2019 (6) TMI 1610 - AT - Central Excise

Appellant Wins CENVAT Credit Dispute

The Tribunal ruled in favor of the appellant, a Public Sector Undertaking, in a case involving the disallowance of CENVAT credit on withheld amounts from ... Reversal of CENVAT Credit - payments have not been made to the service provider - violation of provisions of Rule 4(7) of the CCR or not - HELD THAT:- The issue is no longer res-integra. The Delhi Bench of this Tribunal in the case of M/S. HINDUSTAN ZINC LTD. VERSUS C.C.E., UDAIPUR [2017 (9) TMI 1639 - CESTAT DELHI] has held that In the present case, the appellants retained a portion of the consideration towards service rendered by the service provider in terms of contract towards performance guarantee. We note, the Board's clarification is applicable to the facts of the present case. Identical set of facts came up for decision before the Tribunal in many cases. In appellant's own case the matter has been decided holding that no reversal of credit under Rule 14 can be ordered in such situation. The legal position stands settled in favour of the appellant and against the Revenue - the objection raised by the Department is not sustainable and the appellant is legally entitled to CENVAT credit - Appeal allowed - decided in favor of appellant. Issues:1. Disallowance of CENVAT credit on amount withheld from service providers' invoices.2. Applicability of Rule 4(7) of the CENVAT Credit Rules, 2004.3. Validity of penalty under section 11AC of the Central Excise Act.4. Time bar for contesting the demand.5. Entitlement to CENVAT credit by a Public Sector Undertaking (PSU).Analysis:1. The case involved a dispute regarding the disallowance of CENVAT credit by the appellant on the amount withheld from service providers' invoices for 'penalty for deficiency of services and price fall clause.' The appellant reversed the credit with interest following an audit for the period 2012-13.2. The key contention revolved around the applicability of Rule 4(7) of the CENVAT Credit Rules, 2004. The appellant argued that since the service tax amount charged on the invoices had been paid to the service providers, and only a portion of the basic amount was withheld, the rule did not apply. They cited various tribunal decisions supporting their stance.3. The dispute also involved the imposition of a penalty under section 11AC of the Central Excise Act. The appellant, being a PSU, argued against the imposition of the penalty, stating they had no intent to evade payment of duty.4. The issue of time bar was raised by the appellant, contesting the Show Cause Notice issued in 2016. The appellant argued that the demand was time-barred, further complicating the case.5. The Tribunal, after considering the arguments and precedents, ruled in favor of the appellant. Citing previous decisions, the Tribunal held that the appellant was entitled to the CENVAT credit, setting aside the impugned orders and allowing the appeal with consequential relief. The judgment clarified the legal position in favor of the appellant, emphasizing the settled nature of the issue.This detailed analysis covers the issues involved in the legal judgment, providing a thorough understanding of the case and its implications.