2019 (2) TMI 877 - AT - Service Tax

Time Limitation - suppression of facts or not - Held that - The Audit of the record of the appellants was conducted in the month of December 2012 wherein the issue of ineligible credit availed by the appellant was raised on the basis of the same Audit Report; without further verification a SCN is issued on 03.11.2015 that is nearly three years after the Audit and there is no material on record to show that the appellants have suppressed the material facts with intent to evade payment of duty. It is pertinent to note that in the earlier Audit conducted in the year 2010 the report of which is on record, the Department did not raise this objection with regard to service provided by the service provider and subsequently also there is no demand whereas the appellant is continuously availing the service from the service provider and paying the Service Tax on reverse charge basis and availing the CENVAT credit - when the Department was aware of all the facts relating to the payment of Service Tax to the service provider then alleging suppression of facts is not justified. The impugned order is not sustainable in law as the entire demand confirmed by the Revenue is barred by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Rejection of CENVAT credit by Commissioner (A)
- Allegation of wilful suppression of facts by the Department
- Delay in issuing Show Cause Notice (SCN)
- Validity of SCN issued based on audit observation
- Applicability of limitation period for demand confirmation

Analysis:

The appeal was against the Commissioner (A)'s order rejecting the appellant's appeal regarding the availed CENVAT credit. The appellant, engaged in manufacturing Industrial Valves, was alleged to have availed ineligible credit of ?5,76,981. The Joint Commissioner confirmed the demand along with interest and penalty. The appellant argued that the order was unsustainable as it did not consider the evidence properly and contradicted judicial precedents. They highlighted an agreement with a service provider for business diversification, asserting that no services were actually availed. The Department's reliance on the agreement without verification was contested. The appellant also argued that the Department was aware of their activities and previous service tax payments, making the wilful suppression allegation baseless.

The appellant further contended that the SCN issued solely on audit observations without record verification was invalid. They cited a case to support this claim. Additionally, they pointed out an unreasonable delay in issuing the SCN after the audit, questioning the Department's intention to allege wilful suppression. The appellant had been transparent in their ER-1 Returns, disclosing CENVAT credit details to the Department.

The Department defended the order, emphasizing the agreement's terms regarding service scope and criticized the appellant's post-audit clarifications. After reviewing both parties' submissions and evidence, the Tribunal found the Department's actions flawed. The SCN issued three years after the audit lacked evidence of intentional duty evasion. Previous audits did not raise objections, and the appellant had been compliant with Service Tax payments and CENVAT credit availing. The Tribunal referenced relevant case law to support the decision, highlighting the lack of material to justify the extended limitation period for demand confirmation. Citing precedents, the Tribunal concluded that the entire demand was time-barred due to the absence of evidence supporting the wilful suppression claim, leading to the appeal's allowance.

In the final judgment, the Tribunal set aside the impugned order based on limitation grounds without delving into the case's merits, ultimately allowing the appeal.