2022 (10) TMI 195 - AT - Service Tax

Tribunal allows appeal for Cenvat credit on manufacturing services

The Tribunal allowed the appeal, holding that the appellant was entitled to avail Cenvat credit on services used in the manufacturing process, despite ... CENVAT Credit of service tax paid not used by the appellant in manufacture of excisable goods - invoces were issued to other units and not to the appellant’s unit - suppression of facts - wilful misstatement in contravention of rules with the intent to evade payment of service tax - time limitation - HELD THAT:- From admitted facts, it becomes clear that the appellants have availed the input services at their captive mines. Though the captive mines have separate registration but at the same PAN No. as that of the appellants and as such both are so associated that they have interest, directly or indirectly in the business of each other. Also for the reason that coal extracted in these Mines is the raw material for appellants to manufacture their final product. Moreover the captive use of coal has no where been denied - The invoices are mentioning all the details as are required as per rule 9 (1)(f) of Cenvat Credit Rules. The case of appellant squarely gets covered under the purview of Rule 2 (l) of Cenvat Credit Rules and also under proviso to Rule 9(2) of CCR, 2004. Hence the findings that appellants case is not covered under 2 (l) of CCR are absolutely wrong. The findings of Commissioner (Appeals) are accordingly, held as being liable to be set aside. Tour operator services - Department has alleged those services to have been personally consumed by the employees of the appellant, hence, were ineligible for Cenvat credit - HELD THAT:- It becomes clear that the visit of the employees was purely for enhancing their skills for the better output of the final product of the appellant. Hence, those services have wrongly been alleged to have been personally consumed services. Those services also to be eligible input service for availment of Cenvat credit. With these observations all the findings of commissioner (Appeals) qua the merits of the impugned aforementioned (a) & (b) issue are held as liable to be set aside. Suppression of facts - wilful misstatement in contravention of rules with the intent to evade payment of service tax or not - HELD THAT:- The Show Cause Notice has been issued based upon the scrutiny of appellant’s own document maintained by them in their regular course of business (the documents were in the form of invoices duly entered in appellants record). There is also no denial for the regular filing of the returns by the appellant. It becomes clear that there is no suppression of facts as is alleged by the Department - the Show Cause Notice has not specified any commission or omission which may reveal intention to evade the payment of duty. The only allegation is that had the Department not conducted audit, the appellant would have succeeded to defraud the Government Exchequer. Time Limitation - HELD THAT:- Show Cause Notice being barred by time were raised before original adjudication authority also as is apparent from para E of the reply given to Show Cause Notice but the authority has not given any speaking finding identifying and specifying the acts of omission and commission with supporting evidence warranting invocation of extended period of limitation. The adjudication has failed on merits as well as on point of limitation The findings are therefore hereby set aside - Appeal allowed - decided in favor of appellant. Issues Involved:1. Ineligibility of CENVAT Credit on services not used by the appellant in the manufacture of excisable goods.2. Invoices issued to other units and not to the appellant's unit.3. Allegation of suppression of facts and willful misstatement with intent to evade payment of service tax.4. Invocation of extended period of limitation for issuing the Show Cause Notice.Detailed Analysis:1. Ineligibility of CENVAT Credit on services not used by the appellant in the manufacture of excisable goods:The appellant was engaged in the manufacture of various products and availed Cenvat credit on inputs, input services, and capital goods under the Cenvat Credit Rules, 2004. The department observed that the appellant availed Cenvat credit for services not received by the unit mentioned in the invoices, thus contravening Rule 9(1) of the Cenvat Credit Rules, 2004. However, the appellant argued that their manufacturing unit, spread across various locations, was centrally registered, and the services availed by any unit, including captive mines, qualified as eligible input services. The Tribunal held that the appellant was entitled to avail the Cenvat credit as the services were used in the manufacturing process, and the invoices contained all required details as per Rule 9(1)(f) of the Cenvat Credit Rules.2. Invoices issued to other units and not to the appellant's unit:The department contended that the invoices were issued to other units and not to the appellant's unit. The appellant countered that all their units, including the captive mines, were registered under a centralized registration, and the services availed by any unit were eligible for Cenvat credit. The Tribunal observed that the invoices mentioned the appellant's registered address and that the services were availed by the appellant's units, making them eligible for Cenvat credit. The Tribunal found the department's findings in para 9 of the Commissioner (Appeals) to be incorrect and set them aside.3. Allegation of suppression of facts and willful misstatement with intent to evade payment of service tax:The department alleged that the appellant suppressed facts and made willful misstatements to evade service tax. The appellant argued that they regularly filed returns with all necessary details and that the department's allegations were unfounded. The Tribunal noted that the Show Cause Notice did not specify any acts of omission or commission indicating an intention to evade duty. The Tribunal referenced the Supreme Court's ruling in Collector of Central Excise vs. HMM Ltd, which stated that an intention to evade duty must be explicitly mentioned in the Show Cause Notice. The Tribunal found no evidence of suppression or misconduct and held that the department's allegations were incorrect.4. Invocation of extended period of limitation for issuing the Show Cause Notice:The appellant objected to the invocation of the extended period of limitation, arguing that the Show Cause Notice was issued beyond the normal period of limitation and that there was no willful misstatement or suppression of facts. The Tribunal observed that the Show Cause Notice was based on the appellant's own documents maintained in the regular course of business and that the returns were filed on time. The Tribunal cited the Supreme Court's decision in Raj Bahadur Narayan, which emphasized that a Show Cause Notice must specifically state the reasons for invoking the extended period of limitation. The Tribunal concluded that the department had no reason to invoke the extended period and held the Show Cause Notice as unsustainable due to being barred by limitation.Conclusion:The Tribunal held that the grounds for rejecting the availment of Cenvat credit were wrongly raised. The adjudication failed on merits and on the point of limitation. The appellant was found to have rightly availed the Cenvat credit of eligible input services. Consequently, the appeal was allowed, and the findings of the Commissioner (Appeals) were set aside.