2023 (8) TMI 995 - AT - Service Tax

CENVAT Credit - Extended period of limitation - Adjustment of excess amount paid - development of franchisee service during the Financial year 2010-11 - extended period of limitation - HELD THAT - The reasons for invoking extended period of limitation given in the Show Cause Notice SCN was that after audit, a letter dated 7.9.2012 was sent to the appellant asking it to pay the service tax short paid due to wrong availment of CENVAT credit along with interest and penalty. The appellant had deposited it but sent a letter dated 30.11.2012 contending that the amount was not deposited by it voluntarily as it was deposited without SCN and adjudication. Further, the appellant had deposited the service tax with interest, but failed to deposit the penalty and instead contested the voluntary deposit of the service tax. By doing so, according to the SCN, the appellant had intentionally and wilfully suppressed the facts of availing inadmissible CENVAT credit on the inputs which were used for non-taxable services - according to the SCN, the appellant had deposited the disputed tax and interest but not the penalty but later contested the demand itself and by doing so, the appellant had intentionally and wilfully suppressed the facts of availing inadmissible CENVAT credit. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT the Supreme Court examined Section 11A of the Central Excise Act, 1944 which was worded similar to Section 73 of the Finance Act, 1994. The case of the Revenue is that the appellant had wilfully and deliberately suppressed the fact that it had availed ineligible CENVAT credit on input services. The position of the appellant was at the time of self-assessment and, during the adjudication proceedings and that it is entitled to the CENVAT credit. Thus, it is found that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Thus, the central excise officer has an obligation to make his best judgment if either the assessee fails to furnish the return or, having filed the return, fails to assess tax in accordance with the Act and Rules. To determine if the assessee had failed to correctly assess the service tax, the central excise officer has to scrutinize the returns. Thus, although all assessees self-assess tax, the responsibility of taking action if they do not assess and pay the tax correctly squarely rests on the central excise officer, i.e., the officer with whom the Returns are filed. For this purpose, the officer may require the assessee to produce accounts, documents and other evidence he may deem necessary. Thus, in the scheme of the Finance Act, 1994, the officer has been given wide powers to call for information and has been entrusted the responsibility of making the correct assessment as per his best judgment - It is incorrect to say that had the audit not been conducted, the allegedly ineligible CENVAT credit would not have come to light. It would have come to light if the central excise officer had discharged his responsibility under section 72. Therefore, to say that had the audit not been conducted, the incorrect availment of CENVAT credit would not have come to light is neither legally correct nor is it consistent with the CBEC s own instructions to its officers. The appellant assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else - It is the responsibility of the Central Excise Officer with whom the Returns are filed to scrutinise them and if necessary, make the best judgment assessment under section 72 and issue an SCN under Section 73 within the time limit. If the officer does not do so, and any tax escapes assessment, the responsibility for it rests on the officer - Extended period of limitation cannot be invoked unless there is evidence of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of Act or Rules with an intent - Intentional and wilful suppression of facts cannot be presumed because (a) the appellant was operating under self-assessment or (b) because the appellant did not agree with the audit and claimed that CENVAT credit was admissible; or (c) because the appellant did not seek any clarification from the Revenue; or (d) because the officer did not conduct a detailed scrutiny of the Returns and the availment of CENVAT credit which is alleged to be inadmissible and was discovered only during audit. It is found in favour of the appellant on the question of limitation. As the entire demand except what has been conceded by the appellant falls beyond the value period of limitation it is not necessary to examine the merits of the case - the impugned order is set aside except to the extent of denial of CENVAT credit or Rs. 1,45, 724 on the architectural services during the period 2011-12 and interest thereon and order of its recovery. Appeal partly allowed.

Note:- Legal Nuances in CENVAT Credit Rules and Extended Limitation Periods: A Detailed Analysis

Issues Involved:
1. Demand of CENVAT Credit
2. Service Tax on Wrong Adjustment
3. Interest on Late Payment and Reversed CENVAT Credit
4. Extended Period of Limitation

Summary:

1. Demand of CENVAT Credit:
The Tribunal examined the demand of CENVAT Credit amounting to Rs. 51,44,455/- availed/ utilized wrongly during the period 2007-08 to 2011-12. The appellant argued that the input services used for constructing the school building were also used to provide taxable services such as franchisee services and renting of immovable property service. The Tribunal found that the appellant had a different view on the eligibility of CENVAT credit than the Revenue, and this constituted a difference of opinion rather than deliberate suppression of facts.

2. Service Tax on Wrong Adjustment:
The demand of Service Tax amounting to Rs. 1,25,429/- on wrong adjustment of excess amount paid was dropped by the Commissioner, and this decision was upheld by the Tribunal.

3. Interest on Late Payment and Reversed CENVAT Credit:
The Tribunal upheld the order for charging and recovery of interest on late payment of service tax and on the reversed CENVAT Credit amounting to Rs. 51,44,455/- till the date of deposit. Additionally, the Tribunal confirmed the demand of interest of Rs. 6,678/- due to late payment of service tax on Franchise Service & Renting of Immovable Property.

4. Extended Period of Limitation:
The Tribunal extensively examined the invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994. It was argued that the appellant had intentionally and willfully suppressed facts by availing inadmissible CENVAT credit. However, the Tribunal found that the appellant's actions were based on a different interpretation of the law and not on any fraudulent intent or suppression of facts. Therefore, the extended period of limitation was not applicable, and the demand beyond the normal period of limitation was set aside.

Conclusion:
The impugned order was set aside except for the denial of CENVAT credit of Rs. 1,45,724 on architectural services during the period 2011-12 and the associated interest. The appeal was partly allowed.

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