Excise | No Suppression Where Credits Reflected In Statutory Returns; Extended Limitation Invalid; Indian Oil Petronas Wins CESTAT Appeal
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that when the availment of CENVAT credit is duly disclosed in statutory ER-1 returns and the assessee has regularly paid excise duty, allegations of suppression within the intent to evade duty cannot be sustained. P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) stated that...
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that when the availment of CENVAT credit is duly disclosed in statutory ER-1 returns and the assessee has regularly paid excise duty, allegations of suppression within the intent to evade duty cannot be sustained.
P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) stated that when the payment of duty remains undenied, and there is also no denial of the returns being filed by the assessee regularly, there cannot be any scope to allege suppression, that too with intent to evade duty, which could be alleged against the assessee.
In the case at hand, the assessee/appellant, M/s Indian Oil Petronas, is a company formed as a Joint Venture between M/s. Indian Oil Corporation Ltd., a Government of India Undertaking (“IOCL”) and M/s. Petronas, a Government of Malaysia Undertaking.
The assessee has been engaged in the activity of manufacturing Liquefied Petroleum Gas (“LPG”) since August 2012.
For setting up the LPG plant, the assessee entered into an “Engineering Procurement of Materials, Construction and Commissioning Contract” (EPCC Contract) on a lump sum turnkey basis with M/s. Punj Lloyd, wherein M/s. Punj Lloyd was required to procure, erect, install and commission an LPG plant at the assessee's factory premises.
To execute the contract, M/s. Punj Lloyd, in turn, placed orders from various third-party manufacturers. These goods were brought into the assessee's factory directly.
During the course of each supply, the third-party manufacturers would raise invoices for payment, wherein M/s. Punj Lloyd was referred to as the 'buyer', and the assessee was referred to as the 'consignee'.
M/s. Punj Lloyd did not avail Cenvat Credit of the duties paid on any of the goods procured from the third-party manufacturers. M/s. Punj Lloyd paid service tax under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 on the services portion of the works contract.
M/s. Punj Lloyd did not avail of the benefit of the composition scheme under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.
A show cause notice was issued to the assessee proposing to deny the CENVAT Credit availed by the assessee on the 'capital goods' inasmuch as M/s. Punj Lloyd paid Service Tax under Rule 2A of the Service Tax Valuation Rules, and the said goods are inputs used by M/s. Punj Lloyd thereby falls within the purview of the bar under Explanation 2 to Rule 2A of the Service Tax Valuation Rules.
The Adjudicating Authority held that M/s. Punj Lloyd, being the works contractor, is not eligible to avail CENVAT Credit of duty paid on inputs under Explanation 2 to Rule 2A.
The bench opined that the availment of CENVAT Credit was reflected in the ER-1 Returns, and therefore, there is no justification to hold that the assessee has suppressed the facts with the intent to avail CENVAT Credit wrongly.
The bench held that the extended period of limitation has been invoked mechanically without satisfying the requirements of Rule 15(2) of Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1994.
In view of the above, the Tribunal allowed the appeal.
Case Title: M/s. Indian Oil Petronas v. The Commissioner of GST & Central Excise
Case Number: Excise Appeal No. 40128 of 2023
Counsel for Appellant/ Assessee: Raghavan Ramabadran
Counsel for Respondent/ Department: M. Selvakumar