and investigations within the prescribed period of time, department cannot invoke extended period of limitation. The demand to this extent cannot be sustained and needs to be set aside. Computational Errors - HELD THAT - As regards computational error as stated by the revenue in the appeal the issue do not involve any specific question of law to be agitated upon. Appellant have also pointed out certain computational errors in calculating the amounts to be confirmed. These are matter of factual verification for which we would remand the matter back to the original authority for re- computation of demand if any in accordance with the principles of law. The applicability of Rule 6 (3) by treating the 34 services as has been held by the Commissioner as common input services for providing the exempted and taxable services of brand promotion - the present case is not for determination of common input services, but revenue needs to identify those services which have been exclusively used for providing the taxable service and those which have been used for management of investments. Undisputedly appellants are engaged in providing the brand promotion service by promoting the brand name of TATA. They have availed CENVAT credit in respect of various services used in their activities of brand Promotion. Extended period of limitation - HELD THAT - The extent period of limitation is not available to the revenue as the ingredient as required for invoking the extended period are not available in the present case, it is held that against penalties imposed on the appellant under Rule 15 (3) or 15 (4) of Cenvat Credit Rules, 2004 as applicable during the relevant period read with Section 78 of the Finance Act, 1994 cannot be sustained. Since the matter needs to be remanded back to original authority for taking into account the observations made, the liability to interest will come only on the redetermined amount - appeal allowed by way of remand.

Summary

Issues Involved:
1. Time Bar Issue
2. Eligibility under Rule 6(5) of the CENVAT Credit Rules
3. Eligibility of CENVAT Credit on various input services
4. Nature of incomes earned by the Noticee and their classification
5. Reversal of credit under Rule 6(3A) of CCR for common input services

Detailed Analysis of Judgment:

1. Time Bar Issue:
The Commissioner acknowledged that the demand for the period from 1st April 2008 to 30th September 2008 is time-barred as the show cause notice was served on 17th April 2014. The total CENVAT credit for this period was Rs. 6,14,68,326/-, which was ordered to be dropped.

2. Eligibility under Rule 6(5) of the CENVAT Credit Rules:
Rule 6(5) allowed full CENVAT credit for specified services even if used partly for exempted services until 31.03.2011. The Commissioner identified five services that qualified under Rule 6(5) and allowed full credit amounting to Rs. 7,72,68,855/-.

3. Eligibility of CENVAT Credit on Various Input Services:
The Commissioner disallowed CENVAT credit for 21 services amounting to Rs. 2,05,14,207/- on the grounds that they did not qualify as "input services" under Rule 2(l) of the CCR. These services either had no direct nexus with the output services, were excluded post-1st April 2011, or were construction-related services. The Commissioner broadly categorized the reasons for disallowing the credit into four categories.

4. Nature of Incomes Earned by the Noticee:
The Commissioner examined various sources of income to determine if they constituted taxable or exempted services. Major findings included:
- Dividend Income: Not considered as service income.
- Profit on Sale of Investment: Treated as trading of goods and considered exempted service.
- Miscellaneous Receipts: Considered as income from exempted services due to lack of detailed information.
- Income from Long-Term Investment in Immovable Property: Not considered as service income.
- Exchange Gain: Not considered as service income.
- Guarantee Commission (Export): Considered taxable income.
- Profit on Sale of Current and Fixed Assets: Not considered as service income.
- Interest Income: Not considered as service income.

5. Reversal of Credit under Rule 6(3A) of CCR for Common Input Services:
The Commissioner applied the method as per Explanation 1(d) to Rule 6(3D) of the CCR to determine the value of exempted services for the entire disputed period. The total CENVAT credit attributable to common input services was calculated, and the allowable credit was determined to be Rs. 16,71,22,662/-. The balance credit of Rs. 34,37,05,962/- was disallowed and ordered to be recovered.

Additional Findings:
- Invocation of Extended Period: The Commissioner justified the invocation of the extended period for demand due to suppression of facts by the appellant. However, the tribunal found that the appellant had submitted all relevant information, and the department's failure to make specific inquiries could not justify the invocation of the extended period.
- Computational Errors: Both parties pointed out computational errors in the order. The tribunal remanded the matter back to the original authority for re-computation in accordance with the principles of law determined in the judgment.
- Penalties: The tribunal held that penalties under Rule 15(3) or 15(4) of the CCR read with Section 78 of the Finance Act, 1994, could not be sustained due to the absence of conditions for invoking the extended period of limitation.

Conclusion:
The tribunal allowed the appeals, setting aside the impugned order and remanding the matter to the original authority for reconsideration in light of the tribunal's observations. The adjudicating authority was directed to decide the matter within three months from the date of receipt of the order.