The Commissioner Of Central Tax vs. M/S Abb Limited

Facts

The Commissioner of Central Tax, Bangalore North Commissionerate (Appellant) filed an appeal against an order passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). The Respondent, M/s ABB Limited, was engaged in manufacturing and providing taxable output services. Based on an intelligence report, a show cause notice was issued on April 23, 2010, alleging that the Respondent had wrongly utilized Cenvat credit in relation to its trading activities of electrical goods. The demand was for Rs. 5,68,00,000/-. The Order-In-Original disallowed the Cenvat credit for trading activities. The CESTAT, however, confirmed the demand only for the normal period, setting aside the demand for the extended period, citing no suppression of facts and confusion regarding credit for trading activities. The Appellant contended that the CESTAT's findings were perverse.

Held

The Court considered the rival contentions and perused the records. It noted that the show cause notice, as recorded in paragraph 6 of the notice itself, was issued based on the Balance Sheet for the year ending 2008. Therefore, the Appellant's contentions that the Respondent's trading activity was not known to the department and was learned through an intelligence report were found to be untenable. The Court referred to the decision in Shriram Value Services Pvt. Ltd., where the Madras High Court held that an Explanation inserted with effect from April 1, 2011, was clarificatory and applicable to past periods. In that case, the assessee was under a bona fide belief that trading activity was exempted services due to conflicting tribunal decisions. Such a bona fide belief could not be considered an ulterior purpose for evading duty, making the extended period of limitation unavailable to the revenue. Consequently, the substantial questions of law raised by the Revenue were answered in favour of the assessee. The appeal was dismissed.

Key Issues

1. Whether, in the facts and circumstances, the CESTAT was correct in dropping the demand for the extended period (January 2005 to September 2008) on the grounds that trading details were available in the Balance Sheet and there was confusion regarding credit for trading activities, leading to perversity? 2. Whether the CESTAT erred in dropping the demand for the extended period by disregarding the factual findings in the Order-In-Original, resulting in perversity? 3. Is the mere availability of trading details in the Balance Sheet sufficient to drop a demand for the extended period on the basis of no suppression? 4. Was the CESTAT correct in attributing prior knowledge of trading activity to the Respondent, ignoring that the Balance Sheet was produced only during the investigation? 5. Was the CESTAT correct in setting aside the demand for the extended period and penalties by relying on its own previous decisions and that of SHV LPG India Pvt. Ltd., while ignoring the specific factual aspects of the present case, leading to perversity? Contentions of the Appellant (Revenue): The Respondent did not declare its trading activities in its returns. The department learned about these activities through an intelligence report. The CESTAT's finding that the department was aware of the trading activity was factually incorrect and perverse. The Appellant relied on the principle that perversity on the face of it amounts to a question of law. Contentions of the Respondent (Assessee): The show cause notice was based on the Balance Sheet, which truly declared all activities, thus negating suppression. The trading activity was included from March 1, 2011, via a notification. The Respondent relied on the Madras High Court's decision in ASSTT. COMMR. OF GST & C. EX., CHENNAI vs SHRIRAM VALUE SERVICES PVT. LTD., which held that invoking the extended period of limitation is not tenable when an assessee has acted in good faith.