2019 (4) TMI 22 - AT - Service Tax

CENVAT Credit - option to avail method for reversal - quantification of the amount to be reversed - non-filing of intimation/declaration before the jurisdictional Central Excise officer - Rule 6 of CCR - Scope of SCN - Held that - There was no specific allegation made therein regarding adoption of wrong formula by the appellant-assessee. Since the learned Commissioner (Appeals) has held that non-filing of intimation/declaration is a procedural lapse, he should have allowed the appeal in favour of the appellant-assessee, instead of remanding the matter to the adjudicating authority for quantification of the amount to be reversed by the appellant-assessee - Also, for consideration of the prescribed formula, the learned Commissioner (Appeals) has not specifically issued any notice to the appellant-assessee for the defence submissions - Hence, consideration of altogether a new ground in the impugned order cannot be sustained for judicial scrutiny and accordingly, the appeal of the appellant-assessee should succeed on such ground. Non-filing of intimation/declaration before the jurisdictional Central Excise officer regarding availment of option is a procedural lapse inasmuch as the information required to be contained in the declaration was already available with the department, which were furnished in the periodical ST-3 returns filed by the appellant-assessee - Tribunal in the case of Mercedes Benz India Pvt. Ltd. vs. CCE 2015 (8) TMI 24 - CESTAT MUMBAI has held that non-filing of intimation is only a procedural lapse, for which the benefit provided under Rule 6(3)(ii) read with Rule 6(3A) of the rules cannot be denied. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disputed common input service credit for trading activity.
2. Allegation of non-filing of intimation/declaration.
3. Adoption of incorrect formula for proportionate reversal of cenvat credit.

Analysis:

Issue 1: Disputed common input service credit for trading activity
The appellant-assessee, engaged in providing taxable services and trading spare parts, availed cenvat credit of service tax paid on common input services. The department disputed this credit for trading activity under Rule 6 of the Cenvat Credit Rules, 2004. The appellant-assessee reversed the credit and paid interest. The department initiated recovery proceedings, alleging failure to file intimation/declaration. The Commissioner (Appeals) favored the appellant, considering non-filing as a procedural lapse. However, remanded for quantification of reversed credit. The Revenue challenged this, arguing non-filing as a substantive requirement. The appellant contended the Commissioner exceeded the show cause notice scope. The Tribunal held that raising new grounds post-show cause notice is impermissible, citing relevant judicial precedents. The appeal succeeded based on these grounds.

Issue 2: Allegation of non-filing of intimation/declaration
The Tribunal found that the show cause notice lacked specific allegations on the appellant's use of an incorrect formula for credit reversal. As non-filing was deemed a procedural lapse, the Commissioner should have favored the appellant instead of remanding for quantification. The Tribunal reiterated that new issues cannot be introduced post-show cause notice without proper notice to the appellant. The non-filing of intimation/declaration was considered a procedural lapse, as the required information was available in filed returns, aligning with legal precedents. Consequently, the Tribunal dismissed the Revenue's appeal.

Issue 3: Adoption of incorrect formula for proportionate reversal of cenvat credit
The Tribunal emphasized that the Commissioner's consideration of a new ground without proper notice to the appellant was unjustifiable. The non-filing of intimation/declaration was viewed as a procedural lapse, as the necessary information was already with the department. Referring to established legal principles, the Tribunal dismissed the Revenue's appeal and allowed the appellant's appeal. The judgment highlighted that non-filing of intimation should not result in denial of benefits under the relevant rules.