2024 (10) TMI 1399 - AT - Service Tax

CENVAT Credit in respect of input services as well as on capital goods on the basis of advisory notes - Invocation of the extended period of limitation under the Finance Act - As alleged audit noticed that BSNL had mainly availed CENVAT Credit on towers falling under Chapter 73 of the Central Excise Tariff, which would not be covered under the definition of the capital goods as defined under rule 2(a) of CENVAT Credit Rules, 2004 - HELD THAT - The show cause notice alleges that BSNL had availed CENVAT credit on tower materials. Neither the show cause notice nor Annexure-A to the show cause notice, except for a bald allegation, substantiate that BSNL had actually availed CENVAT credit on tower materials. Annexure-A to the show cause notice takes into consideration all the CENVAT credit availed on duty paid by BSNL. Annexure-A does not show that BSNL had actually availed CENVAT credit on duty paid for tower materials. The Commissioner completely failed to notice this part of the reply submitted by BSNL and merely proceeded to decide whether credit could have been taken by BSNL on the duty paid for tower materials. The issue as to whether CENVAT Credit could have been availed by BSNL on duty paid for tower materials has now been settled by the Tribunal in M/s GMTD Bharat Sanchar Nigam Limited 2024 (8) TMI 785 - CESTAT NEW DELHI after taking into consideration various decisions, held that BSNL could avail CENVAT credit on duty paid for tower materials. Such being the position there is no error in the finding recorded by the Commissioner that BSNL could have availed CENVAT credit on duty paid for tower materials. Whether the extended period of limitation could have been invoked in the facts and circumstances of the case? - A perusal of the show cause notice indicates that there is a bald allegation relating to suppression of facts but there is no allegation that facts were suppressed with an intent to evade payment of service tax. The extended period of limitation under the proviso to section 73 (i) of the Finance Act, therefore, could not have been invoked. See Sunshine Steel Industries 2023 (1) TMI 638 - CESTAT NEW DELHI

Summary

Issues:
1. Validity of CENVAT credit availed by BSNL on tower materials.
2. Invocation of the extended period of limitation under the Finance Act.

Analysis:
1. The appeal challenges the dropping of proceedings against BSNL for allegedly availing CENVAT Credit on tower materials. The show cause notice claimed BSNL wrongly availed credit of Rs. 9,87,74,781/- and suppressed facts. BSNL contended they did not avail credit on tower materials and could rightfully do so. The Commissioner initially confirmed the demand, but on appeal, the matter was remitted back. The Commissioner later dropped the notice, finding tower materials eligible for credit. The Tribunal in another case allowed CENVAT credit on tower materials.

2. The second issue concerns the invocation of the extended period of limitation. The department argued the period was correctly invoked, but BSNL disagreed. The show cause notice lacked specifics on intent to evade tax. Precedents highlighted that mere non-payment does not imply fraud or suppression. The Tribunal's decision was upheld by the Supreme Court, emphasizing the need for deliberate suppression for invoking the extended period of limitation. Consequently, the Commissioner's decision to drop the notice was upheld, and the appeal was dismissed.