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. The Tribunal ruled that audit reports alone cannot form basis for extended period invocation, citing precedent that audit discovery of inadmissible CENVAT credit does not establish suppression or malafide intention to evade tax liability. The Commissioner's order denying credit for input services related to railway siding and rainwater harvesting plant construction was set aside. Appeal allowed.

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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.

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