2016 (11) TMI 1175 - AT - Central Excise

CENVAT credit - availment of credit of service tax paid on the construction services availed by M/s. Tech textile, 100% EOU, is not available to the assessee and as such, they are required to return the same back - Held that - Though the construction services have been held to be a Cenvitable service but it is the construction of the manufacturer s own factory premises which would be Cenvitable for him and not the construction of another unit, which may be belonging to the same group of industries. The fact that the appellant s account and the 100% units accounts are being maintained under a common balance sheet would not change the scenario in as much as the input service definition includes those inputs which are used by the manufacturer in or in relation to the manufacturer and in relation to their own final product. The 100% unit was a separately registered unit, there is a separate set of procedure required to be followed by a 100% EOU. Time bar - Held that - the credit availed related to their 100% EOU was not declared by the appellant and came in the knowledge of the department at the time of scrutiny of the ER-1 filed by them. The fact that ER-1 is required to be filed on quarterly basis and the said fact has come to the notice of the Revenue while scrutinizing ER-1 return, even the issuance of show cause notice in 2013 is not justified. As the facts are not clear, I deem it fit to remand the matter to the original Adjudicating Authority for deciding the issue on limitation after examining all the documentary evidence including the ER-1 and after affording an opportunity to hear the assesee. It may be mentioned that the said issue of limitation has not been adverted to by the undersigned and the assessee is within his rights to contest the same before the Adjudicating Authority - appeal disposed off by way of remand.

Summary

Issues:
1. Availment of cenvat credit on service tax paid for construction services by a separate division of the assessee.
2. Disallowance of cenvat credit by the Revenue and subsequent proceedings initiated.
3. Claim of common ownership and registration of the appellant and the separate division.
4. Challenge on the point of limitation regarding the issuance of show cause notice.

Analysis:
1. The appellant, engaged in manufacturing excisable products, availed cenvat credit on service tax paid for construction services used by a separate division named Tech Textile, a 100% EOU. The Revenue contended that such credit was not permissible, leading to a demand for return of the credit amount.
2. Proceedings were initiated against the appellant based on a show cause notice proposing disallowance of the credit amount. The original adjudicating authority and the Commissioner (Appeals) upheld the order, prompting the appellant to appeal.
3. The appellant argued that Tech Textile and the appellant were not distinct entities, with Tech Textile being a separate division within the same premises. They highlighted common assets and registrations, asserting that both units belonged to the same limited company. The appellant claimed that the construction services qualified as input services based on Tribunal decisions.
4. The Revenue, represented by the DR, supported the denial of credit, aligning with the lower authorities' reasoning. The appellant challenged the limitation aspect, emphasizing that the credit availed in 2010 was questioned through a show cause notice issued in 2013.
5. The Tribunal, after considering submissions from both sides, rejected the appellant's contention that Tech Textile was part of their own unit. It emphasized that cenvat credit for construction services applies to a manufacturer's own factory premises, not to a separate unit, even if under the same group. The Tribunal found no merit in the appellant's argument regarding common balance sheets and registration.
6. Regarding the limitation issue, the Commissioner (A) noted that the department discovered the credit related to the 100% EOU during scrutiny of the ER-1 return, filed quarterly. The Tribunal decided to remand the matter to the original Adjudicating Authority for a detailed examination of documentary evidence, including ER-1, to address the limitation issue thoroughly.
7. The appeal was disposed of with the direction for the Adjudicating Authority to decide on the limitation matter after a comprehensive review of all relevant evidence, providing the appellant with an opportunity to present their case.

[Order pronounced in the open Court on 01.11.2016]