CESTAT set aside the order under challenge and observed that an extended period has wrongly been invoked while issuing the Show Cause Notice and it becomes barred by time and the plea of exclusion is incorrect as services are not primarily for personal use or consumption of any employee.
Brief Facts:
During the course of the audit, it was noticed that the appellant had wrongly availed Cenvat credit on ineligible input services. A show cause notice was issued to the appellant proposing therein recovery of wrongly availed credit under Rule 14 of the Rules read with proviso to Section 11 A (4) of Central Excise Act, 1944 along with interest under Rule 14 of the Rules read with Section 11 AA of the Act and imposition of penalty under Rule 15 of the Rules read with Section 11 AC of the Act. The Adjudicating Authority confirmed the demand for Cenvat Credit along with interest and penalty equal to the amount of Cenvat credit.
Contentions of the Applicant:
The learned counsel appearing for the appellant argued that the credit was eligible as services were used for business purposes and it was wrongly alleged that credit was availed on input services which are not defined under Rule 2(1) of CENVAT Credit Rules, 2004 and on documents as are not prescribed under Rule 9 of CENVAT Credit Rules, 2004. It was further argued that an extended period cannot be invoked since there is no malafide intention nor any suppression of facts and the penalties also cannot be levied for the same reason and as it is a case of interpretation.
Contentions of the Respondent:
The learned departmental representative contended that the order had been passed after considering g the definition of input services and conditions for allowing CENVAT Credit and the limit is also prescribed in the statute thus, there is no infirmity in the impugned order.
Observations of the Court:
The tribunal observed that under Rule 2 (l) of Cenvat Credit Rules, 2004 unless excluded, all goods used for the manufacture of a final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT credit. The court further stated that anything which is used in or about the manufacture of the final product has to be qualified as input service and all the services in the present case were availed concerning the place of manufacture of the final product and concerning the employees in general, of the manufacturer and thus are covered under the wide notation “directly or indirectly used in or about the manufacture.
The court further referred to the judgement in Maruti Suzuki vs. Commissioner of Central Excise, Delhi-III which divided the definition of input into three parts- specific part, inclusive part and the place of use. It was stated that even though the services of General Insurance are mentioned under the exclusion clause, but only in such circumstances where it is for the personal use of the employee and they were used for the employees as a whole in the present case and the services thus are the eligible input service for which appellant was entitled to Cenvat credit. It was stated that the plea of exclusion is incorrect as the services of Membership of Club, and Health Services are not primarily for personal use or consumption of any employee.
It was further observed that an extended period can be invoked if and only if there is an apparent and willful suppression of fact or misrepresentation or there is any element of fraud or collusion on the part of the assessment that too with an intent to evade the duty/tax liability. Reference was made to the judgment in CCE vs. Chemphar Drugs & Liniments where it was held that an extended period is applicable only when something positive other than mere inaction or failure on the part of the assessee is proved and there has to be evidence about conscious and deliberate withholding of information on part of the assessee which is not present in the present case. It was concluded that an extended period has wrongly been invoked while issuing the Show Cause Notice and it becomes barred by time.
The decision of the Court:
The court allowed the appeal and set aside the impugned order.
Case Title: M/s. KEC International Ltd. vs. Commissioner of Customs, Central Excise and Central Goods & Services Tax, Jaipur
Coram: Hon’ble Dr. Rachna Gupta, Member (Judicial)
Case No.: Excise Appeal No. 51203 of 2022
Advocate for the Applicant: Mr. Alok Kumar Kothari
Advocate for the Respondent: Mr. Mahesh Bhardwaj
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