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Issues: (i) Whether CENVAT credit availed on service tax paid for settlement of lease cancellation relating to a proposed new premises qualifies as eligible input service under Rule 2(l) of the CENVAT Credit Rules, 2004; and (ii) Whether the demand raised by the department in September 2015 in respect of credit availed in September 2010 is barred by limitation.
Analysis: Rule 2(l) of the CENVAT Credit Rules, 2004 defines "input service" with separate operative limbs, including services used in relation to setting up or expansion of premises and activities relating to business; satisfaction of any one limb entitles availment of credit. The invoice and payment relate to full and final settlement for the Chennai premises and therefore fall within services in relation to setting up/expansion of business as encompassed by Rule 2(l). Separately, the credit was disclosed in the ST-3 return for the period April-September 2010 (filed October 2010) and made available for departmental scrutiny; the department initiated adjudication in 2015 and issued the show cause notice on 24.09.2015. The delay in initiating scrutiny until shortly before expiry of the extended limitation period defeats a finding of suppression and renders the demand time-barred under applicable limitation principles.
Conclusion: (i) The CENVAT credit availed on service tax charged for the lease settlement qualifies as eligible input service under Rule 2(l) of the CENVAT Credit Rules, 2004, in favour of the assessee. (ii) The demand raised in September 2015 in respect of the credit availed in September 2010 is barred by limitation; the impugned order is set aside, appeal allowed in favour of the assessee.
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