2014 (5) TMI 766 - AT - Service Tax

Reversal of CENVAT Credit - Suppression of facts - Malafide intention - Availment of ineligible CENVAT Credit - Held that - it is a fact of record that the appellant was availing input service credit which was not entitled during the period April 2007 to October 2009 but after October 2009, the appellant stopped availing input service credit as per Notification no. 1/06. It means that the fact of wrongful availment of Cenvat credit came in the knowledge of the appellant in October 2009 and thereafter they have stopped taking the credit. If appellant was not having any malafide intention, it was a duty of the appellant that these facts would have brought in the knowledge of the department and would have been paid the service tax attributable to inadmissible input service credit voluntarily by the appellant. As this act has not been done by the appellant, therefore it amounts that appellant knowingly availed wrongful input service credit, did not reverse the credit, this act of the appellant would amount to malafide intention to avail inadmissible credit - Decided against assessee.

Summary

Issues:
1. Availment of input service credit and benefit of abatement under Notification no. 1/06.
2. Invocation of extended period of limitation for demand of input service credit.
3. Appellant's contention of non-sustainability of show-cause notice.
4. Department's argument of deliberate act by the appellant.

Analysis:
1. The appellant, a resort providing services like mandap keeping, hotel rooms, and catering, availed input service credit and abatement under Notification no. 1/06. The appellant claimed that they were regularly filing service tax returns, disclosing the availment of credit and abatement, and paying service tax accordingly. However, it was noted that the appellant continued to take input service credit not entitled to them during a specific period until October 2009.

2. The department issued a show-cause notice invoking the extended period of limitation for demanding the input service credit availed between April 2007 to October 2009. The lower authorities confirmed the demand along with interest and penalties under relevant sections of the Finance Act, 1994. The appellant contended that the demands were time-barred as the department was aware of the input credit and abatement availed, citing cases to support their argument.

3. The appellant argued that since they were transparent in their filings and the department was aware of their actions, the extended period of limitation should not apply. The department, however, claimed that the appellant deliberately availed inadmissible credit, justifying the invocation of the extended period. The Tribunal considered both arguments.

4. The Tribunal found that the appellant had indeed availed wrongful input service credit until October 2009, after which they ceased the practice. The Tribunal concluded that the appellant's failure to rectify the situation upon realizing the error indicated a malafide intention to avail inadmissible credit. Citing case law, the Tribunal upheld the department's decision to invoke the extended period of limitation based on the appellant's actions and mindset.

5. Consequently, the Tribunal dismissed the appeal, upholding the impugned order and the department's decision. The stay application was also disposed of accordingly. The judgment emphasized the importance of the appellant's actions and intentions in determining the applicability of the extended period of limitation in such cases.