2025 (2) TMI 804 - AT - Service Tax

Invocation of extended period of limitation under proviso to section 73 (1) of the Finance Act - levy of mandatory penalty - suppression of facts or not - wrongful availment of Cenvat credit amount before discharging the service tax liability - eligible document to claim Cenvat credit under reverse charge mechanism as per rule 9(1) of CCR - HELD THAT - The appellant having disclosed the availment of the Cenvat Credit for the month of October and November in the ST3 returns cannot be held liable for concealment of suppression of facts and therefore the extended period of limitation cannot be invoked. In view thereof it is wrong on the part of the revenue to say that the appellant had wilfully suppressed the material facts from the department with intent to wrongly avail Cenvat credit. As per the provisions of the Finance Act the liability of the appellant was to file the STRs within the stipulated time disclosing the true facts and it is not the case of the revenue that they had not filed the STRs or had not disclosed the availment of Cenvat Credit. Hence it is not a case of wilful suppression of material facts. There is no averment in the show cause notice with reference to the factual matrix of the instant case satisfying the presence of the ingredients of fraud collusion wilful misstatement suppression of facts or contravention of any of the provisions of this chapter or of the rules made thereunder with intent to evade payment of service tax. The burden is on the revenue which they have failed to discharge. The allegation of the revenue that the appellant had availed the Cenvat credit in contravention of the provisions of rule 4(7) is not sufficient to invoke the extended period as the violation has to be with reference to the intent to evade payment of duty. Reliance is placed on the decision in Tamil Nadu Housing Board versus Collector of Central Excise 1994 (9) TMI 69 - SUPREME COURT where the Apex Court held that extended period is invocable only if both the situations suppression fraud collusion etc. and intent to evade payment of duty is proved. Initial burden is on the department. Even if it is held that there was an error on the part of the appellant in availing the credit however the error was inadvertent as they were registered only in the month of September 2013 and therefore the extended period invoked by the department is not justified. The principle enunciated in various decisions is that the proviso to section 73 (1) would be applicable on account of misstatement or suppression of facts only if the same was deliberate and for the purpose of evading payment of duty. Levy of mandatory penalty - HELD THAT - Revenue relied on the decision of the Tribunal in the case of Commissioner of C EX ST LTU Delhi versus Gas Authority of India Ltd 2018 (12) TMI 91 - CESTAT NEW DELHI to emphasise the plea that merely because the appellant is a public sector undertaking does not mean that mandatory penalty cannot be imposed once the invocation of the extended time limit has been upheld. Since it is already held that extended period of limitation cannot be invoked in the present case in the absence of the ingredients specified under section 73 of the Act consequently the penalty also cannot be imposed. Moreover the facts in the said case are distinguishable from the present one where the findings were to the effect that the appellant mis-classified the product as Naptha on which much lesser excise duty was payable and therefore mis-declaration was held to be a strategy for tax evasion and further the exemption claimed on the mis-declared product was held to be a positive act of misrepresentation of the facts. It was therefore held that merely because the assessee is PSU is not sufficient to set aside the show cause notice as being barred by time. Since the entire demand is beyond the normal period of limitation and it is held that the extended period is not invocable the entire demand needs to be set aside on this ground alone. It is therefore not necessary to further go into the merits of the matter. The question on merits is left open. Conclusion - Due to the absence of deliberate intent to evade payment the extended period and consequent penalties were deemed inapplicable. Appeal allowed.

Summary

The present appeal challenges the Order-in-Appeal confirming a demand for wrongful availment of Cenvat Credit by the Rajasthan Housing Board, an instrumentality of the State Government. The issue revolves around the appellant utilizing Cenvat Credit to discharge service tax liability in a manner deemed inadmissible under the Cenvat Credit Rules, 2004. The key legal questions considered are the invocation of the extended period of limitation under the Finance Act and the wrongful availment of Cenvat Credit before discharging service tax liability.The appellant argued that once duty is paid, Cenvat Credit cannot be denied, creating a revenue-neutral situation. They contended that the Service Tax Payment Challan is eligible for claiming Cenvat Credit under the reverse charge mechanism. The appellant also challenged the extended period of limitation and imposition of penalties, asserting that as a government authority, they did not engage in suppression or misrepresentation of facts. The respondent countered that the appellant failed to disclose the wrongful availment of Cenvat Credit, which was only discovered during an audit.The Tribunal analyzed the invocation of the extended period of limitation, emphasizing that for its application, the revenue must establish fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions with intent to evade tax. The Tribunal found that the appellant had disclosed the Cenvat Credit availment in their returns, negating any wilful suppression of material facts. Citing relevant case law, the Tribunal held that the extended period can only be invoked if both suppression and intent to evade payment of duty are proven. As the appellant's error was deemed inadvertent, the extended period was deemed unjustified.The Tribunal referenced a decision where the deliberate default was distinguished from inadvertent non-payment, emphasizing that the extended period applies only to deliberate defaults aimed at evading duty. Due to the absence of deliberate intent to evade payment, the extended period and consequent penalties were deemed inapplicable. The Tribunal also distinguished a previous case involving a public sector undertaking where misdeclaration was deemed a strategy for tax evasion, which was not the case here.Ultimately, the Tribunal held that since the demand fell beyond the normal limitation period and the extended period was not applicable, the demand was set aside, and the appeal was allowed without delving into the merits of the case. The impugned order was overturned, and the appeal was allowed based on the findings related to the limitation period.In conclusion, the Tribunal's decision centered on the interpretation of the extended period of limitation under the Finance Act and the wrongful availment of Cenvat Credit. By emphasizing the lack of deliberate intent to evade payment and the appellant's disclosure of Cenvat Credit availment, the Tribunal set aside the demand and allowed the appeal.