2026-VIL-1862-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Order passed beyond six months from SCN - Section 73(4B)(a) of Finance Act, 1994 - Appellant manufactured food processing equipment and rendered erection and allied services. CENVAT credit of service tax paid on a lease premium for factory land was disallowed and recovered with interest and equal penalty by an order passed about eleven months after the SCN. The Appellant contended that the order is void for breach of the six month period - Whether the order is void for having been passed beyond six months from the date of the notice - HELD - Section 73(4B)(a) requires the officer to determine the tax within six months from the date of notice where it is possible to do so. The qualifying words make the time limit elastic, but proceedings must be concluded within a reasonable time. Delay beyond the period does not by itself vitiate the order. Whether the delay was reasonable is a question of fact, and the reasons for delay raised for the first time before the Tribunal must be called for unless the timeline narrated in the order satisfies the Tribunal. The contention that the order is void merely because it was passed after six months fails in law. The reasonableness of the delay need not be decided as the appeal succeeds on merits - The objection is rejected - CENVAT Credit - Service tax on lease premium for factory land - Rule 2(l) of CENVAT Credit Rules, 2004 - Appellant took a long term lease of land for setting up a factory and took credit of service tax paid on the premium under renting of immovable property service. The Department alleged that the words setting up were omitted from Rule 2(l) with effect from 01.04.2011, that the land had no connection with the existing factory or office, and that no manufacture had begun - Whether the service tax paid on the lease premium for the factory land is on an input service within Rule 2(l) as it stood after 01.04.2011 - HELD - The main part of Rule 2(l) covers any service used by a manufacturer, directly or indirectly, in or in relation to the manufacture of final products. The amendment narrowed only the inclusive part and added no exclusion for setting up. Renting of immovable property is not among the excluded services, and a lease of land is not construction. Without land no factory can be set up nor can any manufacture take place, so a lease of the very land on which the factory stands is used in or in relation to manufacture. That the land was vacant when leased and manufacture began later is inherent in every new factory. Rule 4(7) allows credit on receipt of the invoice and makes no reference to commencement of production. Registration of the factory is not a condition for credit - The service tax on the lease premium was paid on an input service of the Appellant as a manufacturer and the ground in the SCN fails - CENVAT Credit - Credit taken in the service tax registration instead of the factory - Rules 3 and 14 of CENVAT Credit Rules, 2004 - Appellant took the credit in the books of its service tax registration at the office, as the invoice was addressed to that office and the factory had no registration at the time. The credit was later reversed there and taken in the return of the new factory. The Department sought recovery on the ground that the land had no nexus with the services rendered from the office - Whether the credit is recoverable because it was taken in the service tax registration and not in the account of the factory - HELD - The lease was not used for providing the output services rendered from the office, so the first limb of Rule 2(l) is not satisfied. Entitlement, however, flows from the definition to the person. Rule 3(1) allows credit to a manufacturer or a provider of output service, and the Appellant is one legal person that is both. A registration identifies the registrant and the place where the credit is accounted for, and is not the source of the entitlement. The proper course was to pass the credit to the factory through an input service distributor, but the departure was procedural. Want of input service distributor registration is a curable irregularity which does not defeat an admissible credit. The returns show that the credit remained untouched and was never used for payment of excise duty. A credit admissible to the person who took it is not taken wrongly under Rule 14 merely because it was first entered in the account of another registration of the same person - The demand is unsustainable. The fresh availment of the credit at the factory is not the subject of the SCN and is left open, and the Appellant shall not take the reversed credit again in the earlier registration or seek its refund - CENVAT Credit - Interest and penalty - Rules 14 and 15(3) of CENVAT Credit Rules, 2004 read with Section 78 of Finance Act, 1994 - Interest and equal penalty were imposed on the allegation that the credit was utilised in the manufacturing registration and that the Appellant's submission that it was only taken and not utilised was a misstatement. The SCN was issued under Section 73(1) alone, and the credit had been shown in a revised return - Whether interest and penalty are sustainable - HELD - Rule 14, as it stood when the credit was taken and the SCN was issued, provides for interest only where credit is taken and utilised wrongly. No interest arises on a credit that was admissible and was not utilised. Penalty falls with the demand and also fails independently. Penalty under Section 78 and Rule 15(3) requires fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade payment of tax. The Appellant did not conceal the credit and declared it in the statutory return under a description naming the lease land. Suppression means a deliberate withholding of information with intent to evade, and the burden lies on the Revenue. Taking a legal opinion before claiming credit is evidence of bona fides. The finding that the credit was utilised was contrary to the returns, and a ground of penalty not proposed in the SCN was added in the order - The demand, interest and penalty are set aside and the appeal is allowed.
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