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Tribunal affirmed appellant’s entitlement to CENVAT credit for period
prior to registration and utilisation thereof for discharging service tax
demanded for such period.
Facts
The appellant, engaged in micro
finance Business, was not registered
with service tax department from April 2004 till june 2009. In June
2009, when statutory auditors pointed
out this fact, appellant obtained opinion
from their consultants and applied for service tax registration. Part of
the liability for the period prior to June
2009 was discharged by adjustment of CENVAT credit pertaining to that
period and balance liability was paid in cash along with interest. on scrutiny
of records in august 2009, department issued SCN to appellant by invoking
extended period of limitation by alleging suppression of Facts by appellant
with intention to evade service tax liability and also proposed to deny
availment of CENVAT credit on the ground that rule 3(4) of CCR, 2004 permits
utilisation of CENVAT credit only to the extent such credit is available on the
last day of the month or quarter for which tax liability is being discharged. The
appellant challenged invocation of extended period and also submitted that the
case is covered by provision of section 73(3) of the finance act, 1994 as entire liability was discharged
prior to scrutiny by department.
Held
As regards eligibility for CENVAT
credit, the hon’ble CeStat opined that if and when the department demands
service tax liability for taxable services rendered during a particular period,
a corresponding right shall accrue to the assessee entitling him to avail of CENVAT
credit on CENVATable documents evidencing inputs or capital goods or input
services received by such assessee during the same period, subject to the
conditionalities envisaged in CCr, 2004. as regards rule 3(4) of CCr, 2004 the
tribunal Held that it merely puts cap on
the credit that can be ‘utilised’ for payment of duty or tax and not on the
quantum that be ‘availed’. The tribunal relied upon decisions in cases of
mPortal India Wireless Solutions (P.) Ltd vs. CST [2011] 16 taxmann.com 353
(Kar.), Nitesh residency Hotels (P.) Ltd. vs. CST [Misc. Order No. 27030/2013,
dated 27-8-2013], Amar Remedies vs. CCE 2010 (257) ELT 552 (Tri-Ahd.) and C.
Metric Solution (P.) Ltd. vs. CCE [2013] 31 taxmann.com 344,to hold that
appellant was entitled to availment and utilisation of CENVAT credit on the
basis of documentary evidences for the period prior to obtaining registration.
As regards applicability of
proviso to section 73(3) the hon’ble tribunal Held that since major part of
duty which was adjusted by CENVAT credit was in dispute, issuance of SCn is
legal and the said proviso is not applicable.
As regards invocation of extended
period, the tribunal affirmed allegations of suppression on the ground that
appellant neither filed returns nor approached department for clarifying
taxability of services rendered by them. however, penalties imposed u/s. 78
were dropped on the basis of finding that as appellant was not aware of tax
liability ab initio, non-payment thereof cannot be said to be done knowingly
and even adjudicating authority took note of the fact that appellant become
aware of its liability only after obtaining opinion from consultants.
{Note: readers may note that, although the tribunal on one hand has Held that invocation of
extended period is justified and on other hand has deleted the penalty u/s. 78,
hon’ble Bombay high Court in the case of
Saswad Mali Sugar Factory Ltd vs. CCE, Pune [2014] 44 taxmann.com 149 has Held
that conditions for invocation of extended period of limitation u/s. 73(1) and
the conditions for imposing penalty u/s. 78 are identical. therefore both the
provisions go hand-in-hand, and if one did not survive, the other also cannot
be invoked.}
