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2014 (1) TMI 1096 - AT - Service Tax


Issues Involved:
1. Entitlement of GSPL to CENVAT credit of excise duty paid on pipes and other materials.
2. Compliance with conditions prescribed in Notification No. 12/2003-S.T.
3. Eligibility of GSPL for credit in respect of input services provided by other contractors to EPC contractors.
4. Whether notices for the period during the year 2005 to 2008 are barred by limitation.
5. Imposition of penalties and applicability of Section 80 of Finance Act.
6. Imposition of penalties under both Sections 76 & 78 of the Finance Act, 1994.

Detailed Analysis:

1. Entitlement of GSPL to CENVAT credit of excise duty paid on pipes and other materials:
The appellant, GSPL, argued that they were entitled to CENVAT credit of excise duty paid on pipes as the pipes were sold by EPC contractors to GSPL, who then used them for laying pipelines. The Revenue countered that GSPL could not claim CENVAT credit as the pipes were neither inputs nor capital goods for GSPL but for the EPC contractors. The Tribunal analyzed the situation and concluded that the pipes, once used in the pipeline system, lost their identity and became part of an immovable property. Thus, GSPL could not claim them as inputs or capital goods for providing output service. The Tribunal also referred to the case of Mundra Port & Special Economic Zone Ltd., concluding that the pipes were not used for providing the output service directly by GSPL.

2. Compliance with conditions prescribed in Notification No. 12/2003-S.T.:
The Tribunal considered whether GSPL had contravened the conditions of Notification No. 12/2003-S.T. by availing CENVAT credit on pipes. The Revenue argued that the notification barred the availment of CENVAT credit on inputs if partial/full exemption was availed. The Tribunal agreed with this interpretation, noting that the notification's conditions prevailed over Rule 3 of the CENVAT Credit Rules. Therefore, GSPL's claim for CENVAT credit on pipes was not justified.

3. Eligibility of GSPL for credit in respect of input services provided by other contractors to EPC contractors:
The Tribunal examined whether GSPL could claim credit for input services provided by other contractors to the EPC contractors. The Revenue contended that these services were not used by GSPL for providing output service but by the EPC contractors. The Tribunal agreed, stating that the input services were used for constructing the pipeline system by the EPC contractors and not directly by GSPL for their output service.

4. Whether notices for the period during the year 2005 to 2008 are barred by limitation:
GSPL argued that the notices were barred by limitation as they had a bona fide belief in their entitlement to CENVAT credit, supported by a legal opinion and correspondence with the C.B.E. & C. The Revenue countered that GSPL did not disclose the credit availed to the jurisdictional officers. The Tribunal found that there was no suppression of facts or wilful misstatement by GSPL, noting that they had filed complete returns and sought clarification from the C.B.E. & C. Therefore, the extended period of limitation could not be invoked, and the demand beyond the normal period was set aside.

5. Imposition of penalties and applicability of Section 80 of Finance Act:
The Tribunal considered whether penalties were imposable and if Section 80 of the Finance Act could be invoked. Given the bona fide belief held by GSPL and the lack of evidence of wilful misstatement or suppression of facts, the Tribunal concluded that penalties were not warranted. The Tribunal invoked Section 80, which allows for non-imposition of penalties in cases where the assessee shows reasonable cause for the failure.

6. Imposition of penalties under both Sections 76 & 78 of the Finance Act, 1994:
Since the Tribunal decided that no penalties were imposable, the question of whether penalties could be imposed under both Sections 76 & 78 did not arise. Similarly, the issue of penalties imposed under Rule 15 in two cases and Sections 76 & 78 in two other cases was rendered moot.

Conclusion:
The Tribunal held that GSPL was not eligible for CENVAT credit of duty paid on pipes during the normal period of limitation. GSPL was liable to pay back the CENVAT credit availed with interest within the normal period of limitation. The demand for the extended period was set aside, and all penalties were also set aside. The appeals were decided accordingly.

 

 

 

 

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