No Suppression When CENVAT Credit Disclosed In ER-1 Returns; Extended Limitation Unsustainable: CESTAT Chennai Allows Indian Oil Petronas Appeal
Pranav B Prem
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that where availment of CENVAT credit is duly disclosed in statutory ER-1 returns and excise duty has been regularly paid, allegations of suppression with intent to evade duty cannot be sustained. Holding that the extended period of limitation had been invoked mechanically and without satisfying the statutory requirements, the Tribunal allowed the appeal filed by Indian Oil Petronas Private Limited and set aside the demand.
The Bench comprising P. Dinesha, Judicial Member, and Vasa Seshagiri Rao, Technical Member, observed that when there is no dispute regarding payment of duty and the filing of returns, there is no scope to allege suppression of facts, particularly with an intent to evade duty.
The appellant, M/s Indian Oil Petronas Private Limited, is a joint venture company formed between M/s Indian Oil Corporation Limited, a Government of India undertaking, and M/s Petronas, a Government of Malaysia undertaking. The company has been engaged in the manufacture of Liquefied Petroleum Gas (LPG) since August 2012.
For setting up its LPG manufacturing plant, the assessee entered into an Engineering, Procurement of Materials, Construction and Commissioning (EPCC) contract on a lump-sum turnkey basis with M/s Punj Lloyd. Under the contract, Punj Lloyd was responsible for procurement, erection, installation and commissioning of the LPG plant at the assessee’s factory premises. To execute the contract, Punj Lloyd placed orders with various third-party manufacturers, and the goods were supplied directly to the assessee’s factory.
In the course of these transactions, the third-party manufacturers issued invoices in which Punj Lloyd was shown as the buyer, while the assessee was shown as the consignee. Punj Lloyd did not avail CENVAT credit on the duties paid on the goods procured from the third-party manufacturers. It discharged service tax on the service portion of the works contract under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 and did not opt for 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 on capital goods. The Department alleged that since Punj Lloyd had paid service tax under Rule 2A, the goods supplied were to be treated as inputs used by the works contractor and that availment of credit by the assessee was barred under Explanation 2 to Rule 2A of the Service Tax Valuation Rules. The notice also invoked the extended period of limitation, alleging suppression of facts.
The adjudicating authority confirmed the demand, holding that Punj Lloyd, as a works contractor, was not eligible to avail credit on inputs and that the assessee had wrongly taken credit. The authority further upheld invocation of the extended period and imposed penalties.
Challenging this order, the assessee contended before the Tribunal that the entire availment of CENVAT credit was transparently reflected in its ER-1 returns, which were filed regularly. It was argued that there was no suppression of facts, as all relevant details were within the knowledge of the Department. The assessee further submitted that extended limitation could not be invoked in the absence of fraud, wilful misstatement or intent to evade duty, as required under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
The Tribunal agreed with the assessee’s submissions. It noted that the availment of CENVAT credit was clearly reflected in the ER-1 returns and that there was no denial of the fact that the assessee had been filing returns regularly and paying excise duty. In such circumstances, the Bench held that allegations of suppression with intent to evade duty were wholly unsustainable.
The Bench further observed that the extended period of limitation had been invoked in a mechanical manner, without satisfying the mandatory statutory conditions. It held that mere difference of opinion on interpretation of legal provisions cannot justify invocation of extended limitation, especially when the Department was fully aware of the availment of credit through statutory disclosures.Holding that the essential ingredients for invoking Rule 15(2) of the CENVAT Credit Rules and Section 11AC of the Central Excise Act were absent, the Tribunal set aside the demand along with interest and penalties. In view of these findings, the CESTAT allowed the appeal filed by Indian Oil Petronas Private Limited, granting consequential relief in accordance with law.
Appearance
Counsel for Appellant/ Assessee: Raghavan Ramabadran
Counsel for Respondent/ Department: M. Selvakumar
Cause Title: M/s. Indian Oil Petronas v. The Commissioner of GST & Central Excise
Case No: Excise Appeal No. 40128 of 2023
Coram: P. Dinesha, Judicial Member, Vasa Seshagiri Rao, Technical Member
