Rent-a-cab operator wins CENVAT Credit recovery case as extended limitation period under Section 11A(4) rejected

CESTAT Allahabad set aside the demand for recovery of CENVAT Credit with interest and penalty against a rent-a-cab service operator. The tribunal held that extended period of limitation under Section 11A(4) could not be invoked as revenue failed to establish suppression of facts with intent to evade service tax. Following precedents from Gujarat HC and CESTAT Allahabad, the court ruled that mere procedural violation of notification conditions does not constitute suppression warranting extended limitation period. The demand was held barred by limitation and the appeal was allowed.

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Issues involved: Appeal against Order-in-Appeal No.108/CE/ALLD/2021 dated 17.03.2021 passed by Commissioner (Appeals) CGST & Central Excise, Allahabad regarding the demand of CENVAT credit beyond the normal period of limitation, interest, and penalty.

Issue 1: Demand beyond the normal period of limitation

The Commissioner (Appeals) upheld the demand of CENVAT credit of Rs.48,253/- along with interest and penalty under Rule 15 of the Credit Rules, citing the appellant's wrongful availment and utilization of CENVAT credit, suppression of facts, and failure to rectify the issue even after being notified. The appellant's reliance on a Supreme Court judgment was deemed inapplicable as the demand was found to be sustainable.

Issue 2: Admissibility of CENVAT credit on Rent a Cab Service

During an audit, it was discovered that the Appellant had taken CENVAT credit on Rent a Cab Service amounting to Rs.48,253/-, which was deemed inadmissible. The show cause notice issued to the Appellant included demands for recovery of the credit, imposition of penalty, and recovery of interest. The Order-in-Original confirmed the demand, penalty, and interest, except for a portion already paid by the Appellant.

Issue 3: Invocation of extended period of limitation

The show cause notice invoked the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944, alleging suppression of material facts by the Appellant regarding the CENVAT credit on rent-a-cab service. However, the Appellant argued that there was no evidence of intentional suppression of facts to evade payment of service taxes, citing relevant legal precedents where demands were held to be barred by limitation.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal on the grounds that the demand was barred by limitation. The decision was based on the lack of specific reasons recorded for invoking the extended period of limitation and the absence of evidence showing intentional suppression of facts by the Appellant.

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