Appellant wins appeal over CENVAT Credit denial due to VCES, 2013 compliance

The appellant successfully challenged the denial of CENVAT Credit based on a supplementary invoice issued under the Voluntary Compliance Encouragement Scheme (VCES), 2013. The Member (Judicial) found that the Revenue's denial was unjustified as the service provider had opted for VCES, and the Revenue had accepted their declaration without challenging it. The appellant's disclosure of details and lack of dispute regarding invoices supported their claim. The impugned order was set aside, and the appeal was allowed, granting consequential benefits to the appellant.

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Issues:
Denial of CENVAT Credit based on supplementary invoice under VCES, 2013.

Analysis:
The appellant challenged the denial of CENVAT Credit based on a supplementary invoice issued by the service provider under the Voluntary Compliance Encouragement Scheme (VCES), 2013. The Show Cause Notice alleged incorrect availing of CENVAT Credit for service tax. The appellant contended that the demand was time-barred as the issue was raised by the audit party before the issuance of the notice. The appellant argued that the service provider had not revoked the VCES-3 and that the Revenue had not challenged it or issued any notice regarding fraud or collusion. The appellant also claimed ignorance regarding whether the service provider had paid service tax before issuing the supplementary invoice.

The adjudicating authority confirmed the demand, which was upheld by the first appellate authority. During the hearing, the appellant's consultant and the Revenue's representative presented their arguments. The Member (Judicial) considered the contentions, examined the documents, and reviewed relevant judgments.

The Member observed that the service provider had opted for VCES, 2013, and issued a supplementary invoice to the appellant. The Revenue had not challenged the VCES-3 issued to the service provider or accused them of any violations. The Member noted that the Department's acceptance of the VCES declaration and issuance of acknowledgment precluded the denial of CENVAT Credit, as it would lead to double taxation, contrary to the taxation rules.

Upon reviewing the ER-1 return, the Member found that the appellant had disclosed the details of CENVAT availed and service tax paid, including invoices from the service provider. The Revenue did not dispute these documents or the appellant's claim that they became aware of the issue in January 2015. In light of these circumstances, the Member deemed the Revenue's denial of CENVAT Credit unjustified and unsustainable, leading to the setting aside of the impugned Order.

Consequently, the appeal was allowed, granting any consequential benefits. The judgment was pronounced in open court on 5th October 2018.

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