2019 (12) TMI 621 - AT - Service Tax

Extended period of limitation - CENVAT Credit - trading/exempt activity - common input services used for manufactured and exempt goods - non-maintenance of separate records - Rule 6(3) of the CENVAT Credit Rules, 2004 - HELD THAT - As found from the show-cause notice and even in the Order-in-Original there was no Service Tax liability shown in the table that pertains to financial year 2009-10, 2010-11, 2011-12, 2012-13 and the only Service Tax liability due against the appellant for the financial year 2008-09 against which last ST-3 return was filed on 22.04.2009. Show-cause notice been issued on 22.04.2009 is, therefore, barred by the period of limitation since issued one day after the stipulated period of 5 years is over which extended period can only be invocable under certain contingency primarily when appellant-assessee intended to evade payment of tax there was no intention shown in the documents available on record for the period 2012-13 2011-12 since Service Tax liability against appellant was shown as zero in the audit report for that period. It is not understood as to under what authority the Excise Officials had travelled beyond the period of 18 months to find out, if any Service Tax was due when they found no evidence of fraud, collusion, wilful misstatement, suppression of fact or contravention of the provision of the Finance Act or Rule within the statutorily prescribed 18 months - the respondent-department can travel only backward from the current assessment to the past period and not like the audit people who usually move forward from the year last audit was closed up to the current assessment/ financial year. Be that as it may, show-cause notice issued after expiry of 5 years would be barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Proportionate denial of CENVAT credits on trading considered exempted service under Rule 6(3) of CENVAT Credit Rules, 2004 challenged.

Analysis:
The appellant, a manufacturer and trader, faced a demand under Rule 6(3) of the CENVAT Credit Rules, 2004 for not maintaining separate accounts for exempted trading services rendered. The demand was based on a duty amount of ?1,25,199/- along with interest and penalty. The appellant contested the show-cause notice's timing beyond the 5-year limitation period and argued against invoking Rule 6(3) without proving intent to evade duty.

During the proceedings, the appellant's counsel highlighted the absence of allegations regarding duty evasion or suppression of facts to justify the extended period for issuing the show-cause notice. The appellant's position was that trading did not constitute a service, making Rule 6(3) inapplicable. In response, the authorized representative for the respondent-department defended the Commissioner (Appeals) order, emphasizing the timeliness of the show-cause notice based on the filing date of the Service Tax return.

Upon reviewing the case record, it was noted that the show-cause notice exceeded the 5-year limitation period and lacked evidence of fraud or intent to evade duty. The Tribunal emphasized that officials can only look back from the current assessment period, not forward beyond the statutory 18 months without clear violations. Citing legal precedents, the Tribunal ruled that the demand was time-barred and unsustainable.

Furthermore, the Tribunal clarified that trading, being a pure sale without any associated service component, does not attract Service Tax liability. Referring to a previous case, the Tribunal reinforced that pure trading falls under taxable jurisdiction without incurring Service Tax liability. Consequently, the appeal was allowed, setting aside the Commissioner's order dated 12.03.2018.

In conclusion, the Tribunal's detailed analysis focused on the timeliness of the show-cause notice, the absence of intent to evade duty, and the nature of trading activities in relation to Service Tax liability, leading to the favorable decision for the appellant.