CHINTAMANI LAMINATION Vs. COMMR. OF SERVICE TAX

JUDGEMENT

(1.) THE appellant is engaged in manufacturing of CRGO transformer core. During the scrutiny of records, it was noticed that the appellant had availed Cenvat credit of service tax of Rs. 1,38,772/ - on works contracts and consultancy fee of Civil Engineer for their unit -2. Credit was taken on 19 -6 -2008 and 1 -10 -2008. Proceedings were initiated for demanding the Cenvat credit on the ground 'that the same is not admissible by issue of show cause notice on 9 -3 -2010. After due process, the demand for Cenvat credit of Rs. 1,38,772/ - was confirmed, taking a view that the same is not admissible. Penalty equal to the amount imposed and interest has been demanded. The learned consultant on behalf of the appellant submitted that there is no dispute about payment of service tax on the services received and there is no dispute that the service has been used. The only ground for denial is that credit should have been taken in unit -2 and not in unit -1. He also submits that from the time the credit was taken till the same was reversed on 1 -11 -2010, the appellant had more credit in their account than the amount demanded and therefore the intention to evade duty is not sustainable and appellant is not liable to reverse the credit also because of the fact that show cause notice was issued beyond the period of one year. He also submits that the credit could have been taken in unit -1 also since the definition of 'input service' provides for availment of Cenvat credit of service tax paid on services used for setting up of a factory also. Therefore he submits, on merits as well as on limitation, the appellant has a case and is eligible.

(2.) LEARNED AR submits that the credit was taken in unit -1 whereas service was received in unit -2 and therefore it has been rightly denied. Further, since the credit was not admissible, extended period has been correctly invoked.

(3.) NEVERTHELESS the question arises whether show cause notice could have been issued by invoking extended period, as already discussed, the definition of 'input service' definitely provides for availment of credit by the manufacturer. Further, if credit could not be taken in unit -1, it could have been taken in unit -2 in any case. Moreover, even after taking the credit in unit -1, as submitted by the learned consultant, throughout period till the credit was reversed, the appellant had substantially more credit than what has been demanded and proceedings initiated. Under these circumstances, invocation of extended period on the ground of misdeclaration with intention to evade duty or suppression of facts cannot be sustained. In any case it cannot be said that there was suppression of facts since the assessee was not required to intimate these details. As regards misdeclaration, there is no intention to evade duty as emerging from the facts and circumstances of the case. Unfortunately the extended period has been upheld only on the ground that the credit has been availed wrongly by the Commissioner (Appeals) and service was not received in the factory by the original authority. In this case show cause notice was issued on 9 -3 -2010 whereas credits were taken in June 2008 and October 2008. Therefore show cause notice is clearly time barred. In view of the above discussion, on the ground of limitation, the demand for Cenvat credit cannot be sustained and consequently, the impugned order also cannot be sustained. Accordingly, the impugned order is set aside with consequential relief to the appellants. Before parting, it is necessary to clarify with regard to submissions, credit was reversed subsequently and in view of the decision that original principal amount could not have been demanded, the question of demand of interest does not arise. Therefore if the credit has been reversed in unit -1 and taken in unit -2, no further action on the part of Revenue would be necessary.