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2026 Supreme(Online)(CESTAT) 463

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

CHENNAI

REGIONAL BENCH - COURT No. I

Service Tax Appeal No.41921 of 2016

(Arising out of Order-in-Appeal No.353/2016 (STA-I) dated 13.06.2016 passed by principal Commissioner of Service Tax (Appeals-I), Chennai)

M/s. Chennai Radha Engineering Works Pvt. Ltd., …. Appellant

40, Sapthagiri Colony (K.R. Layout),

Jafferkhanpet,

Chennai-600 083

VERSUS

Commissioner of GST & Central Excise … Respondent

Chennai Outer Commissionerate,

Newry Towers, Nio.2054-I, II Avenue,

Anna Nagar. Chennai-600 040.

APPEARANCE :

Ms. G. Vardhini Karthik, Advocate for the Appellant

Ms. Rajni Menon, Authorized Representative for the Respondent

CORAM :

HON’BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL)

HON’BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)

FINAL ORDER No.40414/2026

DATE OF HEARING : 10.12.2025

DATE OF DECISION : 24.03.2026

Advocates:
For the Appellants/Petitioners: G. Vardhini Karthik
For the Respondents: Rajni Menon

The extended period of limitation for tax recovery cannot be invoked without evidence of deliberate suppression or intent to evade. Furthermore, once an appellate authority determines a demand is time-barred, it should not proceed to adjudicate on the merits of the claim.

Headnote:(A) Finance Act, 1994 - Section 73(1) and (6) - Cenvat Credit Rules, 2004 - Service Tax appeal - Recovery of service tax not levied or paid - Extended period of limitation - Invocation of proviso to Section 73(1) requires proof of fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions with intent to evade duty - Mere non-payment or omission does not satisfy the criteria for extended limitation. (Paras 8, 10, 11, 12, 21)

(B) Limitation - Jurisdictional fact - Plea of limitation goes to the root of the matter and involves jurisdiction - Once a demand is held to be time-barred, it is an illegality for an appellate authority to adjudicate the issue on merits. (Paras 8, 22, 23, 24)

(C) Audit and Returns - Scrutiny of documents - When an assessee is registered and files periodic returns, and documents are subject to departmental audit and spot verification, the allegation of suppression of facts with intent to evade tax cannot be sustained. (Paras 16, 20)

Facts of the case:
The appellant challenged an order confirming a demand for service tax, interest, and penalties related to the denial of Cenvat credit on capital goods and alleged improper availment of notification-based abatements. The appellant argued that the entire demand was barred by limitation as the department had previously conducted audits, examined returns, and received correspondence regarding these issues, negating any allegation of wilful suppression or intent to evade tax.

Findings of Court:
The court held that the department was aware of the appellant's activities through periodic returns and previous audit records. Mere failure to pay tax or incorrect availment of credit, without proof of positive acts of suppression or deliberate misstatement, does not justify invoking the extended period of limitation. Following established judicial precedents, the court held it was improper to decide the case on merits once the proceedings were found to be time-barred as this would be an illegality.

Issues: The main issues were whether the department could invoke the extended period of limitation under the proviso to Section 73(1) and whether the tribunal should proceed to rule on the merits of the case after finding the demand time-barred.

Ratio Decidendi: The invocation of the extended period of limitation under the Finance Act requires the existence of specific ingredients such as wilful suppression or misstatement with an intent to evade tax. If these are absent, the normal limitation period applies. Once a tribunal determines that a demand is time-barred as a matter of law, it lacks jurisdiction to further adjudicate the dispute on its merits.

Result: Appeal allowed.

Per: Shri Ajayan T.V.

Chennai Radha Engineering Works Pvt. Ltd., the appellant herein, is challenging the Order-in-Appeal No. 353/2016 (STA I) dated 13.06.2016 (the impugned order).

2. Briefly stated, the facts are that the appellant is a registered service provider of management, maintenance or repair service, erection commission and installation service, construction service, Consulting Engineer service, Testing and Inspection service, Business Auxiliary Service and Business Support Service. During the course of audit of the accounts of the appellant for the period 01.10.2006 to 30.09.2008, it was noticed that the appellant had, inter-alia, taken cenvat credit on tippers as capital goods. The department was of the view that the tippers are classified as motor vehicles falling under Chapter 87 of the Central Excise Tariff Act, 1985 (Tariff Act) and cenvat credit on motor vehicles are not allowed under the Cenvat Credit Rules, 2004 (CCR). It was further noticed that the credit was taken on the basis of an ineligible document, namely, commercial invoice. It was also seen that credit was taken on cranes on documents not addressed to their premises, but to their manufacturing unit located at different premises. Furthermore the appellant had wrongly availed abatement under Notification No.01/2006 ST dated 01.03.2006 for construction service by not fulfilling the condition of non-availment of cenvat credit prescribed thereon. Hence Show Cause Notice No.218/2012 dated 24.04.2012 (SCN) was issued proposing to deny the credits, demand service tax consequent to improper availment of notification No.1/2006-ST and impose penalties. After due process of law the Adjudicating Authority vide Order-in-Original No.31/2014 dated 30.05.2014 confirmed the demand along with applicable interest and imposed equivalent penalty under Section 78 of the Finance Act 1994. Aggrieved, the appellant preferred an appeal before the Commissioner of Service Tax (Appeals-I) against the said order who, however, rejected the appeal and upheld Order-in-Original in its entirety. Hence this Appeal.

3. Ms. G. Vardhini Karthik, Ld. Advocate appearing for the appellant contended that the entire demand was wholly barred by limitation in as much as the SCN does not alleged or evidence the ingredients of suppression or willful misstatement with intent to evade the payment of Service Tax and the Department could not have invoked the extended the period of limitation given that the appellant was regularly filling the ST-3 returns indicating the details of cenvat credit availed. These returns were also scrutinized during periodical visits by the audit wing of the department. Spot memo was issued by the Audit officers dated 27.11.2006 The Department had, vide its letter dated 07.12.2006 raised the same issue and the appellant had filed a detailed reply on eligibility of cenvat credit and availment of abatement vide letter dated 04.11.2008 and 13.11.2008 which is relied upon in the Show Cause Notice. In such circumstances the Show Cause Notice issued on 24.04.2012 is wholly barred by limitation.

4. Ld. Counsel further contended that on merits also the appellant was entitled to avail cenvat credit on the tippers which were used as accessory to conveyor system which falls under chapter 85 of the Central Excise Tariff Act, 1985 and then credit on the accessory to the capital goods can be taken as per Rule 2(a)(A)(iii) of the cenvat credit Rules. It was also contended that the cenvat credit availed on cranes was admissible as the appellant is a manufacturing company using the capital goods in their manufacturing process and also when performing output service that are subjected to Service Tax. The allegation of availment of abatement under Notification No. 01/2006 ST was also incorrect and in any event the appellant had vide the letter dated 04.11.2008 clearly informed the department that the abatement is availed on contract and cenvat credit on input or capital goods were not avai

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2026 Supreme(Online)(CESTAT) 463

The extended period of limitation for tax recovery cannot be invoked without evidence of deliberate suppression or intent to evade. Furthermore, once an appellate authority determines a demand is time-barred, it should not proceed to adjudicate on the merits of the claim.

Cases Referred (1)