2025 (2) TMI 8 - AT - Central Excise

100% EOU - Cenvat credit on various input services under the Cenvat Credit Rules 2004 - applicability of time limitation - appellant could not make oral submissions and make effective representation before the authority - violation of principles of natural justice - HELD THAT - From the facts of this appeal it appears that input services viz. Rent a cab Personal insurance Air Travel Agent s services Business Auxiliary Services Commercial or Industrial Construction Services Information Technology Software Services etc. were not allowed by the Revenue for availment of Cenvat credit of the service tax paid on the ground that these were not related to the manufacture of their final products. These services appear to be activities forming part of the Appellant s manufacturing business. However the Appellant has not furnished any reply to the Show Cause Notice dated 04.09.2014 issued and not attended the personal hearing granted by the Original Adjudicating Authority. The Appellant has reversed the credit voluntarily in respect of Rent-a-Cab service and also on personal insurance service which is not interfered with. Conclusion - i) The definition of input service prior to 01.04.2011 included activities related to business requiring examination of eligibility based on this definition. ii) The burden of proof regarding Cenvat credit eligibility lies with the claimant. iii) Interest and penalties are not applicable if Cenvat credit is merely taken and not utilized subject to verification. The impugned Order-in-Original passed by the Commissioner of Central Excise Puducherry cannot be sustained and so ordered to be set aside by way of remand. The Appellant is directed to produce all the relevant documents on the basis of which they have taken the Cenvat credit on various input services. It need not be reiterated that while adjudicating the issue of eligibility of the Cenvat credit on various input services as above strict observance of the principles of natural justice have to be complied with - appeal allowed by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the Appellant is eligible to avail Cenvat credit on various input services under the Cenvat Credit Rules, 2004.

2. Whether the demand for recovery of Cenvat Credit is barred by limitation.

3. Whether interest and penalties are applicable when the Cenvat credit was taken but not utilized.

ISSUE-WISE DETAILED ANALYSIS

1. Eligibility to Avail Cenvat Credit on Input Services

Relevant Legal Framework and Precedents:

The Appellant argued that the definition of 'input service' prior to 01.04.2011 included services used in relation to business activities, which should cover the services in question. The definition was amended to exclude "activities relating to business" effective from 01.04.2011.

Court's Interpretation and Reasoning:

The Tribunal noted that the Appellant had not provided necessary documents or evidence to support their claim for Cenvat credit. The burden of proof lies with the Appellant to establish eligibility under Rule 9(6) of the Cenvat Credit Rules, 2004.

Key Evidence and Findings:

The Appellant had availed services such as Rent-a-Cab, Personal Insurance, Air Travel, and others, which were deemed not directly related to manufacturing activities. The Appellant voluntarily reversed credit for Rent-a-Cab and Insurance services.

Application of Law to Facts:

The Tribunal found that the services in question could potentially be part of the Appellant's manufacturing business activities but required examination of documents to establish this.

Treatment of Competing Arguments:

The Appellant's argument that the services were part of business activities was noted, but the lack of evidence led to the decision to remand the case for further examination.

Conclusions:

The Tribunal concluded that the eligibility for Cenvat credit needs re-examination with proper documentation and adherence to judicial precedents.

2. Limitation on Demand for Recovery of Cenvat Credit

Relevant Legal Framework and Precedents:

The Appellant contended that the demand was time-barred, citing the absence of wilful misstatement or suppression of facts. The Tribunal referred to precedents where extended limitation could not be invoked without evidence of intent to evade duty.

Court's Interpretation and Reasoning:

The Tribunal acknowledged the Appellant's claim that the department had knowledge of the credit through statutory returns, which could negate allegations of suppression.

Key Evidence and Findings:

The Tribunal noted the Appellant's argument that the department's knowledge of credit availment through returns should prevent allegations of suppression.

Application of Law to Facts:

The Tribunal found that the issue of limitation and suppression needed further examination in light of the Appellant's claims and supporting precedents.

Treatment of Competing Arguments:

The Tribunal considered the Appellant's reliance on case law to argue against the extended limitation period.

Conclusions:

The Tribunal decided that the issue of limitation requires re-evaluation, considering the Appellant's arguments and available evidence.

3. Applicability of Interest and Penalties

Relevant Legal Framework and Precedents:

The Appellant argued that interest is not applicable if Cenvat credit is taken but not utilized, citing decisions from the Chennai Tribunal and High Court.

Court's Interpretation and Reasoning:

The Tribunal agreed that interest is not demandable if the credit was merely taken and not utilized, subject to verification of relevant documents.

Key Evidence and Findings:

The Appellant had not utilized the Cenvat credit, which was a key factor in determining the applicability of interest and penalties.

Application of Law to Facts:

The Tribunal found that the applicability of interest and penalties requires verification of the Appellant's credit utilization status.

Treatment of Competing Arguments:

The Tribunal considered the Appellant's reliance on judicial decisions to argue against interest and penalties.

Conclusions:

The Tribunal concluded that the applicability of interest and penalties needs further examination based on document verification.

SIGNIFICANT HOLDINGS

The Tribunal set aside the impugned Order-in-Original and remanded the case for re-examination of the Appellant's eligibility for Cenvat credit, the applicability of limitation, and the imposition of interest and penalties. The Tribunal emphasized the need for adherence to the principles of natural justice and directed the Adjudicating Authority to conduct a thorough review with proper documentation.

Core Principles Established:

- The definition of 'input service' prior to 01.04.2011 included activities related to business, requiring examination of eligibility based on this definition.

- The burden of proof regarding Cenvat credit eligibility lies with the claimant.

- Interest and penalties are not applicable if Cenvat credit is merely taken and not utilized, subject to verification.

Final Determinations on Each Issue:

- Eligibility for Cenvat credit, limitation, and applicability of interest and penalties require further examination and document verification.