2015 (5) TMI 529 - HC - Central Excise

Court affirms CENVAT Credit entitlement; Genuine duty payments crucial for credit eligibility

Commissioner of Central Excise, Goa Versus Essel Propack Ltd. and others

The Court dismissed the appeals, affirming the respondents' entitlement to CENVAT Credit based on the accepted TR6 Challan. The judgment emphasized the ... CENVAT Credit - duty paying documents - Whether the respondent is entitled to claim CENVAT Credit prior to 16/06/2005 on the basis of TR6 Challan, in terms of Rule 9 which was introduced on 16/06/2005 - reverse charge - Held that:- In terms of clause (e) of sub-Rule (1) of Rule 9, of the Rules of 2004, a challan evidencing payment of service tax was a specified document for the purpose of availing service tax credit and the entities listed in clauses (i), (ii), and (iv) of Rule 2 of the Service Tax Rules, 1994 can take the service tax credit on the strength of such challan. But, however, in the case of goods transport agency, although the recipient of the services has been made liable to pay service tax with effect from 1st January, 2005 vide Notification dated 3/12/2004, but the agency has been made eligible to take credit thereof only from 16th June, 2005, vide Notification dated 7th June, 2005, by virtue of which clause (v) of sub-Rule (1) of Rule 2 of the Service Tax Rules, 1994 was inserted making the recipients of goods transport agency service eligible to take credit of the service tax paid on such goods transport agency services. - admittedly, the respondents have availed of such credit during the said period, it was the contention of the appellants that the respondents were not entitled to such credit. The fact that the respondents have paid service tax and, as such, are entitled to Credit during the said period has not been disputed by the appellant. As per Rule 3 of the CENVAT Credit Rules, 2004, CENVAT credit of, inter alia, service tax leviable and paid on any input services can be availed of. Authorities below have accepted that the respondents are entitled to such CENVAT Credit. The only point for consideration, in such circumstances is the type of document required to be produced to avail of such credit. The respondents have produced the TR 6 Challan which is emanated from the office of the appellants themselves to support their claim for such CENVAT Credit, which material was accepted by the authorities below whilst passing the impugned order. - question of discarding the said Challan to avail of such CENVAT Credit, as contended by the learned Counsel appearing for the appellant, cannot be accepted. The Authorities below, as such, have rightly accepted the said Challan as proof of payment of service tax and, as such, no infirmity can be found in the orders passed by the Authorities below. In any vent, the appellants are not entitled to rely upon Rule 9 to refuse the credit to the respondents, as Rule 9 is a procedural aspect which cannot deny the claim of the respondents to avail of such CENVAT Credit which they are, otherwise, admittedly, entitled to - Decided against Revenue. Issues:Interpretation of Rule 9 of CENVAT Credit Rules, 2004 regarding availing CENVAT Credit prior to 16/06/2005 based on TR6 Challan.Analysis:The appeals were consolidated as common substantial legal questions were raised. The modified question of law focused on whether the respondent could claim CENVAT Credit before 16/06/2005 using TR6 Challan as per Rule 9. The appellants argued that the respondents failed to produce required documents for CENVAT Credit, emphasizing that TR6 Challan was introduced post the relevant period. They contended that the authorities misinterpreted the rules, urging the judgment in their favor. Conversely, the respondents supported the lower authorities' decisions, asserting their eligibility for credit under Rule 3, stating that TR6 Challans were valid even in 2004-05. They argued that the documentary evidence from the Department could substantiate their claim.The Court examined the contentions and records. It was noted that the respondents were availing CENVAT Credit as per Rule 3 for duty paid on inputs, capital goods, and input services. The appellants claimed that the respondents should reverse service tax credit on goods transport agencies from March 2005 to 15/6/2005, citing Rule 9 and specific documents required for credit pre-16/6/2005. The Court highlighted the eligibility of recipients for service tax credit from 16/06/2005 onwards and the appellant's argument against the respondents' pre-16/6/2005 credit claim. The Court observed that Rule 3 allowed credit for service tax on input services without specifying documents for the disputed period.Referring to a Punjab & Haryana High Court case, the Court emphasized that if duty payment authenticity is not disputed, credit cannot be denied. The Department's Circular also supported genuine duty payments for credit eligibility. The Court noted that the authorities accepted the respondents' entitlement to CENVAT Credit, focusing on the required document for credit availing. The TR6 Challan, originating from the appellants' office, was accepted as valid proof by the lower authorities. Consequently, the Court rejected the appellants' argument to discard the Challan and upheld the lower authorities' decisions, emphasizing Rule 9's procedural nature.In conclusion, the Court dismissed the appeals, affirming the respondents' entitlement to CENVAT Credit based on the accepted TR6 Challan. The judgment highlighted the importance of genuine duty payments and accepted documents for credit eligibility, emphasizing procedural aspects should not hinder legitimate credit claims.