Tribunal upholds extended limitation period under CCR 2014, grants credit pending verification

The Tribunal upheld the invoking of the extended period of limitation under Rule 14 of the CCR, 2014, along with the proviso to Section 73(1). The demand raised in the impugned order was sustained, except the appellant was granted entitlement to the full credit claimed under Rule 6(5), pending verification. The appeal was partially allowed in accordance with these findings.

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Issues Involved:
1. Denial of Cenvat credit on common input services used for both taxable and exempted services.
2. Applicability of Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules, 2004.
3. Time-barred nature of the show cause notice dated 06.01.2011.
4. Allegation of suppression of facts and the invocation of the extended period of limitation.
5. Entitlement to full Cenvat credit on input services specified in Rule 6(5) of the Cenvat Credit Rules, 2004.

Detailed Analysis:

1. Denial of Cenvat Credit on Common Input Services:
The impugned order denied the Cenvat credit availed by the appellant on common input services used to render both taxable and exempted services. The appellant maintained separate accounts for taxable services and did not avail of Cenvat credit for exempted services. However, for common input services, they availed the credit in full, claiming it did not exceed 20% of the output service tax liability as per Rule 6(3)(c) of the Cenvat Credit Rules, 2004. This restriction was removed from 01.04.2008, and Rule 6(3A) was introduced for proportionate reversal. The adjudicating authority ordered the reversal of the entire Cenvat credit availed on common input services.

2. Applicability of Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules, 2004:
The appellant argued that they complied with Rule 6(3) post-01.04.2008 by adhering to proportionate reversal under Rule 6(3A). Despite a delay in filing the option under Rule 6(3A), they claimed compliance with the proportionate reversal. The Tribunal, however, held that the appellant needed to follow either sub-rule 2 or sub-rule 3 of Rule 6 for common input services. By maintaining separate accounts and availing Cenvat credit only for taxable services, the appellant subscribed to sub-rule 2, making Rule 6(3) inapplicable.

3. Time-barred Nature of the Show Cause Notice:
The appellant contended that the show cause notice dated 06.01.2011 was time-barred for the period prior to September 2009, as an identical issue had been raised in an earlier show cause notice dated 12.10.2006. The Tribunal referred to the Hon'ble Supreme Court's decision in the Nizam Sugar case, which stated that the extended period could not be invoked in a second show cause notice if an earlier notice had been issued for identical facts. However, the Tribunal upheld the extended period of limitation, noting that SCL and SFL were separate entities prior to their merger, and the facts regarding the maintenance of separate accounts came to light only after the merger.

4. Allegation of Suppression of Facts and Invocation of Extended Period of Limitation:
The department justified the allegation of suppression of facts and the invocation of the extended period of limitation, arguing that the identical issue was raised only after the merger of SCL with SFL. The Tribunal agreed with the department, stating that the facts regarding the maintenance of separate accounts and the availing of common input services credit came to light only after the merger and verification by the department. Thus, the extended period of limitation under Rule 14 of the CCR read with the proviso to Section 73(1) was rightly invoked.

5. Entitlement to Full Cenvat Credit on Input Services Specified in Rule 6(5):
The appellant argued that they were entitled to full Cenvat credit on input services specified in Rule 6(5) of the Cenvat Credit Rules, 2004. The Tribunal agreed, noting that the adjudicating authority had allowed full credit for services under Rule 6(5) in the earlier proceedings. Therefore, the appellant was entitled to the entire credit claimed under Rule 6(5), subject to verification by the adjudicating authority.

Conclusion:
1. The invoking of the extended period in terms of Rule 14 of the CCR, 2014 read with the proviso to Section 73(1) is upheld.
2. The demand raised and confirmed in the impugned order is sustained, but the appellant is entitled to the entire credit claimed under Rule 6(5), subject to verification.
3. The appeal is partly allowed as above.

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