Extended Limitation Cannot Be Invoked Twice for Same Issue: CESTAT Kolkata

Neo Metaliks Limited Vs Commissioner of Central Excise and Service Tax (CESTAT Kolkata)

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Kolkata delivered a ruling in the case of Neo Metaliks Limited vs. Commissioner of Central Excise and Service Tax, addressing five appeals concerning the denial of CENVAT credit. The key issue in these appeals was whether the extended period of limitation could be invoked multiple times for the same matter. The tribunal ruled that once the extended limitation has been used for an issue, subsequent notices for the same issue cannot rely on it again. The decision aligns with the Supreme Court’s ruling in Nizam Sugar Factory v. Collector of Central Excise (2006), where it was held that repeated invocation of extended limitation on the same issue is not permissible.

The tribunal also examined the denial of CENVAT credit based on procedural grounds, such as the lack of Input Service Distributor (ISD) registration for the head office and invoices not being issued in the company’s name. It ruled that since the receipt and utilization of services were not in dispute, credit could not be denied merely on procedural irregularities. The ruling emphasized that substantive benefits cannot be denied due to technical lapses when there is no dispute over the legitimacy of credit availed.

Another key aspect of the case involved the classification of ‘trading’ as an exempted service. The tribunal found that trading was recognized as an exempted service only from April 1, 2011. As the disputed period was 2007-2011, the tribunal ruled that there was no requirement to reverse the proportional CENVAT credit attributed to trading for that period. Accordingly, the demand raised in the show cause notices and subsequent orders was set aside, as the basis for the denial of credit did not hold legal merit.

Finally, the tribunal reviewed the penalty imposed on Neo Metaliks Limited, which had been increased by the Commissioner (Appeals) from ₹2,000 to ₹3,21,981. Since the tribunal found that the company was entitled to the CENVAT credit, it ruled that the penalty was unjustified and should be reversed. With these findings, the CESTAT set aside the impugned orders and allowed the appeals in favor of Neo Metaliks Limited, reinforcing the principle that procedural flaws cannot override substantive rights.

FULL TEXT OF THE CESTAT KOLKATA ORDER

There are five appeals. The issues involved in all these appeals are common and hence, they are taken up for decision by a common order.

2. The details of the five appeals are as under:

(i) Excise Appeal No. 70633 of 2013 is related to denial of CENVAT Credit of Rs.1,17,41,737/-pertaining to the period from 2007-08 to 2010-11. The SCN bearing No. 24/Commr/Bol/12 dated 21.03.2012 was issued covering the period 2007-08 to 2010-11, by invoking extended period of limitation.

(ii) Excise Appeal No. 78713 of 2018, is related to denial of CENVAT Credit of Rs.58,938/- pertaining to the period 2008-09. The SCN bearing No.02/AC/DGP-I/13 dated 12.03.2013 was issued covering the period 2008-09, by invoking extended period of limitation.

(iii) Excise Appeal 79090 of 2018, is related to denial of CENVAT Credit of Rs.19,76,334/- pertaining to the period 2009-10. The SCN bearing No. 04/ADC/BOl/12 dated 19.01.2012 was issued covering the period 2009-10, by invoking extended period of limitation.

(iv) Excise Appeal No.75370 of 2020, is related to denial of CENVAT Credit of Rs.3,66,481/- pertaining to the period 2009-10. The SCN bearing No. 12/AC/DGP-1/11-12 dated 21.12.2011 was issued covering the period 2009-10, by invoking extended period of limitation.

(v) Excise Appeal No. 75406 of 2021, is related to the penalty of Rs.3,21,981/- pertaining to the period 2009-10. The SCN bearing No. 12/AC/DGP-1/11-12 dated 21.12.2011 was issued covering the period 2009-10, by invoking extended period of limitation.

3. Excise Appeal No. 70633 of 2013 is related to reversal of input service credit amounting to Rs. 1,17,41,737/-on account of availment of input service credit attributable to trading activity. The appellant submits that the SCN dated 21.03.2012 proposing reversal of proportional input services credit attributable to trading activity was issued covering the period 2007-08 to 2010-11, by invoking the extended period of limitation against them. The appellant further submits that while calculating the amount to be denied, the adjudicating authority has taken the entire CENVAT Credit of service tax which included the credit involved in the instant proceedings and the proceedings with the Additional Commissioner and the Deputy Commissioner; Therefore, it is submitted that when the Commissioner has disallowed the credit attributable to trading, he has taken the entire credit in spite of the fact that the Additional Commissioner and Deputy Commissioner had already denied the CENVAT credit of service tax of Rs. 19,76,334/- and Rs. 3,66,481/- respectively for the year 2009-10. Therefore, the appellant contends that the findings of the Ld. Commissioner that three Show Cause Notices were related to different issues, is not correct since in all the notices are related to availability of CENVAT credit of service tax on input services. The appellant further submits that ‘trading’ has been brought under the category of ‘exempted service’ only with effect from 01.04.2011. Thus, it is pointed out that prior to this period there is no need to reverse proportional credit attributed to the exempted service, ‘trading’; the demand in this case has been raised for the period 2007-08 to 2010-11. The appellant submits that during this period ‘trading’ was not declared as an exempted service. Accordingly, they submit that the reversal of input service credit proportional the value of exempted service namely, trading, is not warranted.

3.1. Excise Appeal No.78713 of 2018 has been filed against Order-in-Appeal passed by the Ld. Commissioner (Appeals), wherein the Ld. Commissioner (Appeals) has upheld the Order-in-Original passed by the Deputy Commissioner of Central Excise, Durgapur-I, confirming the demand of Rs. 58,938/-, including cess along with interest and imposed equal amount of duty as penalty. The issue involved is related to denial of CENAT credit Rs. 58,938/- on services provided to Head Office during 2008-09 under following categories:

3.1.1. The appellant submits that the credit has been denied on the ground that many of the services are rendered at the head office and not at the factory. Also, the head office has not taken registration as ‘Input Service Distributor’ (ISD). In this regard, the appellant mentions that the services were actually received and utilized at the factory only. They also submit that CENVAT Credit cannot be denied on the ground that the head office has not taken the ISD registration. When the receipt and utilization of the service are not in dispute, the credit available to the appellant cannot be denied on mere procedural infirmities. Accordingly, the appellant submitted that the above credit availed by them cannot be denied. The appellant further submits that the notice has been issued on the basis of audit objections raised. They have submitted that two other notices have been issued proposing to deny CENVAT Credit on the basis of audit objections and hence, the demand confirmed by invoking extended period of limitation is not sustainable.

3.2. Excise Appeal No. 79090 of 2018, is related to denial CENVAT Credit of Rs.19,76,034/- which pertains to the year 2009-10. This Appeal has been filed against Order-in-Appeal No. 196/ BOL-CE/ 2018-19 dated 03.08.2018. The issue involved in this appeal is denial of CENVAT credit of Service Tax in respect of the following input services, during 2009-10 . The break-up of demand is as under:

3.2.1. The appellant submits that the credit has been denied on the ground that many of the services are rendered at the head office and not at the factory. Also, the head office has not taken registration as Input Service Distributor’. In this regard, the appellant mentions that the services were actually received and utilized at the factory only. They also submit that CENVAT Credit cannot be denied on the ground that the head office has not taken the ISD registration. It is also contended that when the receipt and utilization of the service are not in dispute, the credit available to the appellant cannot be denied on mere procedural infirmities. Accordingly, the appellant submitted that the above credit availed by them cannot be denied. The appellant submits that another impugned order issued for reversal of input service credit amounting to Rs. 1,17,41,737/-on account of availment of input service credit attributable to trading activity, has covered the credit availed for this period also. Accordingly, the appellant submits that extended period of limitation cannot be invoked to deny this credit. Thus, the appellant prayed for allowing the credit.

3.3. Excise Appeal No.75370 of 2020, is related to denial of CENVAT Credit of Rs.3,66,481/- pertaining to the period 2009-10. This appeal has been filed against the Order-in-Appeal No. 17/BOL-ST/2020-21 dated 04.06.2020 passed by the Ld. Commissioner (Appeals), wherein the Ld. Commissioner (Appeals) has upheld the Order-in-Original passed by the Deputy Commissioner of Central Excise, Durgapur-I confirming the demand of Rs. 3,66,481/- along with interest and penalty. The issue involved in this appeal is related to denial of CENVAT credit of Service Tax attributable to head Office during 2009-10.

3.3.1. The appellant submits that the receipt and utilization of the above input services is not in dispute. Further, the appellant submits that the impugned order confirming the demand by invoking extended period of limitation is not sustainable.

3.4. Excise Appeal No. 75406 of 2021 is related to the penalty imposed of Rs.3,21,981/-. This appeal arises out of the Order-in-Appeal No. 190/BOL-CE/2020-21 dated 03.02.2021 wherein the Ld. Commissioner (Appeals) has allowed the appeal filed by the Revenue and increased the penalty from Rs.2,000/- to Rs.3,21,981/- for the period 2009-10 (pertaining to the same proceedings as in Excise Appeal No. 75370 of 2020).

3.4.1. In this regard the Appellant have submitted that the Ld. Commissioner (Appeals) has failed to consider the amendment of Rule 15 of the CENVAT Credit Rules; they submit that prior to 27.02.2010, the maximum penalty was Rs.2000/-. They also rely on various case-law in their grounds of appeal. The appellant therefore prayed for setting aside the penalty imposed by way of the impugned order.

3.5. In view of the above submissions, the appellant prayed for setting aside the impugned orders and allowing their appeals.

4. The Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order.

5. Heard both sides and perused the appeal records.

6. We observe that the impugned order dated 12.03.2013 has been issued for reversal of input service credit amounting to Rs. 1,17,41,737/-on account of availment of input service credit attributable to trading activity. However, we observe that ‘trading’ has been brought under the category of ‘exempted service’ only with effect from 01.04.2011.

Thus, prior to this period there is no need to reverse proportional credit attributed to the exempted service, ‘trading’. The demand in this case has been raised for the period 2007-08 to 2010-11. As ‘trading’ was not an exempted service during the period under dispute, we hold that the reversal of input service credit proportional the value of exempted service is not warranted. Thus, we set aside the demand confirmed in the impugned order, along with interest and penalty imposed.

6.1. Regarding the denial of CENVAT credit confirmed in other orders covered in this appeal, we observe that all these notices were issued by invoking extended period of limitation. We observe that these notices were issued in piecemeal based on various audit objections. Once a Show Cause Notice is issued proposing denial of CENVAT Credit by invoking extended period of limitation, then another notice cannot be issued on the same issue by invoking extended period again, as held by the Hon’ble Apex court in the case of Nizam Sugar Factory v. Collector of Central Excise, A.P. [2006 (197) E.L.T. 465 (S.C.)] wherein it has been categorically held that once a demand has been raised for any issue by invoking the extended period of limitation, then another demand cannot be raised again by invoking the extended period on the same issue for a subsequent period. The relevant part of the said order is reproduced below:

“9. Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant.”

6.2. Thus, we hold that the demands confirmed in the subsequent notices, invoking extended period of limitation is not sustainable.

6.3. Regarding merits of availment of credit of input services involved in these appeals, we observe that the credit has been denied on procedural grounds such as the head office has not taken the ISD registration and the invoices pertaining to the input services were not in the name of the appellant-company. We observe that when the receipt and utilization of the service are not in dispute, the credit available to the appellant cannot be denied on mere procedural infirmities. Accordingly, we observe that the above credit availed by the appellant cannot be denied. Thus, we hold that the appellant is eligible for the credit of input services availed them in the impugned orders. Since the credit is held to be eligible, the question of demanding interest and imposing penalties does not arise.

6.4. Regarding the penalty enhanced by the Ld. Commissioner (Appeals) in Excise Appeal No. 75406 of 2021, we observe that the Ld. Commissioner (Appeals) has allowed the appeal filed by the Revenue and increased the penalty from Rs.2,000/- to Rs.3,21,981/- for the period 2009-10. We observe that the penalty imposed is on account of the irregular credit availed as in Excise Appeal No. 75370 of 2020. Since, it has been already been held by us that the credit availed by the appellant is in order, there is no need to impose penalty for the alleged irregular credit availed. Accordingly, we set aside the penalty enhanced by the Ld. Commissioner (Appeals) in the impugned order.

6.5. We observe that a penalty of Rs.2000/- was originally imposed by the adjudicating authority on the ground of irregular availment of credit. Since, the credit availed is held to be eligible to the appellant, the penalty of Rs.2000/- imposed by the original adjudication authority is not sustainable, as observed in paragraph 6.3 of this Order (supra).

7. In view of the above discussions, we set aside the impugned orders and allow the appeals filed by the appellant.

(Order pronounced in the open court on 13.12.2024)