CENVAT credit availed on capital goods & Input services used in erection of transmission towers - on what basis it was evident that appellants 'knew' that taking credit was irregular is not discerned from SCN - issue received clarity only after LB decision in Vandana Global - Pre-deposit of Rs 143 Cr waived: CESTAT
By TIOL News Service
NEW DELHI, DEC 25, 2014: THE applicant is engaged in the business of providing cellular services.
The issue involved is admissibility of CENVAT credit on inputs, capital goods and input services used in the erection of transmission towers and shelters spread all over the country far from the office premises of the appellants.
The adjudicating authority has held that CENVAT credit of Rs.142.72 Crores availed by the applicant is inadmissible. Penalty has been imposed in equal measure along with interest. The period involved is September 2004 to January 2008 and the SCN invoking the larger period of limitation was issued on 22.4.2010.
Before the CESTAT, with a stay application, the applicant submits that in their periodical returns the credit taken was duly reflected and there has been no willful mis-statement or suppression of facts on their part and there were judgements of CESTAT which allowed such credit. Inasmuch as it is only after the LB CESTAT decision in Vandana Global - 2010-TIOL-624-CESTAT-DEL-LB that the position acquired a degree of clarity and, therefore, the entire demand is barred by time.
The AR “strenuously” argued that the applicant had deliberately taken the impugned CENVAT credit knowing fully well that the same was not admissible. As for limitation, as the assessee had taken centralised registration in 2009, the period is to be counted therefrom. Moreover, the assessee was asked for the break up the CENVAT credit availed but refused to and this indicated willful suppression.
The applicant mentioned that the Revenue sought the break-up of figures on 16.4.2010 and on 19.4.2010 they said they will take some time to prepare the same and the SCN was issued on 22.4.2010.
The Bench observed that the appellant was not contesting the issue on merit but purely on the ground of limitation.
The Tribunal then proceeded to extract the following paragraphs 12 & 13 from the SCN and paragraph 205 of the Order-in-Original -
(i) "In the present case the party has wrongly availed and utilised CENVAT credit of input services which have not been used for providing taxable output service and hence the same is liable to be recovered under the proviso to Section 73 of the Act";
(ii) "In the present case it appears that the party knew that taking credit of service tax as such by them was irregular and in contrary to the provisions of Service Tax Rules, 1994 and CENVAT Credit Rules, 2004 and the party has, therefore, wilfully suppressed the facts and deliberately contravened the provisions of the CENVAT Credit Rules with intent to evade due service tax by way of availing and utilizing undue CENVAT credit.
From the facts of the present case it is evident that the noticee knew that taking credit of service tax as such, by them was irregular and in contravention of the provisions of Service Tax Rules, 1994 and CENVAT Credit Rules, 204 and the noticee has, therefore, wilfully suppressed the facts and deliberately contravened the provisions of the CENVAT Credit Rules with intent to evade due service tax by way of availing and utilizing undue CENVAT credit."
And observed -
++ From the said paragraph (i.e. paragraph 205 of the adjudication order), it is difficult to discern as to what it was which the appellants suppressed or mis-stated and how and on what basis it was evident that the appellants "knew" that taking credit of the service tax by them was irregular etc. The Show Cause Notice is even less forthcoming with regard to bringing out the aspect of wilfulmis-statement/suppression of facts as is evident from a few sentences (quoted earlier) which it contains with regard thereto.
++ Independently also, it is seen that there is no mention in the Show Cause Notice that the party did not tell/declare to the department what was legally required to be told/declared. Similarly there is also no mention in the Show Cause Notice or in the impugned order as to what did they mis-declare to the department. On the other hand, the appellants have claimed that they had been submitting periodical returns clearly showing therein the impugned credits. They were even regularly audited by the department.
As for the submission by the AR that the appellant had taken centralised registration with effect from 1.10.2009 and, therefore, the period of limitation should be counted therefrom, the same was held devoid of any basis because it was not the Revenue's case that prior to centralised registration they were not registered at various places and were not complying with the requirements of filing periodical returns relating to, and disclosing the availment of, impugned credit.
The CESTAT, thereafter, noted that there had been divergent judgments regarding the admissibility of credit in the situations similar to the ones obtaining in the case on hand. Inasmuch as in the case of Vandana Global - 2008-TIOL-2327-CESTAT-DEL the Divisional Bench had held the credit on the impugned items to be inadmissible, the bench in Bhushan Steel & Strips Ltd.- 2007-TIOL-2306-CESTAT-MUM took a contrary view.And that only when the issue was decided in the year 2010 by the Larger Bench in the case of Vandana Global - 2010-TIOL-624-CESTAT-DEL-LB that the issue received some clarity.
It was, therefore, observed - “ Thus the observation in the Show Cause Notice that the appellants "knew" that taking the impugned credit of service tax was irregular hardly sustains. ”
Relying on the Kerala High Court decision in Binani Zinc laying down that extended period of limitation is not invokable in a scenario where divergent decisions had been delivered by the Tribunal and the decisions in Gopal Zarda Udyog Vs. CCE - 2005-TIOL-123--CEX-LB, Chemphar Drugs Liniments - 2002-T1OL-266 SC-CX, where it is held that something positive other than mere failure on the assessees part or conscious withholding of information when assessee knew otherwise is required for invoking for extended period and that in the present case the Show Cause Notice or the impugned order scarcely brings out any negligence or failure on the part of the appellants, the CESTAT took the prima facie view that the demand is barred by limitation.
In fine, the CESTAT waived the pre-deposit of the adjudged dues and stayed the recovery.
(See 2014-TIOL-2579-CESTAT-DEL)
