CESTAT Sets Aside ₹1,398 Crore CENVAT Credit Demand on Indian Oil Petronas on Limitation Grounds [Read Order]

The Chennai Bench of the Customs, Excise andService Tax Appellate Tribunal (CESTAT), has allowed the appeal filed by Indian Oil Petronas, setting aside a demand of nearly ₹1,398 crore by the Department owing to alleged wrongful availment of CENVAT credit. The Tribunal found that the invocation of the extended period of limitation was unsustainable in law.

Indian Oil Petronas, a joint venture between Indian Oil Corporation Ltd. and Malaysia-based Petronas, is engaged in the manufacture of Liquefied Petroleum Gas (LPG). For setting up its LPG plant, the compcemany had entered into a lump-sum turnkey Engineering, Procurement, Construction and Commissioning (EPCC) contract with Punj Lloyd. Various capital goods and components were procured from third-party manufacturers and delivered directly to the appellant’s factory, while service tax was discharged by the contractor on the service portion of the works contract.

A show cause notice was issued proposing denial of CENVAT credit availed on capital goods as well as on certain input services, alleging that the goods were inputs used by the works contractor and that the services were related to setting up of the factory, which stood excluded from the definition of “input service” after April 1, 2011. The adjudicating authority confirmed the demand along with interest and penalty, which has now led to the present appeal.

The Tribunal Bench, comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member), noted that the availment of CENVAT credit was duly reflected in the ER-1 returns regularly filed by the appellant and the Department had verified the relevant details well before issuance of the show cause notice. In this light, it ruled out allegations of suppression or wilful misstatement as all material facts were available on record and examined by the Department.

Relying on settled principles laid down by the Supreme Court in cases such as Pepsi Foods Ltd., Hindustan Steel Ltd., and Canon India Pvt. Ltd., the Tribunal held that extended limitation cannot be invoked merely on a change of interpretation when the assessee had made full disclosure. The Bench emphasized that payment of duty and regular filing of returns negated any intent to evade tax.

The Tribunal further observed that since the demand itself was barred by limitation, the consequential levy of interest and penalty under Section 11AC of the Central Excise Act could not survive.

The appeal was accordingly allowed on the ground of limitation, with consequential relief to Indian Oil Petronas.

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