Tribunal grants appeal on cenvat credit denial for service tax, citing Revenue's inadequate actions

The Tribunal allowed the appeal, setting aside the denial of cenvat credit on service tax paid on input services at Unit-II. The Tribunal found that the Revenue's actions were insufficient to invoke the extended period of limitation, given their knowledge of the additional unit since 2006 and lack of rejection of registration requests. The Tribunal held that the order was unsustainable and granted relief to the appellant based on technical grounds, without delving into the merits of the case.

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Issues:
Challenge of denial of cenvat credit on service tax paid on input services at Unit-I utilized in additional premises (Unit No. II), demand of interest under Section 11AA, penalty under Section 11AC of Central Excise Act.

Analysis:
The appellant, engaged in manufacturing sheet metal products, avails cenvat credit of duty paid on inputs, capital goods, and service tax paid on input services. The appellant leased an additional premises due to space constraints and informed the Department about it. A declaration was filed for clearance of goods to the additional premises for packing and assembly, including a statement that goods would be returned within six months upon payment of duty. However, Preventive unit officers alleged that Unit-II was not registered under Central Excise Act, leading the appellant to reverse the service tax of input services received at Unit-II. A show-cause notice was issued later, accusing the appellant of non-registration and non-compliance with procedures, resulting in the denial of input service qualification.

The appellant's advocate argued that the Revenue was aware of the additional unit since 2006, as evidenced by the request and declaration submitted. The Revenue did not reject the request for registration/permission, and the declaration under Notification No. 214/1986 was not questioned. The Revenue's issuance of a show-cause notice in 2013, after seven years, was deemed not an act of suppression, as there was no positive evidence of appellant's conscious inaction. Citing a Supreme Court decision, the Tribunal found the Revenue's actions insufficient to invoke the extended period of limitation, setting aside the order on technical grounds.

The Tribunal noted that the Revenue's knowledge of the additional unit since 2006, lack of rejection of registration/permission request, and absence of evidence of suppression or conscious inaction by the appellant undermined the Revenue's case for invoking the extended limitation period. Relying on the Supreme Court precedent, the Tribunal held that the order was unsustainable and allowed the appeal based on technical grounds, with potential consequential benefits, as revisiting the merits was deemed academic.

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