2019 (7) TMI 1012 - AT - Central Excise

Tribunal Allows Appeals on Limitation Grounds, Remands for Fresh Adjudication

The Tribunal allowed Appeal Nos. E/41761/2018 and E/41762/2018, setting aside the impugned orders based on the grounds of limitation. Appeal No. ... Extended period of limitation - suppression of facts - eligibility of Cenvat credit distributed by an ISD - jurisdiction to examine ISD credit at recipient unit - ineligible input service (construction service) excluded under Rule 2(l) of CCR - ineligibility under Rule 7(c) and Rule 7(d) of CCR - remand for fresh adjudicationExtended period of limitation - suppression of facts - Whether demands in appeals E/41761/2019 and E/41762/2019 are time-barred and whether extended period of limitation was rightly invoked. - HELD THAT: - The Tribunal examined the record and observed that the Revenue had earlier queries and correspondence with the assessee (including an early query dated 20.09.2013 and a detailed reply dated 10.06.2014) which put the Department on notice regarding the matters in dispute. Applying the reasoning in the cited Allahabad High Court decision, the Tribunal held that where the Department had knowledge of the facts through correspondence, invocation of the extended period on the ground of suppression is not justified. The Revenue failed to produce documentary evidence of deliberate suppression; consequently the condition precedent for invoking the extended period was not fulfilled and the demands beyond the normal limitation period could not be sustained. [Paras 7]Impugned orders in appeals E/41761/2019 and E/41762/2019 set aside as time-barred; appeals allowed on limitation with consequential benefits as per law.Eligibility of Cenvat credit distributed by an ISD - jurisdiction to examine ISD credit at recipient unit - ineligibility under Rule 7(c) and Rule 7(d) of CCR - remand for fresh adjudication - Whether the adjudication in appeal E/41763/2019 correctly considered the documents and case law relied upon by the assessee regarding ISD distribution and eligibility of credit, and whether the matter requires fresh adjudication. - HELD THAT: - On review the Tribunal found that the adjudicating authority and Commissioner (Appeals) had not considered documents and authorities produced by the assessee relating to the ISD distribution and eligibility of credit under the Cenvat Credit Rules. Given the factual and documentary materials relied upon by the assessee and the contested legal contentions on eligibility and distribution by the ISD, the Tribunal exercised its discretion to remit the matter for de novo adjudication so that the adjudicating authority may consider the arguments, documents and case law afresh. All contentions were left open for determination on remand. [Paras 7]Impugned order in appeal E/41763/2019 set aside and the matter remanded to the adjudicating authority for fresh adjudication after considering the arguments and documents filed by the assessee.Final Conclusion: Appeals E/41761/2019 and E/41762/2019 allowed as barred by limitation; appeal E/41763/2019 allowed by remand for de novo adjudication to consider the assessee's documents and authorities. Issues Involved:1. Eligibility of Cenvat credit availed on construction services.2. Jurisdiction of issuing Show Cause Notice (SCN) to the recipient unit.3. Invocation of extended period of limitation.4. Reversal of Cenvat credit at the ISD level.5. Revenue neutrality and distribution of Cenvat credit by ISD.Detailed Analysis:1. Eligibility of Cenvat Credit on Construction Services:In Appeal Nos. E/41761/2018 and E/41762/2018, the department alleged that the appellant-assessee availed ineligible Cenvat credit on construction services, which are specifically excluded from the definition of input service under Rule 2(l) of the Cenvat Credit Rules (CCR), 2004. The Show Cause Notices (SCNs) were issued for recovery of the ineligible credit along with interest and penalties. The adjudicating authority and the Commissioner (Appeals) upheld the recovery. However, the appellant contended that the inadmissible Cenvat credit was reversed by the ISD along with interest, and further reversal at the unit level would result in double payment. The appellant argued that the eligibility of Cenvat credit distributed by ISD should be examined by the jurisdictional authorities at the ISD level, not at the recipient unit level.2. Jurisdiction of Issuing SCN to Recipient Unit:The appellant argued that the eligibility of Cenvat credit distributed by ISD should be examined only at the ISD level by the concerned jurisdictional authorities. It was contended that no SCN should be issued to the recipient unit. The Tribunal found merit in the appellant's argument, stating that the eligibility of Cenvat credit distributed by ISD can only be examined at the ISD level.3. Invocation of Extended Period of Limitation:The appellant contended that the SCNs were issued beyond the normal limitation period and that the extended period of limitation was not invokable as there was no willful suppression of facts. The Tribunal referred to the decision in Commissioner of Customs, Central Excise and Service Tax Vs. M/s. Monsanto Manufacturer Pvt. Ltd., where it was held that the extended period of limitation could not be invoked if the department was aware of the facts. In the present case, the Tribunal observed that the department was aware of the appellant's activities through various correspondences and queries, and thus, the extended period of limitation was not justified.4. Reversal of Cenvat Credit at ISD Level:The appellant argued that the reversal of inadmissible Cenvat credit by the ISD was sufficient and further reversal at the recipient unit level was not required. The Tribunal agreed with the appellant, stating that the reversal made at the ISD level was correct and further reversal would amount to double payment.5. Revenue Neutrality and Distribution of Cenvat Credit by ISD:In Appeal No. E/41763/2018, the appellant contended that the disputed credit distributed by the ISD pertained to the brands manufactured by the appellant and was in accordance with the ISD regulations. The appellant argued that the demand was unsustainable due to revenue neutrality, as the credit availed was for services pertaining to multiple units and was distributed on a pro-rata basis. The Tribunal noted that the documents and case laws relied upon by the appellant were not considered by the lower authorities and remanded the matter for fresh adjudication.Conclusion:The Tribunal allowed Appeal Nos. E/41761/2018 and E/41762/2018 on the grounds of limitation, setting aside the impugned orders. For Appeal No. E/41763/2018, the Tribunal remanded the matter to the adjudicating authority for fresh adjudication, considering the documents and arguments furnished by the appellant. The appeals were disposed of accordingly.