2025 (6) TMI 190 - AT - Service Tax

Irregular availment of CENVAT Credit - CENVAT Credit was availed on documents which were not raised against them and credit was availed on the basis of documentation which appeared to have no mention of Service Tax - HELD THAT - In this case the disputed period is from 2004-05 to 2008-09 and the impugned Show Cause Notice was issued by invoking the extended period of limitation on 11.04.2012 on the basis of audit conducted on 18.04.2011. The appellant has already reversed the CENVAT Credit of Rs.26, 94, 123/- and agreed before the ld. adjudicating authority that the demand may be limited to that amount. It is observed that the said amount has been paid by the appellant along with interest and paid a penalty of Rs.8, 65, 439/-. Therefore such payment made by the appellant is sufficient to meet the ends of justice in a case where the admitted demand has been paid by the appellant along with interest and 25% of penalty on that. Conclusion - The admitted portion of the demand which has already been paid by the appellant is upheld which is sufficient to meet the ends of justice - rest of the demand set aside. Appeal disposed off.

Summary

Issues Presented and Considered

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the extended period of limitation can be invoked for recovery of CENVAT Credit availed irregularly by the appellant during the period 2004-05 to 2008-09.

2. Whether the appellant's contention that the extended period of limitation is barred due to disclosure of facts in periodical returns is tenable.

3. Whether the appellant's partial reversal and payment of admitted demand along with interest and penalty satisfies the requirements of justice, thereby warranting any further demand or penalty.

4. The applicability and binding nature of the Tribunal's earlier decisions, including the decision in Vandana Global Ltd., on the issue of limitation and CENVAT Credit availment.

Issue-wise Detailed Analysis

Issue 1: Invocability of Extended Period of Limitation for Recovery of CENVAT Credit

The relevant legal framework involves the provisions governing limitation periods under the Service Tax and CENVAT Credit Rules. Typically, recovery of service tax demand is subject to a limitation period of three years from the relevant date, except in cases where extended limitation is invoked due to fraud, suppression of facts, or willful misstatement.

The Tribunal noted that the Show Cause Notice was issued on 11.04.2012, based on audit findings dated 18.04.2011, covering the period 2004-05 to 2008-09. The Revenue invoked the extended period of limitation to recover CENVAT Credit of Rs.32,23,866.05, alleging irregular availment on documents not raised against the appellant and absence of service tax details in input documents.

The appellant argued that since all facts were disclosed in periodical returns submitted to the Department, the extended period of limitation was not applicable. The Tribunal considered the appellant's reliance on the decision in Vandana Global Ltd., wherein it was held that extended limitation is not invocable when facts are disclosed in returns.

The Tribunal's reasoning emphasized that the extended limitation is a special provision and can only be invoked when there is concealment or fraud. Since the appellant had submitted returns disclosing the relevant facts, the extended period should not ordinarily apply.

Issue 2: Disclosure of Facts in Periodical Returns and Its Effect on Limitation

The appellant contended that the facts regarding CENVAT Credit availment were available with the Department through periodical returns, thereby negating the applicability of extended limitation. The Tribunal examined this contention in light of the submissions and earlier rulings.

The Tribunal observed that disclosure in returns is a significant factor in determining whether limitation can be extended. If the Department is aware of the facts through returns, invoking extended limitation would be contrary to principles of natural justice and statutory provisions.

However, the Tribunal also noted that the appellant failed to produce original invoices substantiating the CENVAT Credit claimed, which raised suspicion about the authenticity of the credit. This fact weighed in favor of the Revenue's case for extended limitation. Despite this, the Tribunal balanced the equities by considering the appellant's partial reversal and payment.

Issue 3: Effect of Partial Reversal, Payment of Interest and Penalty on the Demand

The appellant admitted to having reversed Rs.26,94,123/- of the disputed credit and paid interest thereon, along with a penalty of Rs.8,65,439/-. The adjudicating authority confirmed the demand and penalty, but on appeal, the Commissioner (Appeals) remanded the matter for verification of payment authenticity and correct calculation.

The Tribunal found that the appellant had indeed paid the admitted portion of the demand along with interest and penalty, and that such payment was sufficient to meet the ends of justice. The Tribunal opined that once the admitted demand is paid with interest and a portion of penalty, further recovery or penalty is not warranted, especially in light of the appellant's cooperation and partial compliance.

This approach reflects the principle of proportionality and fairness in tax adjudication, where the Tribunal balances strict enforcement with practical considerations.

Issue 4: Applicability of Tribunal's Earlier Decisions

The appellant relied heavily on the Tribunal's earlier decision in Vandana Global Ltd., which held that extended limitation is not invocable where facts are disclosed in returns. Additionally, the appellant cited its own earlier appeal (Final Order No. 75920/2024 dated 16.05.2024) where extended limitation was held inapplicable for the period April 2006 to March 2011.

The Tribunal acknowledged these precedents and found them persuasive. The principle that extended limitation cannot be invoked absent concealment or fraud was reaffirmed. However, the Tribunal distinguished the present case on the basis that the appellant had not produced original invoices, which created a factual distinction.

Nevertheless, the Tribunal's ultimate view was to uphold the admitted demand already paid and set aside the balance, thus aligning with the spirit of the earlier rulings.

Significant Holdings

"Such payment made by the appellant is sufficient to meet the ends of justice in a case where the admitted demand has been paid by the appellant along with interest and 25% of penalty on that."

"The extended period of limitation is a special provision and can only be invoked when there is concealment or suppression of facts; mere irregularities or non-production of invoices do not automatically justify its invocation."

"Where facts are disclosed in periodical returns submitted to the Department, the extended period of limitation is not ordinarily invocable."

"In cases where the appellant has reversed the admitted portion of CENVAT Credit and paid interest and penalty, further demand beyond that admitted amount should not be sustained."

The Tribunal's final determination was to uphold the admitted portion of the demand already paid by the appellant, including interest and penalty, and to set aside the remainder of the demand and penalty. This decision reflects the Tribunal's commitment to balancing statutory enforcement with fairness and adherence to limitation principles.