2023 (3) TMI 128 - AT - Service Tax

CENVAT Credit - input services - lack of nexus with output service - disallowance of credit for having been availed, and long after service had been received for 2004-05 to 2010-11, in June 2012 - principles of natural justice. Denial for the lack of nexus - HELD THAT - The bland finding is not responsible disposal of allegation in show cause notice through adjudication order and, certainly, warrants appropriate handling. Time Limitation - HELD THAT - Doubtlessly, rule 3 of CENVAT Credit Rules 2004 is devoid of any time limit for availment of credit. There is also, no doubt, that credit availed, and unutilised, continues in the account for all time to come. Eligibility for credit of tax, included in the invoices raised by M/s Tata Sons Ltd on the appellant, is not in dispute. It also does not require to be stated that it is only with the advent of Point of Taxation Rules, 2011 that significance was attached to time for eligibility to take credit and that, prior to its notification, service was deemed to have been rendered only upon payment - Surprisingly, too, the assessee has also merely cited legal precedent without offering any justification for the delay in availing credit that, notwithstanding the position in law, devolves upon the assessee. In the absence of justification for rendering a finding of liability that does not take into account provisions of law or judicial determination, we are unable to come to conclusion on upholding of the impugned order, rejection thereof or any modifications therein. To enable disposal of the show cause notice in a manner that could be subjected to the test of law, as enacted and judiciary determined, the impugned order is set aside and matter remanded to the original authority for a fresh disposal ensuring that the principles of natural justice are adhered to. Appeal allowed by way of remand.

Summary

Issues:
1. Finding of ineligibility for availed credit
2. Disallowance of credit for delayed availing
3. Relevance of rule 6(5) of CENVAT Credit Rules, 2004
4. Lack of nexus for credit of &8377; 57,38,354

Analysis:

Issue 1: Finding of ineligibility for availed credit
The appellant, M/s Tata Power Company Limited, challenged the order of the Commissioner of CGST & CEX, Mumbai Central, regarding the ineligibility of availed credit. The appellant had availed credit of tax included in invoices for using the 'TATA' brand, which was liable to tax. The appellant provided both taxable and exempt services during the period in question. The dispute also involved tax charged by providers of taxable services that were deemed ineligible due to non-conformity with input services under rule 3 of CENVAT Credit Rules, 2004.

Issue 2: Disallowance of credit for delayed availing
The appellant faced disallowance of credit amounting to &8377; 11,01,38,756 due to delayed availing, long after services had been received. The appellant argued that there was no time limit for availing credit under rule 3 of CENVAT Credit Rules, 2004. The significance of time for credit eligibility was highlighted post the Point of Taxation Rules, 2011. However, the adjudicating authority did not adequately consider the legal precedents cited by both parties, leading to a lack of justification for the delay in availing credit.

Issue 3: Relevance of rule 6(5) of CENVAT Credit Rules, 2004
The relevance of rule 6(5) of CENVAT Credit Rules, 2004 was questioned by the appellant, emphasizing that the rule's rescinding did not impact their entitlement to credit. The rule was limited in application to the context of availing credit on eligible input services and subsequent use in manufacturing exempted goods or services. The lack of specific facilitation post 1st April 2011 necessitated the allocation of taxable services towards output and exempted services.

Issue 4: Lack of nexus for credit of &8377; 57,38,354
Regarding the denial of credit amounting to &8377; 57,38,354 for lack of nexus, the adjudication order's finding was deemed inadequate. The services for which credit was availed were not directly related to the provision of output services by the appellant. The lack of a proper disposal of the allegation in the show cause notice required appropriate handling.

In conclusion, the Tribunal set aside the impugned order and remanded the matter back to the original authority for a fresh disposal, ensuring adherence to the principles of natural justice. The lack of justification in rendering findings that disregard legal provisions or judicial determinations necessitated a reevaluation of the case.