2023 (12) TMI 524 - AT - Central Excise

Commissioner cannot invoke extended period based solely on audit findings for CENVAT credit denial

CESTAT Mumbai held that extended period invocation was unjustified where Commissioner relied solely on audit findings to establish suppression of facts. ... Legality of issue of show-cause notice to the Appellant in invoking extended period and justifying the demand - Suppression of facts or not - CENVAT Credit - input services - services taken for laying down Railway siding used for material handling equipment within the factory premises and construction of rainwater harvesting plant through earth excavation and land development works - HELD THAT:- On perusal of the order passed by the Commissioner, it is noticed that the ground stated in invocation of extended period was not convincing for the reason that he said that had Audit not scrutinised the record, the fact of availment of inadmissible credit would not have come to the knowledge of the Department and, therefore, suppression to evade payment of tax was established - such an observation is not convincing for the reason that the Tribunal has consistently held in various orders that Audit report can’t alone from the basis of invocation of extended period. It is worthwhile to reproduce a portion of judgment passed in the case of M/S THYSSENKRUPP INDUSTRIES INDIA PVT. LTD. VERSUS CCE & ST, PUNE-I [2018 (11) TMI 1041 - CESTAT MUMBAI] concerning the purpose of Audit and its resultant effect holding that it cannot be said that only because audit party had found some credit availed as inadmissible, suppression of fact is made out. It cannot also be established that appellant had any malafide intention to suppress its duty liability from the department. The order passed by the Commissioner of CGST & CX, Nagpur-II, to the extent of denial of credit, is hereby set aside - Appeal allowed. Issues involved: Denial of CENVAT Credit to a cement company on Earth Excavation, Land development work, Erection of Street Light Poles, and Manpower Supply services by the Commissioner of CGST & CX, Nagpur-II for the period between September 2014 to June 2017.Facts of the case: The Appellant, a manufacturer of Cement OPC and Cement PPC, received a show-cause notice proposing denial of credit on various inputs. Ultimately, a demand for Rs. 16,72,024/- for certain input services was denied, while a demand of Rs. 2,04,30,291/- was dropped. The legality of the denial of credit is contested by the Appellant.Arguments by Appellant: The Appellant argued that input services used for infrastructure development, such as LED Street lighting and maintenance of Road lights, are admissible credit. They also contested the denial of credit for manpower supply services.Arguments by Respondent: The Respondent argued that the Appellant did not provide sufficient proof to justify the credit claimed for certain services. They contended that certain services fell under exclusion clauses and composite contracts, leading to the denial of credits.Decision: The Tribunal did not delve into the Appellant's arguments regarding the definition of 'Plant & Machinery' but focused on the legality of the show-cause notice and the justification for the demand. The Appellant's submission regarding lack of suppression of facts to evade duty payment was supported by various legal precedents. The Tribunal ruled in favor of the Appellant, setting aside the Commissioner's order denying credit.Separate Judgment: The appeal was allowed, and the Commissioner's order denying credit was set aside. The order was pronounced in open court on 12.12.2023.