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TMI Blog2024 (8) TMI 1214X X X X Extracts X X X X X X X X Extracts X X X X ..... evied or short paid or erroneously refunded by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of the Finance Act or of the Rules made thereunder with the intent to evade payment of Service Tax, then the limitation for serving notice upon the person chargeable with the Service Tax is extended upto 5 (five) years from the relevant date. Whether the respondent Company, in its ST Return, had disclosed all the relevant information regarding availment of CENVAT Credit while submitting ST-3 Returns? - HELD THAT:- On looking into the show-cause notice, it is clear that the respondent Company had provided every details regarding availment of CENVAT Credit in the ST-3 Returns. In the show-cause notice, the details provided by the respondent in ST-3 Return, had been taken into consideration by the Commissioner, Central Excise Service Tax. It is also to be noticed that in the said show-cause notice, it is nowhere mentioned that the respondent had misstated any fact with intent to evade the payment of Service Tax - The findings recorded by the Commissioner, Central Excise Service Tax to the effect that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out of Order-in-Original No. 01/ST/ADJ/Commr./Dib/14-15 dated 23.05.2014 passed by the Commissioner of Central Excise and Service Tax, Dibrugarh), whereby the appeal filed by the respondent was allowed with consequential relief and the impugned demand was set aside. 3. The appeal was admitted vide order dated 15.09.2021 passed by this Court and the following substantial question of law was framed for adjudication: Whether under the peculiar facts and circumstances of the case CESTAT, Kolkata was correct in holding that the demand of CENVAT Credit of Central Excise Duty utilized by the assessee was barred by limitation? 4. The brief facts of the case are that the respondent M/s North Eastern Cables and Conductors Private Limited (hereinafter referred to be as the respondent Company ), having its Service Tax Registration under Jorhat Division, had provided services under the category of Erection, Commissioning or Installation Services to various organizations like Electricity Board etc. under the specific contract. Apart from that, the respondent Company had also supplied materials like RCC Poles, conductors, angles etc. under separate and independent contract. 5. According to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lizing the Cenvat Credit, reversed an amount of Rs. 8,82,52,170.00 on 31.03.11 but interest thereon is not yet paid. Rule 14 of the Cenvat Credit Rules, 2004 stipulates that where Cenvat Credit had been taken and utilized wrongly the same along with interest shall be recovered under Section 75 of the Finance Act, 1994. Whereas, the noticee had reversed the principal amount on their assessment and the interest thereon of Rs.1,19,16,571.00 stands recoverable from them. (Enclosed as Annexure B) SUMMARY OF CENVAT CREDIT AVAILED, UTILIZED AND REVERSED Cenvat Credit S. Tax Ed. Cess S HE Cess Total Availed during 01.10.09 to 31.03.11 98558079.00 1971958.00 806968.00 101337005.00 Utilized during 01.10.09 to 31.03.11 12703718.00 254080.00 127037.00 13084835.00 Reversed as on 31.03.11 85854361.00 1717878.00 679931.00 88252170.00 Whereas, it appears that the utilization of Cenvat Credit of Rs. 1,27,03,718.00 as Service Tax, Rs. 2,54,080.00 as Education Cess and Rs.1,27,037.00 as Secondary Higher Education Cess aggregating to Rs. 1,30,84,835.00 (Rupees One Crore Thirty Lakh Eighty Four Thousand Eight Hundred Thirty Five) only for payment of service tax is not permissible in terms of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Finance Act, 1994 and Rules made thereunder or by any other law that are for the time being in force in India. 8. After receiving the above notice, the respondent submitted its reply. The relevant portion of the reply filed submitted by the respondent is reproduced hereunder: 2.0. Reply of the noticee:- The noticee vide their letter Ref. No. NECON/CE/SCN/01/2013-14 dated 7th December, 2013 have submitted their reply wherein they have inter alia stated that : 2.1. The Noticee has been submitting the ST-3 Returns along with relevant records documents as enclosure to the Returns since obtaining the registration. No fact has ever been suppressed or mis-reported. 2.2. The credit under dispute was taken with bona fide belief that the same are eligible for credit under cenvat credit rules the credits so taken and utilized were duly reflected in the relevant returns as well as submission of said returns were duly made to the proper office enclosing all the relevant documents where the details of the credits were reflected and the credits were in the knowledge of the dept, and no objection was raised by the deptt. Nor the deptt. has ever said that the credits were irregular until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as aforesaid alleged has happened. But only contravention has nothing to do in case of extended period. It is very much necessary that the intention to evade payment of duty must be present. Here in the instant case, as all the particulars were already declared, the intention to evade payment of duty is absent. Hence, extended period is not invokable. Therefore the SCN in question is not sustainable and liable to be quashed and set aside. (b) (i) The notice under Section 11 A must be issued within one year of the relevant date of submission of ST-3 return in question. The instant notice issued beyond one year; hence stands as time barred; (ii) As per Section 73 of Service Tax Act, when there is no suppression, mis-statement, fraud, collusion etc. no notice can be issued after one year or eighteen months as the case may be and question of penalty does not arise at all. 2.8. SCN based on Audit objection:- (a) Larger period of limitation not invokable when SCN is issued based on audit objection [ Aditya College of Competitive Exam Vs. CCE; Visakhapattanam-2009 (16) STR. 154 (Tri Bong)]. (b) Demand based on audit objection and limitation : The tribunal held that when audit objections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or suppression of fact. There may be some elements of mis-statement or suppression of fact which may happen even after regular submission of ST-3 Returns. Hence, the department is required to investigate or to audit an assessee under the umbrella of the department. Besides, I find that the said noticee had taken and utilized ineligible cenvat credit violating the provision of Cenvat Credit Rules, 2004. They even did not reverse the wrongly taken Cenvat Credit until audit had pointed out. After the completion of audit they reversed the amount of Cenvat Credit which was not utilized upto the date of audit. Had the audit not unearthed the fact, it would have remained hidden. Therefore, I find that there was an element of mis-statement and contravention of Service Tax Rules with intent to evade payment of Service Tax. Had the audit not pointed out, they would have utilized the whole amount instead of reversing the ineligible cenvat Credit which was wrongly taken and thereby they might have evaded payment of Service Tax for providing taxable services. So, the ineligible Cenvat Credits that were utilized for payment of Service Tax for providing taxable service under the category of E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been availed wrongly without any intent to evade payment of service tax. We find that in the course of adjudication, the appellant specifically submitted the plea that they disclosed details of availment of credit in the ST-3 returns and that there is no evidence to the contrary to prove that credit has been willfully availed to defraud the Revenue. In the instant case, we observe that the SCN has not shown any positive evidence to prove willful fraud or suppression to justify invocation of extended period of limitation. 8. We take note of the decision of the Tribunal in the case of Ultra Tech Cement Ltd. v. CCE, Jaipur-II [2014 (48) taxmann.com 99 (New Delhi-CESTAT), wherein it has been held that: 2. Without going into the merits of the case, I find that the Revenue has invoked the longer period of limitation by simplicitor observing that the appellant has not disclosed the nature of service in respect of which credit was availed. Commissioner (Appeals) has observed that the returns filed by the appellant only shows the total amount of credit by which it cannot be inferred that credit of certain inadmissible input services was availed. 3. However, I find no justification in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order dated 04.12.2019. 14. Mr. Keyal has submitted that in the above facts and circumstances of the case, the appeal filed by the appellant is liable to be allowed and the substantial question of law, so framed, is liable to be answered in the negative. 15. In support of the above contentions, Mr. Keyal has placed reliance on the decision of the Hon ble Supreme Court rendered in M/s Modipon Fibre Company, Modinagar, UP vs. Commissioner of Central Excise, Meerut, reported in 2007 0 Supreme (SC) 1391 [Appeal (Civil) No. 8529-8531 of 2001 with Civil Appeal Nos.2008-2010 of 2002, decided on 25.10.2007]. 16. Per Contra, Mr. G.N. Sahewalla, learned senior counsel assisted by Mr. H.K. Sarma, learned counsel for the respondent Company has vehemently opposed the writ appeal and has submitted that it is not the case of the appellant that the respondent had not disclosed the details of the CENVAT Credit of Central Excise Duty as Service Tax, Education Cess, Secondary Higher Education Cess. The Respondent Company has not suppressed anything in the Return. Every detail was with the Department. However, despite having all these details, till the audit objection was raised, no notice was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant appeal filed on behalf of the appellant and the same is liable to be dismissed and the question of law, so framed, is to be answered in affirmative. 20. Heard the learned counsel appearing for the parties and also perused the material available on record. 21. It is not in dispute that the respondent Company had availed ineligible CENVAT Credit which was not permissible in terms of the provisions of CENVAT Credit Rules, 2004. It is also not in dispute that the total amount of ineligible CENVAT Credit which includes Service Tax, Education Cess, Secondary Higher Education Cess comes to Rs. 1,30,84,835/-. 22. As per Section 73 of the Service Tax (Finance Act, 1994), where any service tax is not levied or paid, short-levied or short-paid or erroneously refunded, a show-cause notice is required to be served upon the person chargeable with the Service Tax within a period of 18(eighteen) months from the relevant date. However, where any Service Tax has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice Tax. The findings recorded by the Commissioner, Central Excise Service Tax to the effect that there was an element of misstatement and contravention of Service Tax Rules with the intent to evade payment of Service Tax is perverse, as the said finding is not based on any material available before it. 24. The Hon ble Supreme Court in various pronouncements has categorically held that the fact of willful misstatement or suppression should specifically be mentioned in the show-cause notice. In Continental Foundation Joint Venture Holding, Nathpa, H.P Vs. CCE, Chandigarh-I (supra), the Hon ble Supreme Court has defined the expression suppression in para No.12, which reads as under: 12. The expression suppression has been used in the proviso to Section 11-A of the Act accompanied by very strong words as fraud or collusion and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop (sic evade) the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enlarged to five years. The contention of the respondent was that there was no positive act by it. There was only mere inaction. It was further contended that the Department was aware of the receipt of interchange fee by the respondent as issuing bank. There were audits. These arguments have been rejected by the Commissioner by relying on the law laid down by this Court in Assn. of Leasing Financial Service Companies Vs. Union of India, [(2011)2 SCC 352]. The aforesaid decision was rendered under Section 11-A of the Act. The relevant provisions of Section 11-A in this regard are pari materia with the corresponding provisions in Section 73 of the Act. Suppression is found in both statutes as a ground to extend the period. In the aforesaid judgment of this Court has held that the period begins with knowledge by the Department. 111. While on suppression, I may notice the judgment of this Court again rendered under Section 11-A of Central Excise Act and reported in CCE V. Bajaj Auto Ltd. [(2010) 13 SCC 117]. In the said case, I need to notice the following paragraphs: (SCC pp.123-24, paras 15-19) 15. Section 11-A of the Act empowers the Central Excise Officer to initiate proceedings wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollusion are concerned, it is evident that the requisite intent i.e. intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word willful preceding the words misstatement or suppression of facts which means with intent to evade duty. The next set of words contravention of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty . It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11-A. Misstatement or suppression of fact must be wilful. 18. In Anand Nishikawa Co. Ltd. v. CCE [(2005) 7 SCC 749] this Court has observed: (SCC p. 759, para 27) 27. we find that suppression of facts can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done and not that he must have done, would not render it suppression. It is settled law that mere f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of the proviso to Section 11-A. Misstatement or suppression of fact must be wilful. This decision was followed in Uniworth Textiles Ltd. v. Commissioner of Central Excise [(2013) 9 SCC 753] where it was stated that: (SCC p.762 para 12) 12 The conclusion that mere nonpayment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere nonpayment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or willful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso. 180. Therefore, with regards to the Revenue s allegation of wilful suppression, I find no merit given that this was not the allegation or scope of the show-c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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