Commissioner Of Central Excise And Service Tax, Dibrugarh vs. M/S North Eastern Cables And Conductors Private Limited

Facts

The appellant, Commissioner of Central Excise and Service Tax, challenged a CESTAT order that allowed the respondent company's appeal and set aside a demand. The respondent company provided "Erection, Commissioning or Installation Services" and also supplied materials under separate contracts. The appellant alleged that the respondent violated CENVAT Credit Rules, 2004, by availing and utilizing CENVAT credit of Rs. 1,30,84,835.00 on inputs used for exempted services (supply of materials). The respondent had submitted periodic ST-3 returns detailing credit availed, utilized, and reversed. A show-cause notice was issued on 04.11.2013, proposing recovery of the utilized credit, interest of Rs. 1,19,16,571.00, and penalty. The CESTAT allowed the respondent's appeal, setting aside the demand.

Held

The Court held that the demand of CENVAT credit was barred by limitation. The substantial question of law was answered in the affirmative. The Court reasoned that the respondent company had disclosed all details regarding the availment of CENVAT credit in their ST-3 returns. Crucially, the show-cause notice issued by the Revenue did not contain any allegation of wilful suppression or misstatement with the intent to evade service tax. The Court cited Supreme Court judgments in Cosmic Dye Chemical and Anand Nishikawa Co. Ltd., emphasizing that the extended period of limitation can only be invoked when there is a conscious act of fraud, collusion, wilful misstatement, suppression of fact, or contravention of provisions with intent to evade duty. The Court found the appellant's reliance on M/s Modipon Fibre Company distinguishable, as in that case, the assessee had filed a declaration without disclosing required details, unlike the present case where all details were disclosed in returns. Therefore, the impugned order of the CESTAT was found to be without illegality.

Key Issues

1. Whether, under the peculiar facts and circumstances of the case, the CESTAT, Kolkata was correct in holding that the demand of CENVAT Credit utilized by the assessee was barred by limitation? The appellant argued that the demand was not barred by limitation as the respondent had availed ineligible CENVAT credit and utilized it for payment of service tax, which was not permissible. The appellant contended that the extended period of five years under the proviso to Section 73(1) of the Finance Act, 1994, was rightly invoked due to wilful suppression and misstatement with intent to evade payment of service tax. The respondent argued that the demand was barred by limitation as there was no wilful suppression or misstatement. They contended that all details regarding the availment of CENVAT credit were disclosed in the ST-3 returns. The respondent relied on Supreme Court judgments emphasizing that mere non-disclosure or failure to declare does not amount to wilful suppression and that there must be a conscious act with intent to evade duty.