Orient Decorators wins appeal as CENVAT credit proportionate reversal deemed sufficient, extended period demand fails

CESTAT Kolkata allowed the appeal on both merits and limitation grounds. The tribunal held that proceedings against Orient Decorators exceeded the scope of the Show Cause Notice. Regarding CENVAT credit reversal, the appellant had voluntarily reversed the entire credit of Rs.6,14,107/- with interest after taking proportionate credit of Rs.73,000. The tribunal ruled that proportionate reversal was sufficient, not the 6%/8% penalty provision. On limitation, the tribunal found no suppression as credits were reflected in ER-1 returns and confirmed by chartered accountant certificate, making the extended period demand unsustainable.

---

---

Issues Involved:
1. Admissibility of Cenvat Credit.
2. Allegation of taking credit beyond the scope of Show Cause Notice.
3. Time-barred demand and suppression of facts.

Summary:

1. Admissibility of Cenvat Credit:
The Appellant, engaged in providing 'Mandap Keeper Service' and 'Convention Service', faced a Show Cause Notice demanding 6%/8% of the value of exempted services for not maintaining separate records for input services. The Appellant argued that they had reversed the total credit of Rs.6,14,107/- along with interest of Rs.1,33,720/- on 27.11.2010, which amounts to not having taken any Cenvat Credit at all. They maintained separate records for taxable and exempted services, and any credit taken was due to clerical mistakes, which were fully reversed upon being pointed out.

2. Allegation of Taking Credit Beyond the Scope of Show Cause Notice:
The Appellant contended that the Adjudicating Authority confirmed the demand based on invoices issued by Orient Decorators, which was not mentioned in the Show Cause Notice. This was considered as "travelling beyond the scope of Show Cause Notice." The Tribunal agreed, noting that the Appellant had not taken credit for services rendered by Orient Decorators during 2006-07 and 2007-08, and any credit taken in 2008-09 and 2009-10 was an inadvertent error, fully reversed later.

3. Time-barred Demand and Suppression of Facts:
The Appellant argued that the Show Cause Notice issued on 22.09.2010 for the period March 2006 to September 2009 was time-barred. They maintained separate records and reversed the credit along with interest, negating any intent to evade duty. The Tribunal found no specific case of suppression by the Appellant, as the Cenvat credit was reflected in their ER 1 Returns, and the reversal was more than 100% of the credit taken. Hence, the confirmed demand for the extended period was not sustainable due to time bar.

Conclusion:
The Tribunal allowed the Appeal on merits and limitation, granting consequential relief as per law. The Miscellaneous Petition was also disposed of. The judgment emphasized that reversal of credit amounts to no credit being taken, aligning with precedents set by various High Courts and the Supreme Court.

---