AI Drafter 
TaxTMI 
TaxTMI 
2025 (7) TMI 797
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....tem 22021010) which was dutiable and beverage syrup 'Lehar Slice' (classifiable under Tarriff Item 22029020) which was exempted from payment of excise duty under Notification No. 3/2006-CE dated 01.03.2006, from April 2008 to February 2011; appellant paid excise duty at the concessional rate of 1% on Lehar Slice w.e.f. 01.03.2011 as per Notification No. 1/2011-CE and informed the department through letter dated 01.04.2011. The appellants did not avail any credit on common inputs and common input services, except for some input services such as Architect services, Management consultant services, Security agency services, Maintenance or repair services, technical testing and analysis services, Construction services, Pest control services and Labour supply services, during April 2008 to March 2010; Appellant started availing the credit on chemicals, a common input, and common input services from April 2010 and informed the department vide letter dated 31.03.2009. In respect of common input services, the Appellant reversed the proportionate credit under Rule 6(3) of Credit Rules on monthly basis based on the ratio of quantity of exempted goods to the quantity of exempted and dutiable g....
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....sed in the manufacturing of exempted goods as the Circular uses 'may' while suggesting that the calculation can be done be based on stores/ production records; sole requirement is that the method of reversal devised should be in relation to the actual consumption of inputs in the manufacturing of exempted goods; the quantity of the common chemicals consumed in the manufacturing of exempted goods is directly proportional to the quantity of the said exempted and dutiable goods manufactured; further, the Appellant is reversing the credit in respect of sugar based on the quantity of sugar utilised in the manufacturing of exempted goods; the reversal made by the Appellant is in consonance with the Circular dated 09.05.2008; Adjudicating Authority failed to take into consideration the Circular dated 09.05.2008 while confirming the demand of reversal of credit based on the value of exempted goods. Ld. Counsel submits that it is a settled principle that if the taxpayer has proportionately reversed the credit or availed the credit, by adopting the procedure which is resulting in the availment of credit attributable to only the dutiable goods, Rule 6(3) is said to be complied. He relies on f....
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....ted 2024-TIOL-698-CESTAT-KOL and Intas Pharmaceuticals Limited 2023-TIOL-1131-CESTAT-AHM. 7. Learned counsel submits further that extended period of limitation cannot be invoked; entire demand is barred by limitation; department conducted yearly audits of the Appellant, who regularly filed the statutory returns; department did not raise the dispute on the method of reversal adopted by the Appellant post 01.04.2008, during multiple audits; the present proceedings are the outcome of the audit proceedings conducted by the department; department had full knowledge that the Appellant took credit in the manner discussed above; in this regard, Appellant intimated the department that it started availing the credit on common inputs and input services, through letter dated 31.03.2009 and department issued a letter dated 19.11.2010, in reference to the compliance to audit report; hence, fraud, wilful misstatement or suppression cannot be alleged against the Appellant; the Appellant was under the bona fide belief that the procedure adopted for the reversal of the credit is correct; in any case, the issue in the present case involves interpretation of complex legal provisions regarding the r....
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....inance Act, 1994 read with Rule 14 of the Cenvat Credit Rules. 2004. In normal circumstances, show cause notice for recovery of duty/credit wrongly taken is permitted to be issued covering a period of one year from the relevant date. In the case of the Noticee, it has been alleged that they wilfully suppressed and mis-stated the fact of availing credit on inputs and input services used for manufacture of dutiable and exempted goods. The allegation is proved beyond doubt as I find that the Noticee, vide their letter dated 17.02.2011 and 08.03.2011(RUD-5 and RUD-6 of the SCN) wrongly intimated to the Department that they had not availed any credit till date on inputs/input services used in manufacture of exempted goods and that they had availed Cenvat credit on inputs and input services used exclusively for the manufacture of dutiable goods whereas in fact, they were availing Cenvat credit on inputs and input services used in manufacture of dutiable and exempted goods. They had not reversed credit taken in relation to exempted goods as required under Rule 6(3) (ii) of the Cenvat credit. Facts contrary to what they disclosed in their letter dated 17.02.2011 and 08.03.2011 came to the ....
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....t services used exclusively for the manufacture of dutiable goods whereas in fact, they were availing Cenvat credit on inputs and input services used in manufacture of dutiable and exempted goods and therefore, learned Adjudicating Authority has correctly upheld the invocation of extended period. 11. In the instant case the appellants have been a long-standing assessee for the Revenue, both under Central Excise and Service Tax. They have been regularly filing the statutory ER-1 and ST-3 returns. They have been subjected to various audit through the years and the previous audits did not raise any objection regarding the impugned issue of reversal of credit of input and input services, utilised both in dutiable and exempted goods. We find that the Audit Report IAR No 218/2008-09, on audit conducted on 10.0.2008 to 12.09.2008 does not raise this issue. In addition to audit, in terms of department Circulars Nos 818/15/2005-CX dated 15-7-2005 and No. 887/7/2009-CX dated 11-5-2009, officers are required to scrutinise the records of the appellant. There is no whisper of scrutiny, if any, that has been undertaken in this regard. When the audit and scrutiny did not find out wrong practic....
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....e invoked. We find that the Principal Bench has gone into the issue of invocation of extended period in an elaborate manner while dealing with the case of M/s G.D. Goenka Pvt. Ltd. - 2023-TIOL-782-CESTAT-DEL, the Bench observed as follows: 12. Section 73 provides for recovery of service tax not levied, not paid, short levied, short paid or erroneously refunded. The provisions of this section apply mutatis mutandis to irregularly availed CENVAT credit recoverable under Rule 14 of CCR. This section permits invoking extended period of limitation to raise a demand on the following grounds: a) Fraud; or b) Collusion; or c) Willful misstatement; or d) Suppression of facts; or e) Violation of the Act or Rules with an intent to evade payment. 13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, willful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act ....
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....xtended period of limitation was that the appellant had deposited the disputed amount of service tax during audit but later disputed it which shows the appellant's intent to willfully and deliberately suppress the facts. This reasoning of the Revenue cannot be accepted because there is nothing in the law which requires the assessee to accept the views of the audit or of the Revenue. There is nothing in the law by which an inference of intent to evade can be drawn if the assessee does not agree with the audit. It also does not matter if the assessee deposited the disputed amount as service tax during audit and later disputed it. Often, during audit or investigation, the assessee deposits some or all of the disputed amounts and later, on consideration or after seeking legal opinion, disputes the liability and seeks a notice or an adjudication order. This does not prove any intent to evade or deliberate or willful suppression of facts. 16. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit....
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....tax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification, is fallacious." Therefore, there is no force in this ground also. 19. It has also been pointed out that but for the audit, the allegedly irregularly availed CENVAT credit would not have come to light. It is incorrect to say that but for the audit, the alleged irregular availment of CENVAT credit would not have come to light. It is undisputed that the appellant has been self-assessing service tax and filing ST-3 Returns. Unlike the officers, the assessee is not an expert in taxation and can only be expected to pay service tax and file returns as pe....
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....se officer had discharged his responsibility under section 72. 21. This legal position that the primary responsibility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self-assessment was clarified by the Central Board of Excise and Customs^7 in its Manual for Scrutiny of Service Tax Returns the relevant portion of which is as follows: 1.2.1 A The importance of scrutiny of returns was also highlighted by Dr. Kelkar in his report on Indirect Taxation^8. The observation made in the context of Central Excise but also found to be relevant to Service Tax is reproduced below: It is the view that assessment should be the primary function of the Central Excise Officers. Self assessment on the part of the taxpayer is only a facility and cannot and must not be treated as a dilution of the statutory responsibility of the Central Excise Officers in ensuring correctness of duty payment. No doubt, audit and anti-evasion have their roles to play, but assessment or confirmation of assessment should remain the primary responsibility of the Central Excise Officers. ( emphasis supplied ) 22. Therefore, to say that had....
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....r its equivalent, and the Income Tax Audit Report maintained under Section 44AB of the Income Tax Act. In other words, the Rule permits the officer to examine financial records for scrutinizing the return to determine the correctness of the assessments made. In pursuance of this, the Board has also issued guidelines vide letter F.No.137/27/2007 CX.4, dated 08.02.2007, which makes it mandatory to scrutinize returns on a regular basis. Details of the Board's guidelines on returns' scrutiny are discussed in Chapter 2 of this Manual. 1.2.2 B The guidelines clearly envisaged that returns' scrutiny would become the core function of the Service Tax Group/Range, supervised by the Assistant Commissioner of the Service Tax Unit. 24. Thus, the CBEC took a conscious decision that detailed scrutiny of the Returns should be done only in some cases selected based on some criteria. In those Returns, where detailed scrutiny is not done by the officers some tax may escape assessment which may not be discovered within the normal period of limitation. As a matter of policy, the CBEC, took such risk and the loss of Revenue is a result of the policy. 25. To sum up: a)....