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2024 (6) TMI 1010 - AT - Service TaxCENVAT Credit - taking credit commonly for both exempted goods and the taxable service - various services used for laying the pipeline which ultimately was used for supply of the CBM gas. Demand of Rs. 11,12,41,507/- based on Rule 6(3A) of the Cenvat Credit Rules, 2004 - HELD THAT - It has been held by the Adjudicating Authority that the Appellant was registered as service provider and was filing of their Returns towards the Cenvat taken by them. Appellants were carrying bona fide belief that no excisable goods were being manufactured by them. Therefore they neither took the Registration nor did they file any Returns. In spite of the ST-3 Returns being filed as service provider, the Department did not issue any query as to whether they were also into manufacturing of the gas. Therefore, it is held that the demand of Rs.11,12,41,500/- raised based on the alleged exempted turnover of the goods, is legally not sustainable on account of time bar in respect of the demand pertaining to extended period. The Adjudicating Authority has set aside this demand on merits in the Order-in-Original and the same is upheld. Demand of Rs. 5,27,86,789/- for Cenvat Credit taken for services used in laying pipelines - HELD THAT - Even if any immovable property comes into being, but if the same is used for provision of output service resulting in payment of Service Tax, the Cenvat Credit cannot be denied. Considering that the Appellant is eligible to take the Cenvat Credit. On merits, the confirmed demand of Rs.5,27,86,789/- along with interest and penalty on merits is set aside. The Appeal filed by the Revenue stands rejected and the Appeal filed by the Assessee stands allowed.
Issues Involved:
1. Demand of Rs. 11,12,41,507/- based on Rule 6(3A) of the Cenvat Credit Rules, 2004. 2. Demand of Rs. 5,27,86,789/- for Cenvat Credit taken for services used in laying pipelines. Summary: Issue 1: Demand of Rs. 11,12,41,507/- based on Rule 6(3A) of the Cenvat Credit Rules, 2004 The Appellants were issued a Show Cause Notice for taking Cenvat Credit for services utilized for the transportation of CBM gas through pipelines, alleging that this amounted to taking credit for both exempted goods and taxable services. The Adjudicating Authority dropped the demand of Rs. 11,12,41,507/-, holding that Rule 6 of the Cenvat Credit Rules, 2004 had been misinterpreted. The Revenue appealed, arguing that Rule 6(3) applies even when exempted goods are manufactured and supplied along with taxable services. The Tribunal upheld the Adjudicating Authority's decision, noting that the Appellant was only compressing CBM for transportation, not manufacturing CNG. The Tribunal also considered a verification report from the Assistant Commissioner, which concluded that the Appellant's activities did not amount to manufacturing CNG. Consequently, the Tribunal rejected the Revenue's appeal. Issue 2: Demand of Rs. 5,27,86,789/- for Cenvat Credit taken for services used in laying pipelines The Adjudicating Authority disallowed the Cenvat Credit of Rs. 5,27,86,789/- taken for services used in laying pipelines. The Appellant argued that the credit was taken only for services utilized in the transportation of gas and not for the extraction of CBM. The Appellant cited several case laws, including *Rastriya Ispat Nigam Ltd. vs. CCE, Cus & S.T., Visakhapatnam* and *Mundra Ports & Special Economic Zone Ltd. v. CCE & Cus.*, to support their claim that Cenvat Credit is admissible for services used in laying pipelines. The Tribunal agreed with the Appellant, setting aside the demand on merits. Additionally, the Tribunal found that the demand for the extended period was time-barred, as the Appellant was registered with the Service Tax Department and had been reflecting the Cenvat Credit in their ST-3 Returns. Consequently, the Tribunal allowed the Appellant's appeal and set aside the confirmed demand of Rs. 5,27,86,789/-. Conclusion: The Tribunal rejected the Revenue's appeal concerning the demand of Rs. 11,12,41,507/- and allowed the Assessee's appeal regarding the demand of Rs. 5,27,86,789/-, with consequential relief as per law.
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