Cenvat credit allowed on head office invoices; extended limitation, suppression and penalty rejected for polyester yarn manufacturer

CESTAT, Ahmedabad held that the assessee manufacturing polyester filament yarn was entitled to Cenvat credit of service tax taken on invoices issued in the name of its head office rather than the factory, as there was no dispute about receipt or use of input services for the factory. It upheld the Commissioner's order dropping the demand, holding that use of such invoices did not amount to suppression or wilful misstatement and that the extended limitation period was not invocable. Consequently, penalty was held unsustainable and set aside. The Revenue's appeal was rejected and the assessee's appeal was allowed.

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Issues:
1. Admissibility of service tax credit based on invoices not in the name of factory.
2. Imposition of penalty under Cenvat Credit Rules, 2004.

Admissibility of service tax credit based on invoices not in the name of factory:
The case involved the appellant availing credit of service tax amounting to Rs. 1,37,618/- during a specific period based on invoices not in the name of their factory. The Commissioner (Appeals) deemed this as a procedural omission and held the credit to be in order. The Revenue appealed against this decision, arguing that the credit was not admissible due to the invoices being in the name of the head office when the appellant had multiple factories. The Revenue contended that the proper procedure for multiple factories was to register the head office as a distributor of input service credit. However, the Tribunal upheld the Commissioner's decision, citing that there was no dispute regarding the receipt of services by the factory, making the credit admissible despite the invoices being in the name of the head office.

Imposition of penalty under Cenvat Credit Rules, 2004:
The appellant argued that since the demand was dropped by the Commissioner, no penalty should have been imposed. They relied on the decision in the case of Godrej Soaps to support this contention. The Tribunal considered the submissions and found that the Commissioner correctly followed the precedent set by the Tribunal in a similar case. The Commissioner's decision to drop the demand was upheld, as there was no dispute raised regarding the admissibility of the input service credit to the factory. The Tribunal concluded that the omission was a curable defect and not a suppression of fact. Therefore, the Tribunal set aside the penalty imposed under the Cenvat Credit Rules, 2004. Consequently, the appeal filed by the Revenue was rejected, and the appeal filed by the party was allowed.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision.

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