2020 (1) TMI 167 - AT - Service Tax

Tribunal allows appeal on CENVAT credit disallowance due to limitation issues

M/s Philips Carbon Black Ltd. Versus Commissioner of CGST & Central Excise, Bolpur

The Tribunal allowed the appeal, setting aside the impugned order disallowing CENVAT credit on ISD invoices and invoices from Delicious Trade Links ... Distribution of CENVAT Credit - reverse charge mechanism - ISD distributed credit of Service Tax paid including paid under the reverse charge basis on various input services - Rule 7A of CENVAT Credit Rules, 2004 - time limitation - HELD THAT:- The invoices issued by Delicious Trade Links Private Limited, credit for which is disputed by the Revenue Department, forms part of ISD invoice dated 31/08/2005 and parallel proceedings i.e. double demand. In the present facts, the Department had conducted an audit of the Appellant unit (pre- 2006) and scrutinized the ER – 1 return filed for the month of August 2005 wherein the Appellant had availed CENVAT credit in respect of the said invoices issued by Delicious Trade Links Private Limited, and this fact is also recorded in Show Cause notice dated 06/09/2006. Time Limitation - HELD THAT:- In this case the entire facts were within the knowledge of the Revenue Department and there is no suppression of material facts from the Department. On the contrary the relevant facts and information were known to the Revenue Department by the ER 1 filed and during course of its audit specifically concerning CENVAT credit. Despite this, the Revenue Department issued the subsequent Show Cause notice which led to duplicity of demand and these proceedings - demand is for longer period and is thus hit by limitation. Appeal allowed. Issues:1. Disallowance of CENVAT credit on ISD invoices.2. Disallowance of credit on invoices issued by Delicious Trade Links Private Limited.3. Double demand and duplicity of demand.4. Barred by limitation - invoking extended period.Analysis:Issue 1: Disallowance of CENVAT credit on ISD invoicesThe Appellant, engaged in the manufacture and sale of 'Carbon Black,' distributed CENVAT credit from its Head Office to its Durgapur unit under an ISD invoice. The Central Excise Revenue Audit found the ISD invoices defective, leading to Show Cause notices and subsequent disallowance of the credit. The Tribunal remanded the matter concerning an earlier Show Cause notice, which was pending. The Counsel argued against incorrect availment, citing judgments and double jeopardy concerns.Issue 2: Disallowance of credit on invoices by Delicious Trade LinksA Show Cause notice was issued specifically for credit availed on invoices from Delicious Trade Links. The Appellant contended that ongoing proceedings regarding ISD invoices should prevent further disallowance, citing judgments to support the argument. The Counsel highlighted that the Revenue Department had prior knowledge of the credits, making the subsequent notice and demand barred by limitation.Issue 3: Double demand and duplicity of demandThe Counsel argued that the ongoing proceedings and prior disallowance of CENVAT credit on ISD invoices should prevent further allegations of incorrect availment, leading to double jeopardy. The Tribunal found that the Department's subsequent Show Cause notice resulted in duplicity of demand, setting aside the impugned order and allowing the appeal.Issue 4: Barred by limitation - invoking extended periodThe Tribunal noted that the Revenue Department had prior knowledge of the facts and information regarding the credits, as evidenced by the audit and scrutiny conducted pre-2006. Despite this, the Department issued a subsequent Show Cause notice beyond the limitation period, leading to duplicity of demand and rendering the demand hit by limitation. The impugned order was set aside, and the appeal was allowed on this ground.