2020 (7) TMI 555 - AT - Central Excise

Utlization of CENVAT Credit - one-to-one co-relation between input services and output services required or not - period March 2009 to August 2009 - time bar - scope of SCN - HELD THAT - The manufacturer of excisable goods can take credit of CENVAT paid on input services and there is no such requirement for one to one co-relation and there is no bar on the utilization of CENVAT credit availed on input services for payment of tax on excisable goods manufactured and cleared. It has been held in numbers of cases that as far as the inputs or input services are availed on payment of duty and as long as they are capable of being used in the provision of service Tax and manufacture of excisable goods credit cannot be denied; there is no requirement of one to one correlation. Time Limitation - HELD THAT - Timely scrutiny of Returns by the Department would have shown that there is huge accumulated credit; Department was free to further investigate the matter and issue timely SCN. In view of the same, the appellants have a strong case on limitation too and the SCN is barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of CENVAT credit rules for utilization of credit on input services for excisable goods.
2. Time limitation for issuing Show Cause Notice (SCN) based on audit findings.

Interpretation of CENVAT Credit Rules:
The appellants, registered for taxable output services since 2005, had accumulated credit for input services and utilized it for duty payment on excisable goods. The Revenue objected to this utilization and issued an SCN in 2011. The appellants argued that cross-sectoral utilization of credit is permitted under CENVAT rules, citing various legal precedents. The Tribunal noted that there is no requirement for one-to-one correlation for utilizing CENVAT credit on input services for excisable goods. Referring to a Finance Minister's speech and CBEC clarification, the Tribunal held that credit accumulation for input services can be used for excise duty payment without restrictions. The Tribunal found in favor of the appellants, emphasizing that the impugned order was not maintainable.

Time Limitation for SCN:
The appellants contested the time limitation of the SCN issued in 2011, claiming it was time-barred as the normal period expired in 2010. They argued that regular filing of returns and lack of suppression justified the limitation defense. The Tribunal agreed, stating that the Department could have scrutinized returns timely to discover the accumulated credit, making the SCN time-barred. The Tribunal ruled in favor of the appellants on the limitation issue, concluding that the impugned order did not survive on merits or limitation grounds. Consequently, the appeal was allowed, with the judgment delivered on 14/07/2020.