The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) of Ahmedabad set aside the order of adjudicating authority demanding extended period as the department failed to establish non utilisation of common input services for trading. It was viewed that the department has failed to establish the allegation of suppression of facts with intent to evade payment of duty against the assessee so as to invoke the extended period.
Rishi Kiran Logistics P Ltd, the assessee is a service provider and is registered under the categories of Storage and Warehousing services, Cargo handling services, Goods transport agency. The assessee is also availing Cenvat credit of service tax paid on various input services. The assessee is engaged in generating electricity which falls under CETSH ( Central Excise Tariff Sub Heading ) 27 16 0000 which is not leviable to excise duty.
During the audit of records of the assessee such as ST-3 returns for the period 200708, Cenvat credit account up to October-2008 and balance sheet for the year 2007-08, it was observed that under the head income, the assessee had shown “electricity generating receipt” of Rs. 1,47,99,356/- and under the head of “other income” in schedule “O” to the profit and loss account, the assessee had shown to have earned Rs. 91, 24,000/- by raw salt sales.
After due process of law, the Original Authority vide order impugned herein confirmed the duty of Rs. 72,18,957/- being the wrongly availed credit in respect of common input services used for taxable and exempted services ( trading ). It was alleged that the assessee has used common input services for taxable services as well as generation/selling electricity in Tamil Nadu and for trading activities. It is submitted that the assessee had used input services like terminal charges, Stevedoring services and Telephone services for their business activities in Gandhidham area. The activity of generating electricity by use of windmills was under taken in Tamil Nadu.
It was submitted that the department has not established that such input services were actually used for generation of electricity in Tamil Nadu. The allegations in the show cause notice has to be proved by the department. In the impugned order, the Commissioner has rendered a finding that because the assesse was maintaining common profit and loss account for both activities, the plea that the input services were not used commonly for generating of electricity and sale of salt cannot be accepted. The original authority has erred in observing that assesse has failed to demonstrate by furnishing documents that such common input services were not used for the activity of generating electricity at Tamil Nadu and that these were exclusively used for taxable output services at Gandhidham.
In the SCN there is only a vague allegation of suppression of facts without stating as to what is the act of suppression committed by the assessee. In the case of M/s Musaddilal Projects LTD. Vs, Commissioner of C EX, wherein the Tribunal held that when the investigation conducted by the DGCEI did not bring out any act of suppression by the assessee and the entire Cenvat credit was disclosed in ST-3 returns which were filed regularly, the show cause notice issued alleging suppression of facts is not sustainable.
It was evident that with effect from 01.04.2011 ‘trading’ is included in the definition of exempted services. The assessee in the present case, has availed the credit of service tax paid on input services in the nature of Telephone Services, Mobile Services, Courier Services, Travel Services etc. Such services cannot be said to have been used only for taxable output services when the activity of the assessee includes generation/sale of electricity as well as sale of raw slat. These expenses have been accounted in the common Profit and Loss account. It is the burden of the assessee to establish with documents that they have not used common input services for trading.
A two member bench comprising Ms Sulekha Beevi C S Member ( Judicial ) and Mr C L Mahar Member ( Technical ) observed that the department has failed to establish the allegation of suppression of facts with intent to evade payment of duty against the assessee so as to invoke the extended period. The show cause notice issued beyond the normal period cannot sustain and requires to be set aside. The issue on limitation is answered in favour of assessee and against the department.
The CESTAT modified the impugned order confirming the demand, interest and penalties by limiting the demand and interest to the normal period. The appeal filed by the assessee is partly allowed and appeal filed by the department was dismissed.
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