The Gauhati High Court while upholding the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has observed that the demand is not sustainable against the assessee as the assessee disclosed cenvat credit availment details and there was no intention of service tax evasion.
The bench of Chief Justice Mr. Vijay Bishnoi and Justice Suman Shyam has observed that the respondent-Company had disclosed all the details about availment of the CENVAT Credit in ST-3 Returns and there is no allegation by the department of willful suppression and misstatement with intent to evade Service Tax in the show-cause notice. Therefore, there is no illegality in the order passed by the CESTAT.
The appellant/department filed the central excise appeal aggrieved with the order passed by the Customs, Excise and Service Tax Appellate Tribunal.
The respondent, North Eastern Cables and Conductors Private Limited having its Service Tax Registration under Jorhat Division, had provided services under the category of “Erection, Commissioning or Installation Services” to various organisations like Electricity Board etc. under the specific contract. Apart from that, the respondent-Company had also supplied materials like RCC Poles, conductors, angles etc. under separate and independent contract.
The supply of materials was not covered under the purview of Service Tax Act but the Erection, Commissioning or Installation part is liable to Service Tax. The respondent Company had violated Rule 3 and Rule 6 of the CENVAT Credit Rules, 2004 by availing and utilising the CENVAT Credit of Central Excise Duty amounting to Rs.1,30,84,835 only on inputs used for rendering exempted service as defined under Rule 2(e) of the Rules, 2004.
The periodic returns ST-3 had been submitted by the respondent-Company in which the details regarding total credit, credit utilized as well as credit reversed had been mentioned.
On the basis of an audit objection, the Commissioner, Central Excise and Service Tax, Dibrugarh had issued a demand-cum-show-cause notice (SCN) to the respondent-Company and asked the respondent-Company to show cause as to why, an amount of Rs.1,30,84,835 wrongly utilized by it should not be demanded and recovered along with the interest. It was also mentioned as to why interest to the tune of Rs.1,19,16,571/- be not demanded and recovered from it and why penalty should not be imposed upon it.
The respondent Company had not contested the demand on merits but contested the show-cause notice only on the ground that it was beyond the period of limitation.
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The Commissioner, Central Excise and Service Tax, Dibrugarh had rejected the objections raised by the respondent-Company regarding limitation and confirmed the demand of ineligible CENVAT Credit as Service Tax along with the interest and penalty.
The respondent Company had filed an appeal before the CESTAT, Kolkata and the Tribunal after hearing both the parties allowed the appeal. The CESTAT held that there was no justification in the stand of the lower authorities. The credit was duly reflected in the returns, which were filed with the Revenue. In the absence of any column in returns requiring the nature of the input or input services, the non-disclosure of the same cannot attribute any mala fide to the assessee. The Gujarat High Court in the case of Prolite Engineering Co. v. Union of India has observed that non-disclosure of information, which is not required to be disclosed or recorded by statutory provisions or prescribed proforma does not amount to suppression or concealment. The demand is barred by limitation.
The department contended that the appellant has submitted that the learned CESTAT has erred in holding that the appellant had failed to show any positive evidence to prove willful fraud or suppression to justify invocation of extended period of limitation. It is contended that mere submission of Returns by the respondent Company cannot be deemed that it had discharged its burden.
The department argued that the respondent-Company had taken and utilized ineligible CENVAT Credit violating the provision of CENVAT Credit Rules, 2004 and reversed it only when the audit objection was raised. It is submitted that this fact itself is sufficient to conclude that there was an element of misstatement with intent to evade payment of Service Tax. Therefore, the Commissioner, Central Excise and Service Tax, Dibrugarh had rightly passed the order of recovery and was also justified in demanding interest. The Commissioner was also justified in imposing a penalty upon the respondent Company. The action of the Commissioner, Central Excise and Service Tax, was in accordance with law whereas the CESTAT had ignored the aspect of the matter and illegally passed the order.
The assessee contended that it is not the case of the appellant that the respondent had not disclosed the details of the CENVAT Credit of Central Excise Duty as Service Tax, Education Cess, Secondary & Higher Education Cess. The Respondent Company has not suppressed anything in the Return. Every detail was with the Department. However, despite having all these details, till the audit objection was raised, no notice was issued to the respondent-Company within the limitation period i.e. 18 months from the relevant date and the same was admittedly issued after the expiry of the period.
The assessee contended that until and unless the Department is able to demonstrate that the Service Tax, not levied or not paid or short levied or short paid or erroneously refunded by the reason of fraud, collusion, willful misstatement, suppression of fact or contravention of any of the provisions of the Act or of the Rules with the intent to evade payment of Service Tax, the extended period of limitation i.e. 5 years would not be available with the Department.
As per Section 73 of the Service Tax (Finance Act, 1994), where any service tax is not levied or paid, short-levied or short-paid or erroneously refunded, a show-cause notice is required to be served upon the person chargeable with the Service Tax within a period of 18(eighteen) months from the relevant date.
However, where any Service Tax has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of the Finance Act or of the Rules made thereunder with the intent to evade payment of Service Tax, then the limitation for serving notice upon the person chargeable with the Service Tax is extended upto 5 years from the relevant date.
The issue raised was whether the respondent Company, in its ST Return, had disclosed all the relevant information regarding availment of CENVAT Credit while submitting ST-3 Returns. If we look into the show-cause notice, it is clear that the respondent Company had provided every detail regarding availment of CENVAT Credit in the ST-3 Returns.
The court while dismissing the department’s petition held that it was nowhere mentioned in the show-cause notice that the assessee had misstated any fact with intent to evade the payment of Service Tax.
Case Details
Case Title: Commissioner Of Central Excise And Service Tax Versus M/S North Eastern Cables And Conductors Private Limited
Citation: Case No. : C.Ex.App./6/2020
Decision date: 19.08.2024
