Cenvat credit on loan-related input services upheld, while extended limitation failed for lack of suppression of facts.

Cenvat credit on collateral management charges for loans and advances was held admissible where the lending activity was not treated as an exempt service merely because interest on loans was outside service tax. The notice also failed on limitation because it was issued after a substantial delay despite proper books, statutory registers, and regular return filing, with no suppression of facts or contumacious conduct shown. On that basis, the demand was not sustainable and consequential relief followed in accordance with law.

---

---

Issues: (i) Whether the appellant was entitled to cenvat credit on input service used for collateral management charges in relation to loans and advances; (ii) whether the show cause notice could validly invoke the extended period of limitation in the absence of suppression of facts.

Issue (i): Whether the appellant was entitled to cenvat credit on input service used for collateral management charges in relation to loans and advances.

Analysis: The activity of giving loans was treated as an activity of the bank and not as a service. On the facts recorded, the notice proceeded on the premise that loans were an exempt service merely because interest on loans was not liable to service tax. The credit dispute therefore arose from the alleged use of the input service in relation to exempt activity.

Conclusion: The issue was decided against the Revenue and in favour of the assessee.

Issue (ii): Whether the show cause notice could validly invoke the extended period of limitation in the absence of suppression of facts.

Analysis: The notice was issued more than 32 months after the last date on which the return for the relevant financial year was due. The record showed maintenance of proper books, statutory registers, and regular filing of returns, and no suppression of facts or contumacious conduct was found.

Conclusion: The extended period of limitation was not available and the notice was barred on limitation.

Final Conclusion: The demand could not be sustained, and the assessee was granted consequential relief in accordance with law.

Ratio Decidendi: Mere non-taxability of interest on loans does not, by itself, convert lending activity into an exempt service, and the extended period cannot be invoked absent suppression of facts or contumacious conduct.

---