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of <h1>Cenvat credit on input services disclosure in ER-1 prevents invocation of extended limitation and sustains relief against penalties</h1> Cenvat credit availed on input services was disclosed in ER-1 return and supporting correspondence, which the adjudicator found sufficient to show no ... Cenvat credit on input service - suppression and extended period of limitation - disclosure in ER-1 return - intimation to department - penalty and personal liability - manufacture and clearance of seating system for automobile - HELD THAT:- The cenvat credit availed by the appellant was reflected in their respective ER-1 returns which also the learned Commissioner did not accept and observed that the information furnished in the ER-1 return is not sufficient to indicate that cenvat credit has been availed on the input services reflected against these two invoices. We also do not find merit in the said observation of the learned Commissioner. On going through the ER-1 Retun enclosed with the paper-book, it is seen that the appellant has in the ER-1 return clearly mentioned that they are availing cenvat credit on input services viz., free issue design used for manufacture of dutiable items seating system for Toyota Kirloskar Corporation, cost of such design is being amortized on dutiable final products. Thus, reading ER-1 return remarks and the letter dated 23.03.2009 reveal that the appellant had disclosed all the facts relating to the availing of cenvat credit on the invoices issued by the Pune Unit and no fact was suppressed or mis-declared by the appellant. In these circumstances, invoking extended period of limitation, in our view, cannot be sustained. In the result, the demand confirmed and penalties imposed cannot be sustained and accordingly, the impugned order is set aside and the appeals are allowed. Issues: Whether cenvat credit of service tax paid by a group unit on design and drawing services can be availed by the manufacturing unit and whether the demand, interest and penalties based on alleged suppression and invocation of extended period of limitation are sustainable.Analysis: The facts show service tax was discharged by the Pune unit on invoices expressly stating the services were to be used as input service by the Bangalore manufacturing unit; the Pune unit did not avail cenvat credit; the Bangalore unit availed cenvat credit, recorded the same in ER-1 returns and sent a letter dated 23.03.2009 informing the department of such availment; the adjudicating authority rejected the letter and ER-1 entries as insufficient and invoked extended limitation and penalties for alleged suppression. The available records invoices, ER-1 return entries and the intimation letter demonstrate disclosure of the transactions and that the cost of design was amortized into the value of dutiable products.Conclusion: The cenvat credit availed by the appellant on the service tax paid by the Pune unit is valid and the findings imposing demand, interest and penalties and invoking the extended period of limitation are not sustainable; the impugned order is set aside and the appeals are allowed.
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