2024 (9) TMI 108 - AT - Central Excise

Wrongful availment of common credit on input services used for trading and manufacture - period December 2008 to September 2013 - Time limitation - HELD THAT - In the present case, the appellant has reversed the proportionate credit attributable to trading form 1.4.2011 onwards. The Annexure I of the SCN would show that the appellant has reversed the credit w.e.f. 1.4.2011. The department has not disputed the quantification of the amount that has been reversed by the appellant for the period after 1.4.2011. There is no case for department that the amount reversed is not in accordance with the formula prescribed under Rule 6 (3A) (b) of CCR, 2004. The adjudicating authority has confirmed the total common input credit. There is no provision to deny the credit of input services used for manufacturing activity. Hence the demand raised in SCN and confirmed by adjudicating authority is erroneous. The reason given by adjudicating authority for confirming the entire common input credit is that appellant has availed credit on input services exclusively used for trading. On perusal of the SCN, it is found that these are merely assumptions made on the basis of invoices. It has not been established that the appellant has availed credit exclusively for trading. In the reply to SCN the appellant has stated that they have not availed credit on any input services exclusively used for trading. The confirmation of the entire common input service credit on such allegation is baseless. Time Limitation - HELD THAT - The issue as to whether trading can be considered as an exempted service was a debated issue prior to 1.4.2011. There were views expressed by various forums which held in favour of assesse. The issue is purely interpretational in nature. Further, w.e.f. 1.4.2011, the appellant has started reversing the proportionate credit which is clear from the Annexure to the SCN. Taking these aspects into consideration the appellant cannot be saddled with the guilt of suppression of facts with intent to evade payment of duty. There are no ingredients for invoking the extended period. The demand raised beyond the normal period is set aside as time barred. The appellant succeeds on the issue of limitation. The impugned order is modified to the extent of setting aside the demand, interest and penalties for the extended period. The appellant is liable to reverse the proportionate as under Rule 6 (3A) for the normal period. The amount already reversed can be adjusted and applied to the normal period (If not already reversed). The penalties imposed for the normal period are set aside for the same reasons applicable to the issue of limitation. Appeal allowed in part.

Summary

Issues:
1. Wrongful availment of common credit on input services used for trading and manufacture.
2. Eligibility of availing credit on input services used for trading activity.
3. Validity of demand raised for the period December 2008 to September 2013.
4. Application of the extended period for demand raised beyond the normal period.

Analysis:
The appellant, engaged in manufacturing service station equipment and trading goods, availed cenvat credit on input services used for both activities. The Department alleged wrongful availment of common credit on input services used for trading and manufacture. The appellant contended that they reversed the proportionate credit attributable to trading from 1.4.2011 onwards, as per the amended definition of 'exempted services.' The Tribunal noted that prior to 1.4.2011, there was confusion regarding credit eligibility for trading activities, which was resolved by the amendment. The appellant's reversal of credit post-amendment was found valid, and the demand for the period before 1.4.2011 was deemed erroneous.

The Department claimed that the appellant availed credit on input services exclusively used for trading, which was refuted by the appellant. The Tribunal found the Department's assumptions baseless, as the appellant denied availing such exclusive services for trading. The confirmation of the entire common input service credit based on these allegations was deemed unfounded. The demand for the period beyond the normal period was set aside as time-barred, as the appellant had started reversing credit post-amendment, indicating no intent to evade duty payment.

In conclusion, the Tribunal modified the impugned order by setting aside the demand, interest, and penalties for the extended period. The appellant was directed to reverse the proportionate credit for the normal period as per Rule 6 (3A), with adjustments for amounts already reversed. Penalties for the normal period were also set aside. The appeal was partly allowed, granting consequential reliefs to the appellant.