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2024 (12) TMI 835 - AT - Central ExciseCENVAT Credit - reversal of input service credit on account of availment of input service credit attributable to trading activity - Invocation of Extended period fo limitation - denial of credit on procedural grounds such as the head office has not taken the ISD registration and the invoices pertaining to the input services were not in the name of the appellant-company - Enhancement of penalty. Reversal of input service credit amounting to Rs. 1,17,41,737/-on account of availment of input service credit attributable to trading activity - HELD THAT - It is observed that 'trading' has been brought under the category of 'exempted service' only with effect from 01.04.2011. Thus, prior to this period there is no need to reverse proportional credit attributed to the exempted service, 'trading'. The demand in this case has been raised for the period 2007-08 to 2010-11. As 'trading' was not an exempted service during the period under dispute, the reversal of input service credit proportional the value of exempted service is not warranted. Thus, the demand confirmed in the impugned order, along with interest and penalty imposed, set aside. Invocation of Extended period of limitation - HELD THAT - It is observed that all the notices were issued by invoking extended period of limitation. These notices were issued in piecemeal based on various audit objections. Once a Show Cause Notice is issued proposing denial of CENVAT Credit by invoking extended period of limitation, then another notice cannot be issued on the same issue by invoking extended period again, as held by the Hon'ble Apex court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP 2006 (4) TMI 127 - SUPREME COURT wherein it has been categorically held that once a demand has been raised for any issue by invoking the extended period of limitation, then another demand cannot be raised again by invoking the extended period on the same issue for a subsequent period - the demands confirmed in the subsequent notices, invoking extended period of limitation is not sustainable. Denial of CENVAT credit on procedural grounds such as the head office has not taken the ISD registration and the invoices pertaining to the input services were not in the name of the appellant-company - HELD THAT - It is observed that when the receipt and utilization of the service are not in dispute, the credit available to the appellant cannot be denied on mere procedural infirmities. Accordingly, the above credit availed by the appellant cannot be denied. Thus, the appellant is eligible for the credit of input services availed them in the impugned orders. Since the credit is held to be eligible, the question of demanding interest and imposing penalties does not arise. Enhancement of penalty - HELD THAT - Since, it has been already been held by us that the credit availed by the appellant is in order, there is no need to impose penalty for the alleged irregular credit availed. Accordingly, the penalty enhanced by the Ld. Commissioner (Appeals) in the impugned order set aside - it is observed that a penalty of Rs.2000/- was originally imposed by the adjudicating authority on the ground of irregular availment of credit. Since, the credit availed is held to be eligible to the appellant, the penalty of Rs.2000/- imposed by the original adjudication authority is not sustainable. The impugned order set aside - appeal allowed.
Issues Involved:
1. Denial of CENVAT Credit due to trading activity being classified as an exempted service. 2. Denial of CENVAT Credit due to procedural issues, such as lack of Input Service Distributor (ISD) registration. 3. Invocation of extended period of limitation for issuing multiple Show Cause Notices (SCNs). 4. Imposition and enhancement of penalties related to alleged irregular credit availment. Detailed Analysis: 1. Denial of CENVAT Credit due to Trading Activity: The primary issue in Excise Appeal No. 70633 of 2013 was the reversal of input service credit amounting to Rs. 1,17,41,737/- on account of trading activity being classified as an exempted service. The appellant argued that 'trading' was not categorized as an exempted service until 01.04.2011, and thus, for the period 2007-08 to 2010-11, there was no requirement to reverse proportional credit attributed to trading. The tribunal agreed with this argument, noting that since trading was not an exempted service during the disputed period, the reversal of input service credit was unwarranted. Consequently, the demand, along with interest and penalties, was set aside. 2. Denial of CENVAT Credit due to Procedural Issues: In Excise Appeals No. 78713 of 2018, 79090 of 2018, and 75370 of 2020, the denial of CENVAT Credit was contested on the grounds that services were rendered at the head office without ISD registration. The appellant contended that the services were actually received and utilized at the factory, and the denial based on procedural infirmities, such as the absence of ISD registration, was unjust. The tribunal observed that when the receipt and utilization of services were undisputed, credit should not be denied due to procedural issues. Thus, the credit availed by the appellant was deemed eligible. 3. Invocation of Extended Period of Limitation: The tribunal addressed the issue of invoking the extended period of limitation for issuing multiple SCNs based on audit objections. It was observed that once a SCN is issued invoking the extended period, subsequent notices on the same issue cannot invoke the extended period again. Citing the precedent set by the Hon'ble Apex Court in Nizam Sugar Factory v. Collector of Central Excise, it was held that subsequent demands invoking the extended period were unsustainable. Therefore, the demands confirmed in the subsequent notices were set aside. 4. Imposition and Enhancement of Penalties: In Excise Appeal No. 75406 of 2021, the enhancement of penalty from Rs.2,000/- to Rs.3,21,981/- was challenged. The tribunal noted that since the credit availed by the appellant was found to be in order, the imposition of penalties for alleged irregular credit was unnecessary. Consequently, the enhanced penalty was set aside. Furthermore, the original penalty of Rs.2,000/- was also deemed unsustainable given the eligibility of the credit availed by the appellant. Conclusion: The tribunal concluded by setting aside the impugned orders and allowing the appeals filed by the appellant, emphasizing that procedural infirmities should not obstruct the rightful availment of CENVAT Credit when the receipt and utilization of services are not in dispute.
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