2023 (3) TMI 1590 - AT - Central Excise

Denial of CENVAT Credit for Not Availing Exemption and Excess Service Tax Payment Overruled Under Section 5A(1A)

The CESTAT Ahmedabad held that denial of CENVAT credit on the ground that the appellant did not avail exemption and paid excess Service Tax was ... CENVAT Credit - denial on the ground that the appellant did not avail the exemption and therefore paid excess Service Tax - denial of benefit of the excess Service Tax paid by the respondents - Extended period of limitation - revenue neutrality. CENVAT Credit - HELD THAT:- From the decision of Tribunal in the case of Federal Mogul Goetze India Ltd. [2012 (7) TMI 713 - CESTAT, BANGALORE] it is apparent that there is no binding on the assessee in Service Tax to avail mandatorily the benefit of any notification. The provisions of Section 5A(1A) of the Central Excise Act has not been borrowed in the Finance Act, 1994 and therefore it is the option of the assessee to avail or not avail the benefit of notification. In this background denial of CENVAT Credit of actual Service Tax paid by the appellant cannot be sustained. The demand is therefore set aside. Extended period of limitation - revenue neutrality - HELD THAT:- It is also noticed that the situation is Revenue neutral and whatever tax was available to respondent as credit. In this background invocation of extended period of limitation cannot be justified. Appeal dismissed. ISSUES: Whether CENVAT Credit of Service Tax paid without availing exemption under Notification No. 17/2004 - ST can be denied by Revenue.Whether the assessee is mandatorily required to avail the benefit of exemption notifications under the Finance Act, 1994.Whether invocation of extended period of limitation is justified when the tax position is revenue neutral. RULINGS / HOLDINGS: The denial of CENVAT Credit of actual Service Tax paid by the appellant cannot be sustained where the appellant did not avail the exemption under Notification No. 17/2004 - ST, as it is the option of the assessee to avail or not avail the benefit of the notification.There is no mandatory obligation under the Finance Act, 1994 for an assessee to compulsorily avail exemption notifications, unlike the provisions under Section 5A(1A) of the Central Excise Act which are not borrowed into the Finance Act.Invocation of extended period of limitation is not justified in a revenue neutral situation where the tax credit availed corresponds to the actual tax paid by the assessee. RATIONALE: The Court relied on the statutory framework under the Finance Act, 1994 and distinguished it from the Central Excise Act, particularly noting the absence of a provision analogous to Section 5A(1A) of the Central Excise Act that mandates compulsory availing of exemption.The Court referenced precedent establishing that exemption notifications issued under Section 93(1) of the Finance Act are conditional and cannot be 'thrust on the provider of service' unilaterally, emphasizing the assessee's discretion in availing such benefits.The principle that the tax position was revenue neutral informed the Court's decision to set aside the demand and dismiss the appeal, also negating the justification for extended limitation period.