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2016 (5) TMI 135 - AT - Service TaxDisallowance of Cenvat credit - Insurance Auxiliary Service - Availed Cenvat Credit in respect of certain service which is exclusively used for non taxable activity that is auction sale abandoned cargo and export of stuff cargo - Appellant contended that auction of abandoned goods being a trading activity is not a exempted service as the trading activity was covered under the definition of exempted service only w.e.f. 01.04.2011. Held that:- even prior to 1.4.2011 since no service tax was payable on auction sale of abandoned cargo and export cargo, credit was not admissible on the input service used in such output activity as per the definition of input service. Therefore the Cenvat Credit on the input service used for auction sale of abandoned cargo and export cargo is not admissible to the appellant. Period of limitation - Demand of Service tax - Auction of sale of abandoned cargo - Held that:- the demand proceeding on the auction of sale of abandoned cargo itself was alarm to the appellant that whether the Cenvat Credit should be availed on the input service used in the auction sale of abandoned cargo. Therefore despite knowing all the facts, the appellant kept on availing Cenvat Credit. As regard details of availment of Cenvat Credit on the nature of input service is not known to the department therefore it cannot be accepted from the department to issue show cause notice within 1year unless until the facts are unearthed. Therefore, as there is a suppression of fact on the part of the appellant, extended period in the first show cause notice was rightly invoked. Imposition of penalty under Section 78 - Held that:- Section 78 penalty can be imposed only when there is a suppression of fact, fraud, collusion, willful misstatement etc. In the present case, the suppression of fact involved only in the first show cause notice. However, all the subsequent show cause notices were issued after knowing the facts involved in the first show cause notice, therefore in the subsequent show cause notices it cannot be said that there is suppression of fact on the part of the appellant, nor it can be said that the department had no knowledge about the fact of the case after issuance of first show cause notice. Therefore penalty under Section 78 is not sustainable corresponding to demand of Cenvat Credit for the period after September 2005 but sustainable for the period October 2003 to September 2005. - Decided partly in favour of appellant
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