Cenvat credit recovery and extended limitation fail where no recovery mechanism existed and facts were already known.

Adjustment of excess service tax paid on exported services against inadmissible cenvat credit on inputs cleared as such was not permissible under Rule 6(3), because the two amounts did not arise from the same statutory basis. However, recovery of the disputed credit could not be sustained for the relevant period as no valid recovery mechanism existed until the amendment notified on 01.03.2013. On limitation, the Department's continuing correspondence and prior interest payment showed awareness of the material facts, so suppression was not established and the extended period was unavailable. Demand, interest, and penalty were therefore set aside.

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Issues: (i) Whether the appellant could adjust excess service tax paid on exported services against inadmissible cenvat credit alleged to have been wrongly availed on inputs cleared as such. (ii) Whether recovery of the alleged irregular credit could be sustained by invoking the extended period of limitation.

Issue (i): Whether the appellant could adjust excess service tax paid on exported services against inadmissible cenvat credit alleged to have been wrongly availed on inputs cleared as such.

Analysis: Rule 6(3) of the Service Tax Rules, 1994 permits adjustment of excess service tax paid on a taxable service not provided wholly or partially against the service tax liability for a subsequent period. The disputed adjustment was not of that nature, because the amount sought to be set off related to inadmissible cenvat credit on inputs cleared as such, whereas the excess payment related to service tax paid on export services. The Tribunal also noted that the recovery machinery for such irregular credit was introduced only through the amendment notified on 01.03.2013 and was not available during the relevant period.

Conclusion: The adjustment was not permissible under Rule 6(3) as claimed, but the impugned recovery could not be sustained for want of a valid recovery provision during the relevant period, so the issue was ultimately answered in favour of the assessee.

Issue (ii): Whether recovery of the alleged irregular credit could be sustained by invoking the extended period of limitation.

Analysis: The record showed continuing correspondence between the assessee and the Department regarding the adjustment from February 2007 onwards, followed by payment of interest in March 2009, and the show-cause notice was issued only on 15.06.2009. In these circumstances, suppression of facts was not established and the Department was already aware of the material facts. The Tribunal therefore held that invocation of the extended period was not justified.

Conclusion: The extended period of limitation was not available to the Revenue.

Final Conclusion: The demand, interest, and penalty were set aside and the appeal succeeded.

Ratio Decidendi: Where the Department is already aware of the material facts and no statutory recovery mechanism exists for the relevant period, extended limitation cannot be invoked and recovery of the disputed amount cannot be sustained.

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