2023 (6) TMI 296 - AT - Central Excise

Wrongful availment of CENVAT Credit - input services - Outdoor Catering service - Membership of Club - General Insurance services - Maintenance of ETP - input service credit related to other units on the basis of ISD invoice related to the period from September 2013 to February, 2014 i.e. prior to the Credit Rules, 2004 - HELD THAT - Reverting to the facts of the present case it is observed that entire demand as proposed vide the Show Cause Notice denying the availment of Cenvat Credit was confirmed by the Original Adjudicating Authority. However, the services as were shown to have been utilized in relation to effluent treatment plant was held to be indirectly relevant for the manufacture of the Final Product. The demand of Rs.1,17,720/- on this ground was set aside by Commissioner (Appeals) after following the decision of Hon ble Supreme Court in the case of INDIAN FARMERS FERTILISER COOP. LTD. VERSUS CCE., AHMEDABAD 1996 (7) TMI 141 - SUPREME COURT . Thus the only issue remains is as to whether the restaurant service /Membership of Club Service, General Insurance Service, FICCI Quality Awards, coating of floor, AC Service Charges can be called as the input services. From the discussion it is clear that anything which is used in or in relation to the manufacture of final product has to be qualified as input service. All the above services since were availed with respect to the place of manufacture of final product and with respect to the employees in general, of the manufacturer, the services gets covered under the wide notation directly or indirectly used in or in relation to the manufacture - The service of general insurance also do not relate to motor vehicle. Hence, are not specifically covered under the exclusion. The services of Membership of Club, Health Services also are not for the employees on vocation. Thus, are not primarily for personal use or consumption of any employee. As such, the plea of exclusion of the services from the definition of input is held to be incorrect. Extended period of limitation - HELD THAT - Though the Adjudicating Authority has reflected the opinion that in the era of self assessment, it was the duty of the appellant to correctly avail the Cenvat Credit and to comply with the provisions of law, Commissioner (Appeals) has held that since the appellant has failed in that duty the extended period has rightly been invoked - extended period can be invoked if and only if there is an apparent and willful suppression of fact or misrepresentation or there is any element of fraud or collusion on part of the assess that too with an intent to evade the duty / tax liability. In the present case, there is no denial that appellant was regularly filing the returns. The factum of availment of Cenvat Credit with respect to impugned services was mentioned in those returns to the extent of the details permissible in the said format. It is not the case of the Department that appellants were never been audited earlier. No objection was ever raised with respect to those returns. Suppression cannot be alleged against the assessee. Hon ble Supreme Court in the case of COLLECTOR OF CENTRAL EXCISE VERSUS CHEMPHAR DRUGS LINIMENTS 1989 (2) TMI 116 - SUPREME COURT , wherein it was held that extended period is applicable only when something positive other than mere inaction or failure on part of the assessee is proved. There has to be the evidence about conscious and deliberate withholding of information on part of assessee. It is observed that such evidence is missing in this case. The findings that extended period is rightly invoked are, therefore, not sustainable. It is held that extended period has wrongly been invoked while issuing the Show Cause Notice. Thus, the Show Cause Notice itself becomes barred by time. The findings in order under challenge are hereby set aside - the appeal stands allowed.

Summary

Issues involved:
The issues involved in the judgment are the wrongful availment of Cenvat credit on ineligible input services and the imposition of penalty under the Central Excise Act, 1944.

Issue 1: Wrongful Availment of Cenvat Credit on Ineligible Input Services
The appellant was found to have wrongly availed Cenvat credit amounting to Rs.3,31,954 on ineligible input services such as Outdoor Catering service, Membership of Club, General Insurance services, Maintenance of ETP, and input service credit related to other units. The Show Cause Notice proposed recovery of the amount under Rule 14 of the Rules read with proviso to Section 11 A (4) of the Act. The Adjudicating Authority confirmed the demand of Cenvat Credit along with interest and penalty equal to the amount of credit. The appeal was partly allowed, granting benefit about services related to effluent treatment plant. The appellant challenged the order, arguing that the credit was eligible as services were used for business purposes and there was no malafide intention or suppression of facts. The Tribunal held that the services in question were eligible input services directly or indirectly used in relation to the manufacture of the final product, and the extended period was wrongly invoked as there was no willful suppression of facts.

Issue 2: Imposition of Penalty
The Adjudicating Authority imposed a penalty under Rule 15 of the Rules read with Section 11 AC of the Act. The appellant contended that penalties cannot be levied due to lack of malafide intention or suppression of facts, and it was a case of interpretation. The Tribunal held that penalties were not justified as there was no willful suppression of facts, and extended period could only be invoked in cases of fraud or collusion to evade tax liability. The Tribunal set aside the findings of the Adjudicating Authority and allowed the appeal, ruling that the extended period was wrongly invoked, rendering the Show Cause Notice time-barred.

This judgment highlights the importance of correctly availing Cenvat credit on eligible input services and the criteria for invoking the extended period under the Central Excise Act, 1944.