2026 (3) TMI 587 - AT - Central Excise

Input Service eligibility under Rule 2(l) upheld; demand for disclosed CENVAT credit held time barred due to limitation.

Whether CENVAT credit on service tax paid for lease cancellation qualifies as an input service under Rule 2(l) was answered by applying the limb covering ... Eligibility of CENVAT credit for input services relating to setting up or expansion of business premises - time-bar of demand where credit was disclosed in statutory return and scrutiny initiated after normal limitation period - Whether the credit availed by the appellant in respect of service tax paid towards lease of the premises from where no taxable service was provided can be considered as ineligible CENVAT credit to confirm demand with interest and to impose penalty. Eligibility of CENVAT credit for input services relating to setting up or expansion of business premises - HELD THAT:- The Tribunal applied the limbs of the definition of input service and accepted that services relating to setting up or expansion of business premises constitute an independent category of input services. The invoice from the service provider evidenced that the payment related to modernization/expansion of the appellant's business premises; accordingly the credit availed on the service tax component qualifies as CENVAT credit under the limb dealing with setting up/expansion and is therefore allowable. The Tribunal relied on the reasoning in M/s. Coco Cola India Pvt. Ltd. Vs. Commissioner of C. Ex., Pune-III[2009 (8) TMI 50 - BOMBAY HIGH COURT] that each limb of the definition operates independently and satisfaction of one limb suffices for availment of credit. [Paras 9] CENVAT credit on the payment to the lessor for setting up/expansion of premises is admissible and not an ineligible credit. Demand barred by limitation - HELD THAT:- The Tribunal found that the disputed credit was disclosed in the ST-3 return filed in October 2010 for the period April 2010 to September 2010. The Department commenced scrutiny only in 2015, nearly five years later and close to expiry of the extended limitation period. That delayed scrutiny, initiated well after disclosure in the statutory return, did not constitute suppression by the assessee; consequently the show cause notice issued on 24.09.2015 alleging ineligible credit for September 2010 was beyond the normal limitation and the demand is time-barred. [Paras 10, 11] The demand is barred by limitation and cannot be sustained. Final Conclusion: The impugned order confirming demand and imposing penalty is set aside: the CENVAT credit in question is admissible as an input service for setting up/expansion of premises and the departmental demand is time barred; the appeal is allowed with consequential relief in accordance with law. 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.