THE HON’BLE SRI JUSTICE M.S.RAMACHANDRA RAO
THE HON’BLE SRI JUSTICE M.S.RAMACHANDRA RAO
AND
THE HON’BLE SRI JUSTICE T. VINOD KUMAR
C.E.A.No.6 OF 2021
ORDER: (Per Hon’ble Sri Justie T.Vinod Kumar)
This appeal is directed against the Final order No.A/31172/2019
dt.07.08.2019 in Service Tax Appeal No.ST/20087/2014, passed by the
Customs, Excise and Service Tax Appellate Tribunal, Regional Bench, Hyderabad(for short, ‘the Tribunal’).
- The Revenue is the appellant before this Court.
- By the present appeal, the Revenue is questioning the order passed
by the Tribunal to the extent it had allowed the appeal and set aside the
Order-in-Original dt. 27.09.2013 passed by the adjudicating authority confirming the demand by invoking the extended period of limitation.
4. The respondent/ assessee is a public sector undertaking owned by
the Government of India. The respondent is engaged in manufacture of
Gas Turbines, Pumps, Bowl Mills etc., falling under Chapter 84 and 85 of
Central Excise Tariff Act, 1985; that in addition to the said activity, the
respondent is also engaged in the activity of trading of bought out goods; and that it had availed Cenvat credit of central excise duty paid on inputs and service tax on input services.
5. The respondent/ assessee was issued with a show cause notice dt.
19.10.2012 for the period April 2007 to March 2012, seeking recovery of the amount contemplated under the statue, interalia alleging that it had
availed cenvat credit on common input services used for providing both
taxable (manufacturing of excisable goods) and exempted service (trading
activities); that it had not paid the specified amount equivalent to the
value of the exempted service, nor paid the amount of credit attributable
to the provision of exempted service; and thus did not comply with the
condition and procedure specified in sub-rule(3) of Rule 6 of the Cenvat Credit Rules, 2004 (in short “Rules”).
6. The respondent/ assessee objected to the same by contending among other that the term “exempted service” as defined in Rule 2(e) of
the Rules prior to amendment w.e.f. 01.04.2011 covered only i) taxable
services which are exempted from the whole of service tax leviable by way of notification and ii) Services on which no service tax is leviable
under Section 66 of the Finance Act, 1994 ; that since it did not fall under
any of the two categories of exempted service, the activity of trading does
not amount to an exempted service; that only through Finance Act, 2011,
effective from 01.04.2011, the activity of ‘trading’ is brought under the definition of ‘exempted service’ in the ‘Rules’; that the amendment being a
substantial change cannot have retrospective effect; that as the issue
involved relates to interpretation, extended period of limitation cannot be
invoked for demanding duty for the period April 2007 onwards; and that it
did not resort to any suppression as audit was conducted by the
Department in the year 2010 whereat the information and documents relating to the activities of respondent/ assessee were provided.
7. The above said submissions of the respondent/ assessee did not
find favour with the Commissioner viz., appellant-Revenue, who by his
order dt. 27.09.2013 in Order-in-Original No.24/2013-(Service Tax)- Commr., confirmed the proposals made in the show cause notice.
8. Being aggrieved by the said Order-in-Original, the
respondent/assessee preferred appeal before the Tribunal as provided under Section 86 of the Finance Act, 1994.
9. The Tribunal, by its order dt. 07.08.2019, in so far the invocation of
extended period of limitation held that the same cannot be invoked for
confirmation of adjudged demand and in relation to the demand for the normal period, the matter was remanded to the Original Authority to
examine the issue as to whether the requirement of sub-rule (3A) of Rule
6 of the Rules has been complied with by the respondent/ assessee.
Further, the tribunal also held that the assessee not be made liable to pay penalty, in case, any demand is confirmed under normal period.
10. Aggrieved by the said order passed by the Tribunal in holding that
the extended period of limitation is not invocable, the Revenue has filed the present appeal.
- Heard Sri Swaroop Orilla, learned Senior Standing Counsel appearing for the appellant/revenue.
- As seen from the order of the Tribunal as well as the Order-in- Original, the issue involved therein relates to the availment of Cenvat
Credit by the assessee on the common input services used for providing
both the taxable and exempted service. The common input services on
which the respondent/assessee claimed Cenvat credit were like Audit fee,
Inspection charges, legal expenses. Telephone expenses, Service tax on bank guarantee charges etc.
13. It is not in dispute that the definition of “exempted service” as
defined in Rule 2(e) of Rules has been amended by Finance Act, 2011
w.e.f. 01.04.2011. By the said amendment, it has been explicitly stated
that the same would cover ‘trading’ also within its ambit. Prior to the above amendment, the reference to ‘exempted service’ in Rule 6 of the
Rules had to reckoned with the definition as provided in Rule 2(e) of the
Rules. It is only by virtue of explanation inserted vide Notification No.
3/2011-CE(NT) dt. 01.03.2-011 w.e.f. 01.04.2011, the activity of ‘trading’
has been specified as ‘exempted service’. While the appellant/ Revenue
contends the said amendment to be ‘clarificatory’, respondent/ assessee contends the same to be prospective in nature.
14. It is also not in dispute that the said issue during the subject period
was considered by different benches of the Tribunal in various matters, wherein divergent views had been taken.
15. On the basis of the factual findings recorded by the original authority, on the aspect of invocation of extended period of limitation as
against the normal period of ‘six months’ provided under the Finance Act, the Tribunal observed as under:
“The term “exempted service” has been defined in Rule 2(e) ibid. The said phrase was brought into the ambit of such definition clause by way of an explanation appended to the said rule w.e.f. 01.04.2011. The issue whether, the activity of trading would fall within the ambit of exempted service was highly contentious and there were divergent views by the judicial forums. Even, the issue regarding retrospective or prospective application of such explanation clause was also highly debatable. Thus, under such circumstances, payment of amount as per the requirement of sub- rule(3) of Rule 6 ibid was not diligently complied with by the appellant as asserted. However, it is noticed that based on the records maintained by the appellant, the Cenvat amount attributable to the common input services used for the trading activity was reversed. On proper scrutiny of the case records, we are convinced that the extended period of limitation cannot be invoked against the appellant for confirmation of the adjudged demands inasmuch as the charges of suppression, fraud, willful mis-statement etc., cannot be invoked for bona fide interpretation of statutory provisions placed by the appellant. We find that in an identical situation, this Tribunal in the case of AVL India Pvt. Ltd., (supra) has held that the extended period of limitation cannot be invoked to the issues concerning interpretation of the provisions
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contained in the explanation to Rule 2(e) ibid and accordingly, has held that the demand, if any, should only be confined to the normal period.”
16. The Tribunal by placing reliance on the decision in AVL India Pvt. Ltd., in the facts of the present case held that that –
“we do not find any merits in the impugned order, insofar as it has confirmed the adjudged demands under the extended period of limitation.”
17. The finding as recorded by the Tribunal, in our view, does not call for any interference, for more than one reason. Firstly, the finding with
regard to invocation of extended period of limitation is a pure finding of
fact depending on facts of each case, as held by the Hon’ble Supreme Court in Commissioner of Central Excise, Indore v. Reymond Ltd.
Secondly, as rightly observed by the Tribunal, whether the activity of trading is to be considered as ‘exempted service’ at the relevant point of
time was highly contentious and also the issue regarding the retrospective
or prospective application of the explanation clause inserted. Thus, it can
be safely stated that the issue was in fluid state and in such
circumstances, it cannot be alleged that the respondent/ assessee
resorted to either suppression, fraud or willful mis-statement, attracting the extended period of limitation as there isn o positive or deliberate act
on part of the assessee, as held by the Hon’ble Supreme Court in Commissioner of Central Excise, Hyderabad v. Chemphar Drugs & Liniments .
2017(4) GSTL 59 (Tri‐Del)
(2017) 88 Taxmann.com 234 (SC)
(1989) 2 SCC 127 = 1989 AIR 832 (SC)
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18. Further, Apex Court in Sanjay Industrial Corporation and Another v. Commissioner of Central Excise, Mumbai, held that –
“if the appellant also had nurtured this belief that the process carried out by him does not amount to manufacture and did not pay the Excise duty, we can safely infer that this conduct of the appellant was a bona fide conduct and cannot be treated as contumacious or willful suppression ”.
19. In Pushpam Pharmaceuticals Company v. Collector of
Central Excise, Bombay ,
the Hon’ble Supreme Court, while
considering analogous provision Section 11A of the Central Excise Act, 1944 held that –
“the extended period can be invoked in respect of suppression of facts only if the non-disclosure was deliberate and aimed at evading payment of duty.”
20. The Apex Court in
Commissioner of Central Excise,
Aurangabad v. Bajaj Auto Limited and Others , held that in order to
Attract the provisions of Section 11A of the Central Excise Act,
1944, which confers power on the authority to invoke the extended period of limitation has held –
“In our view, on a reading of the relevant provision the extended period of limitation as provided by the proviso to section 11A(1) of the Act, can only be invoked when there is a conscious act of either fraud, collusion, willful mis-statement, suppression of fact, or contravention of the provisions of the Act or any of the rules made thereunder on the part of the person chargeable with duty or his agent, with the intent to evade payment of duty.”
21. Applying the principles as deduced from the above decisions of the
Supreme Court to the facts of the case as recorded by the Tribunal, it
(2015) 14 SCC 639
1995 Supp (3) SCC 462 = 1995 (78) ELT 401 (SC) (2010) 13 SCC 117
cannot be said that the respondent/ assessee had resorted to suppression
conferring the authority with the power to invoke the extended period of limitation.
22. Thus, this Court is of the view that in the given facts and
circumstances, the reasons assigned by the Tribunal for holding that the
extended period of limitation cannot be invoked for confirmation of adjudged demand does not call for any interference.
- In view of the above, this Court is of the opinion that no substantial question of law arises for consideration in the appeal.
- Accordingly, the appeal of the revenue is dismissed.
- Pending miscellaneous petitions, if any, shall stand closed in the
light of this final order. No order as to costs.
________________________________
JUSTICE M.S.RAMACHANDRA RAO
______________________
Date: 27.04.2021
GJ
JUSTICE T.VINOD KUMAR
