2013 (1) TMI 764 - AT - Central Excise

Appellant's Cenvat credit claim upheld due to genuine belief in eligibility. Penalties overturned.

The appellant availed cenvat credit of service tax paid by the Commission Agent but faced a show-cause notice challenging this. The lower authorities ... Liability of Cenvat Credit of service tax paid by the Commission Agent - denial of credit on the ground that appellant is not eligible for credit of service tax paid by the Commission Agent - Held that: - the Hon’ble High Court of Gujarat, in the case of Cadila Healthcare Ltd. [2009 (8) TMI 172 - CESTAT, AHMEDABAD], has held that service tax paid by the Commission Agent would not qualify for the purpose of availment of cenvat credit and answered the question in favor of the Revenue against the assessee - credit allowed. Extended period of limitation - Held that: - The appellant herein has availed cenvat credit on service tax paid to the Commission Agent on the bona-fide belief, that the said commission paid by him is in line of business - the appellant could have entertained a bona-fide belief that he is eligible to avail cenvat credit of service tax paid to the commission agent during the period from May, 2005 to March, 2007 - the appellant has made out a case on limitation - the SCN issued on 03/06/2010 for the demand of cenvat credit availed on service tax paid by the Commission Agent during the period from May, 2005 to March, 2007 is blatently time barred. Appeal allowed - credit allowed - decided in favor of appellant. Issues:- Availment of cenvat credit of service tax paid by Commission Agent- Merits of the decision by lower authorities- Applicability of limitation periodAnalysis:Availment of cenvat credit of service tax paid by Commission Agent:The appellant availed cenvat credit of service tax paid by the Commission Agent for the period from May 2005 to March 2007. A show-cause notice was issued to recover the credit on the grounds of ineligibility. Both the Adjudicating Authority and the First Appellate Authority rejected the appellant's claim. The appellant argued that the service tax liability was discharged by the Commission Agent, making them eligible for the credit. However, the authorities did not agree, citing the case law precedent set by the Hon'ble High Court of Gujarat in the Cadila Healthcare Ltd. case, which held that service tax paid by the Commission Agent does not qualify for cenvat credit.Merits of the decision by lower authorities:The appellate authority dismissed the appellant's argument on limitation, invoking the extended period due to lack of details in the appellant's returns regarding the availed credit of service tax paid by dealers on commission. The authority imposed penalties under the Cenvat Credit Rules. However, the presiding judge found this decision to be incorrect, as the appellant acted in good faith believing they were eligible for the credit based on previous legal interpretations. The judge referenced other cases supporting the appellant's position and concluded that the show-cause notice for the demand of cenvat credit was time-barred.Applicability of limitation period:The judge held that the appellant had a genuine belief in their eligibility to avail cenvat credit on service tax paid to the Commission Agent. Considering the various legal precedents and the appellant's good faith, the judge determined that the show-cause notice issued in 2010 for the demand of cenvat credit availed during 2005-2007 was time-barred. Consequently, the impugned order was set aside, and the appeal was allowed.