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CX – Assessee cannot be charged with intent to evade payment of tax where it disclosed entire credit availed & reflected such details in ST-3 returns: CESTAT

2019-TIOL-2317-CESTAT-MAD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI

Appeal No. E/41993/2018

Arising out of Order-in-Appeal No.94&95/2018, Dated: 17.05.2018
Passed by the Commissioner of Central Excise (Appeals), Madurai

Date of Hearing: 08.03.2019
Date of Decision: 08.03.2019

M/s SRI RAM COMPANY

Vs

COMMISSIONER OF GST AND CENTRAL EXCISE
MADURAI

Appellant Rep by: Ms Vishnu Priya, Adv.
Respondent Rep by: Shri L Nandakumar, AC AR

CORAM: Sulekha Beevi C S, Member (J)

CX – The assessee is trader of timber wood and registered with department for payment of service tax under BAS, Renting of Immovable Property Service, Supply of Tangible Goods Service and GTA Service – On scrutiny of ST-3 returns, it was revealed that assessee has taken and utilised Cenvat credit of certain input services which according to department was ineligible as their activity was normally trading – SCN was issued proposing to recover wrongly availed credit along with interest and also for imposing penalty – The assessee has disclosed entire credit availed by them – The ST-3 returns also reflect these details – Therefore, the assessee cannot be saddled with guilt of intention to evade payment of tax – Further, an earlier SCN has been issued invoking extended period which overlaps with the period involved in present SCN – The Supreme Court in case of M/s. Nizam Sugar Factory – 2006-TIOL-56-SC-CX has held that when all relevant entries were within the knowledge of department while which issuing the first SCN, the second SCN invoking extended period cannot sustain – Following the said decision, the demand is held time-barred – The appeal succeeds on limitation – On perusal of SCN, it is seen that there is no invocation of provision of CGS Act in SCN – Therefore, such confirmation of demand or penalties or interest invoking the provisions not contained in the SCN also cannot sustain: CESTAT

Appeal allowed

Case law cited:

M/s. Nizam Sugar Factory Vs Collector of Central Excise, A.P – 2006-TIOL-56-SC-CX… Para 2

FINAL ORDER NO. 40471/2019

Per: Sulekha Beevi:

Brief facts are that the appellants are traders of timber wood and are registered with the department for payment of service tax under Business Auxiliary Service, Renting of Immovable Property Service, Supply of Tangible Goods Service and GTA Service. On scrutiny of ST-3 returns for the period 2011-12 to 2014-15, it was revealed that the appellant has taken and utilised Cenvat credit of certain input services to the tune of Rs.40,32,973/- during the period from 2011-12 to 2013-14 which according to the department was ineligible as their activity was normally trading. Show-cause notice was issued proposing to recover the wrongly availed credit along with interest and also for imposing penalty. After due process of law, the original authority confirmed the demand along with interest imposed penalty under section 78(3) of the Finance Act, 1994. In appeal, the Commissioner (Appeals) upheld the same. Hence this appeal.

2. On behalf of the appellant, the learned counsel Ms. Vishnu Priya appeared and argued the matter. She submitted that the appellant is not contesting the confirmation of demand on merits. She argued that the show-cause notice is time-barred and, therefore, cannot sustain. It is submitted by her that in 2012, a audit was conducted by department, wherein, it was pointed out that the appellant had not discharged service tax under GTA Services. The appellant thereupon immediately paid-up the entire demand under GTA Services. Later, a letter was issued by department dated 30.12.2014 calling for details with regard to entire credit availed for the period 2009-13. The appellant replied vide letter dated 21.11.2015. Again, a letter was issued by the department dated 05.01.2015 to which also the appellant has furnished reply dated 08.01.2015 giving all necessary details. The present show-cause notice has been later issued for the period Apr.’11 to Mar.’14 alleging that appellant has wrongly availed input tax credit for trading activity. The show-cause notice is issued invoking the extended period alleging suppression of facts with intention to evade payment of service tax. She submitted that the department is aware of the entire credit availed by them during the conduct of earlier audit in 2012. Further, when the appellant had filed ST-3 returns pursuant to audit objections for GTA Services, the entire credit availed by the appellant for the input services impugned in the show-cause notice was also disclosed. She adverted to para 31 of Order-in-Original and submitted that the original authority has taken note of this fact and observed that the appellant has not suppressed any facts and had disclosed details of the credit in their accounts. This would go to show that the allegation that appellants have suppressed facts with intention to evade payment of tax is factually incorrect. The department has issued earlier a show-cause notice dated 09.10.2013 in respect of the GTA Services for the period Oct.’11 to Mar.’12 invoking extended period. In the present show-cause notice dated 04.01.2017 which is for the period Apr.’11 to Mar.’14 is also issued invoking extended period. Therefore, this second show-cause notice would be hit by the ratio of Hon’ble Supreme Court in the case of M/s. Nizam Sugar Factory Vs Collector of Central Excise, A.P., reported in 2008 (9) S.T.R.314 (S.C.) = 2006-TIOL-56-SC-CX. With regard to late fee, she submitted that the appellant had filed ST-3 returns on being pointed out by the department in regard to GTA Services. During the relevant period, the computerized system of ACES was introduced and the delay was due to technical hitches and was not intentional. She therefore prayed for setting aside the late fee also.

3. Learned Authorised Representative for the Revenue Shri L. Nandakumar, AC (AR) supported the findings in the impugned order.

4. He argued that the appellant was engaged only in trading and was not providing any Output Services. Therefore, trading being deemed exempted service with effect from 01.04.2011, the appellants cannot avail any input tax credit. The credit availed on various input services is therefore ineligible. Since the provisions of law is very much clear, the contention of the appellant that they have not suppressed facts with intention to evade payment of tax cannot be accepted. The findings in the order passed by the authorities below are legal and proper.

5. Heard both sides.

6. The learned counsel has argued only on the ground of limitation. It is seen from the records that an earlier show-cause notice, dated 09.10.2013 was issued for the period from Oct.’11 to Mar.’12 invoking extended period. In the show-cause notice, the demand was in respect of GTA Services. The appellant paid the service tax and filed ST-3 returns. The returns filed for such period has been produced before me. The learned counsel for the appellant has drawn my attention to the fact that the entire credit availed by them during the disputed period was reflected by the appellants in these returns. However, the present show-cause notice dated 04.01.2017 has been issued again invoking the extended period for the period Apr.’11 to Mar.’14 alleging availment of wrong credit. The period in both the show-cause notices are overlapping. In para 31 of Order-in-Original, the Assistant Commissioner has noted that the appellant has maintained proper books of accounts during the disputed period, wherein, the entries relating to the credit availed on input services have been clearly reflected. The relevant paragraphs are reproduced:-

“According to the first proviso to section 78(1) of the Finance Act, 1994 where the details relating to such transactions are recorded for the period beginning with the 8th April, 2011 upto the date on which the Finance Bill, 2015 receives the assent of the President, the penalty shall be fifty per cent of the service tax so determined. In the instant case, the service provider has maintained proper books of accounts during the years 2011-12 to 2014-15, wherein, the entries relating to the input services and service tax paid thereon are reflected, which are being regarded as specified records as prescribed in the Explanation under section 78(1). Hence, I am inclined to impose penalty under proviso to section 78(1) of the Act. Accordingly, I pass the following order.”

7. From these findings, it can be seen that the appellant has disclosed entire credit availed by them. The ST-3 returns also reflect these details. Therefore, the appellants cannot be saddled with guilt of intention to evade payment of tax. Further, an earlier show-cause notice has been issued invoking the extended period which overlaps with the period involved in the present show-cause notice. The Hon’ble Supreme Court in the case of M/s. Nizam Sugar Factory (supra) has held that when all relevant entries were within the knowledge of department while which issuing the first show-cause notice, the second show-cause notice invoking extended period cannot sustain. After appreciating the facts as well as following the decision in the case of M/s. Nizam Sugar Factory (supra), I am of the view that the demand is time-barred. The appeal succeeds on limitation.

8. It has to be mentioned that while confirming the demand, in the operative portion, the Assistant Commissioner has noted that the demand is confirmed under section 73(1) of the Finance Act, 1994 read with sub-section 8(a) of section 142 of CGS Act, 2017. The interest, penalties as well as late fee have also been confirmed on provisions of law along with the provision of CGS Act, 2017. On perusal of the show-cause notice, it is seen that there is no invocation of provision of CGS Act in the show-cause notice. Therefore, such confirmation of demand or penalties or interest invoking the provisions not contained in the show-cause notice also cannot sustain.

9. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any.

(Dictated and pronounced in open court)

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