2024 (8) TMI 1214 - HC - Service Tax

Company wins CENVAT credit dispute as demand becomes time-barred under Section 73 limitation period

Commissioner Of Central Excise And Service Tax, Dibrugarh Versus M/s. North Eastern Cables And Conductors Private Limited (Formerly North Cables And Conductors Pvt. Ltd.), Jorhat, Assam.

The HC dismissed the revenue's appeal regarding ineligible CENVAT credit of Rs. 1,30,84,835 claimed by the assessee company. The court held that since the ... CENVAT Credit of Central Excise Duty utilized by the assessee - barred by time limitation - HELD THAT:- It is not in dispute that the respondent Company had availed ineligible CENVAT Credit which was not permissible in terms of the provisions of CENVAT Credit Rules, 2004. It is also not in dispute that the total amount of ineligible CENVAT Credit which includes Service Tax, Education Cess, Secondary & Higher Education Cess comes to Rs. 1,30,84,835/-. As per Section 73 of the Service Tax (Finance Act, 1994), where any service tax is not levied or paid, short-levied or short-paid or erroneously refunded, a show-cause notice is required to be served upon the person chargeable with the Service Tax within a period of 18(eighteen) months from the relevant date. However, where any Service Tax has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of the Finance Act or of the Rules made thereunder with the intent to evade payment of Service Tax, then the limitation for serving notice upon the person chargeable with the Service Tax is extended upto 5 (five) years from the relevant date. Whether the respondent Company, in its ST Return, had disclosed all the relevant information regarding availment of CENVAT Credit while submitting ST-3 Returns? - HELD THAT:- On looking into the show-cause notice, it is clear that the respondent Company had provided every details regarding availment of CENVAT Credit in the ST-3 Returns. In the show-cause notice, the details provided by the respondent in ST-3 Return, had been taken into consideration by the Commissioner, Central Excise & Service Tax. It is also to be noticed that in the said show-cause notice, it is nowhere mentioned that the respondent had misstated any fact with intent to evade the payment of Service Tax - The findings recorded by the Commissioner, Central Excise & Service Tax to the effect that there was an element of misstatement and contravention of Service Tax Rules with the intent to evade payment of Service Tax is perverse, as the said finding is not based on any material available before it. The Hon’ble Supreme Court in various pronouncements has categorically held that the fact of willful misstatement or suppression should specifically be mentioned in the show-cause notice. In M/S CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING, NATHPA HP VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I [2007 (8) TMI 11 - SUPREME COURT] the Hon’ble Supreme Court has defined the expression “suppression” and it was held that 'When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.' The respondent Company had disclosed all the details about availment of the CENVAT Credit in ST -3 Returns and there is no allegation by the Revenue of willful suppression and misstatement with intent to evade Service Tax in the show-cause notice, there are no illegality in the impugned order dated 04.12.2019 passed by the CESTAT. Hence, the substantial question, so framed in this appeal, is answered in the affirmative. The instant excise appeal stands dismissed. Issues Involved:1. Whether the demand of CENVAT Credit utilized by the assessee was barred by limitation.Issue-wise Detailed Analysis:Issue 1: Whether the demand of CENVAT Credit utilized by the assessee was barred by limitation.Facts and Background:- The appellant/Revenue challenged the CESTAT's order that set aside the demand against the respondent company for wrongly availing and utilizing CENVAT Credit.- The respondent company provided 'Erection, Commissioning or Installation Services' and also supplied materials under separate contracts.- The appellant alleged that the respondent violated Rule 3 and Rule 6 of the CENVAT Credit Rules, 2004 by availing CENVAT Credit on inputs used for exempted services.- An audit led to a demand-cum-show-cause notice (SCN) issued on 04.11.2013, demanding recovery of Rs. 1,30,84,835/- along with interest and penalty.Respondent's Reply:- The respondent contested the SCN on the ground of limitation, arguing that the demand was time-barred as it was issued beyond the statutory period of 18 months.- The respondent claimed that all relevant details were disclosed in the ST-3 returns, and no suppression or misstatement was made.Commissioner's Order:- The Commissioner rejected the respondent's objections, confirming the demand along with interest and penalty, stating that the respondent had mis-stated facts with the intent to evade payment of Service Tax.CESTAT's Judgment:- The CESTAT allowed the respondent's appeal, holding that the SCN did not show any positive evidence of willful fraud or suppression to justify the invocation of the extended limitation period.- The CESTAT relied on the case of Ultra Tech Cement Ltd. v. CCE, Jaipur-II, stating that mere non-disclosure of specific details in the returns does not constitute suppression if such details were not required to be disclosed.Appellant's Arguments:- The appellant argued that the respondent's mere submission of returns did not discharge its burden of proving no intent to evade tax.- The appellant contended that the respondent's reversal of CENVAT Credit only after the audit objection indicated an intent to evade tax.Respondent's Arguments:- The respondent maintained that all details were disclosed in the ST-3 returns, and no willful misstatement or suppression was alleged in the SCN.- The respondent cited various Supreme Court judgments emphasizing that suppression must be willful and with intent to evade tax to invoke the extended period of limitation.Court's Analysis:- The court noted that the respondent disclosed all relevant information in the ST-3 returns and that the SCN did not allege willful misstatement or suppression.- The court cited Supreme Court judgments, including Continental Foundation Joint Venture Holding and CCE, Nagpur vs. Ballarpur Industries Ltd., which held that suppression must be deliberate and with intent to evade duty.- The court found the Commissioner's findings of misstatement and intent to evade tax to be perverse and unsupported by evidence.Conclusion:- The court concluded that the extended period of limitation could not be invoked as there was no willful suppression or misstatement by the respondent.- The court affirmed the CESTAT's order, setting aside the demand and dismissing the appellant's appeal.Final Judgment:- The substantial question of law was answered in the affirmative, and the appeal was dismissed.