2023 (10) TMI 818 - AT - Service Tax

Burden to prove - eligibility for CENVAT Credit - possibility of having provided exempted excise duty activities from the premises in issue cannot be ruled out - appellant failed to discharge burden to prove under Rule 9(6) of CENVAT Credit Rules 2004 - Extended period of limitation - scope of SCN crossed - HELD THAT - SCN is the foundation on which the department has to build up its case and the allegations in the show cause notice have to be specific as oppose to vague or lacking details. The CENVAT credit has been denied by the learned Commissioner merely on the basis of assumption and presumption which is arbitrary and not as per law. While deciding the issue raised in the show cause notice about nexus and non-registration of premises at Delhi in favour of the appellant the said 1st appellate authority denied the CENVAT credit to the appellant by taking recourse to the provision of Rule 9(6) ibid merely on the basis of assumption and presumption by recording the finding that the possibility of having provided exempted Excise duty activities only from the said cannot be ruled out and therefore in such situation the impugned credit would be ineligible to the appellant which is not sufficient to deny the credit to the appellant. There is no mention about rule 9(6) ibid anywhere in the show cause notice. Rule 9(5) ibid mandates maintaining of proper records for the receipt disposal consumption and inventory of the input and capital goods whereas Rule 9(6) ibid talks about maintaining of proper records for the receipt and consumption of input services emphasis supplied . Rule 9(5) is about the input/capital goods whereas rule 9(6) is regarding input service and both are independent of each other. Time and again it has been laid down through various decisions that show cause notice is the foundation and judicial principles do not permit the adjudicating authority or the 1st appellate authority as the case may be to travel beyond the show cause notice. Since the impugned order has travelled beyond the show cause notice and has been passed on a new ground the same is not sustainable and is liable to be set aside. In such circumstances it would not be necessary to examine the other issues viz. suppression or invocation of extended period. The appeal filed by the appellant is allowed.

Summary

Issues Involved:
The judgment involves the admissibility of CENVAT credit for service tax paid on rent services of the appellant's New Delhi Office, the burden of proof under Rule 9(6) of CENVAT Credit Rules, 2004, and the validity of the show cause notice invoking Rule 9(5) and Rule 9(6) ibid.

Admissibility of CENVAT Credit:
The appellant appealed against the Order-in-Appeal rejecting their appeal due to the possibility of providing exempted excise duty activities from the New Delhi premises, leading to the ineligibility of the CENVAT credit under Rule 9(6) of CENVAT Credit Rules, 2004. The Commissioner confirmed the demand for recovering the CENVAT credit amount and penalty. However, the Commissioner decided in favor of the appellant regarding nexus and registration issues. The appellant argued that the denial of credit was based on vague assumptions and presumptions, which should not be sufficient to deny the credit. The Commissioner's decision to deny the credit solely on assumptions was deemed arbitrary and not in accordance with the law.

Burden of Proof and Show Cause Notice:
The show cause notice was issued based on presumption, invoking Rule 9(5) ibid for the appellant's failure to produce proof of credit admissibility. However, the Commissioner denied the credit under Rule 9(6) ibid, which was not mentioned in the show cause notice. Rule 9(5) pertains to input/capital goods, while Rule 9(6) concerns input services, and both are independent. The judgment highlighted that the authorities cannot go beyond the show cause notice, citing legal principles established by the Hon'ble Supreme Court. As the impugned order exceeded the scope of the show cause notice, it was deemed unsustainable and set aside. Consequently, the appeal by the appellant was allowed with any consequential relief as per the law.

Separate Judgement:
The Hon'ble Mr. Ajay Sharma, Member (Judicial), delivered the judgment on the admissibility of CENVAT credit and the burden of proof under Rule 9(6) of CENVAT Credit Rules, 2004, setting aside the impugned order and allowing the appellant's appeal.