2023 (7) TMI 198 - AT - Service Tax

Appeal Dismissed: Excess CENVAT Credit & Baggage Charge Demands Deemed Unsustainable; Limitation Period Exceeded.

Commissioner, Service Tax Commissionerate Delhi-III Versus M/s. Spicejet Ltd.

The Commissioner dismissed the department's appeal, concluding that the demand for Rs. 21.55 crores for excess CENVAT credit was unsustainable, as the ... CENVAT Credit - rule 14 of the 2004 Credit Rules read with section 11A of the Central Excise Act, 1944 - levy of penalty under section 15(3) of the 2004 Credit Rules - contravention of rule 6(3A) of the 2004 Credit Rules - levy of service tax on excess baggage charges recovered from passengers - invocation of provisions of section 73(1) of the Finance Act for suppression of facts. Extended period of limitation - HELD THAT:- In the present case, the show cause notice was issued on 21.10.2014. In regard to the demand of CENVAT credit taken in excess of rule 6(3A) of the 2004 Credit Rules, the period of dispute is from July 2010 to March 2011. In regard to the demand of service tax short paid on excess baggage charges, the period of dispute is from April 2009 to March 2012. In the present case, the entire demand is for the extended period of limitation - in the absence of any challenge to this finding, the extended period of limitation could not have been invoked. When the entire demand proposed in the show cause notice is for the extended period of limitation, the demand proposed in the show cause notice has to be set aside, irrespective of the challenge by the department to the issues on merit. The audit of the statutory records of the respondent was conducted from 02.05.2012 to 08.05.2012. The same issues and demand were suggested in the audit report. The respondent had also been filing ST-3 returns. However, the show cause notice was only issued on 21.10.2014, i.e. after more than two years of the facts coming to the knowledge of the department. The department could have issued the show cause notice within the normal period of limitation. The extended period of limitation could, therefore, not have been invoked by the department. The appeal filed by the department deserves to be dismissed and is dismissed. Issues:The judgment involves the following Issues:1. Whether CENVAT credit was allowable under rule 14 of the 2004 Credit Rules and penalty under section 15(3) was imposable for contravention of rule 6(3A).2. Whether service tax on excess baggage charges recovered from passengers should be leviable.3. Whether the extended period of limitation under section 73(1) of the Finance Act was invokable for suppression of facts.Issue 1:The Commissioner concluded that the demand of Rs. 21.55 crores for excess claim of CENVAT credit during July 2010 to March 2011 was not tenable. The Commissioner determined that the previous year's ratio should not be adopted for reversing CENVAT credit for exempted services. The Commissioner noted that no CENVAT would be available in the current year if 100% services were exempt in the previous year. The Commissioner found that the demand for excess CENVAT credit was not sustainable.Issue 2:The Commissioner agreed with the assessee that charges collected for excess baggage should be included in the turnover of 'Transportation of Passengers by Air Service.' The Commissioner held that the demand of Rs. 4.01 crores for excess baggage charges collected from passengers was not sustainable. The Commissioner noted that service tax was payable at a specific rate and the demand by the department was not valid.Issue 3:The Commissioner observed that the extended period of limitation could not be invoked in this case. The Commissioner found that the show cause notice was issued after more than two years of the facts coming to the knowledge of the department. The Commissioner held that the extended period of limitation could not have been invoked by the department. The Commissioner dismissed the appeal filed by the department as the demand proposed in the show cause notice had to be set aside due to the absence of a challenge to the finding regarding the extended period of limitation.In conclusion, the Commissioner dismissed the appeal filed by the department based on the findings related to the three main issues discussed in the judgment.