High Court allows recall of order, erroneous order withdrawn, Rule 4(7) interpreted for credit availability.

Union of India Versus M/s Hindustan Zinc Ltd. And M/s Hindustan Zinc Ltd. Versus Union of India

Union of India Versus M/s Hindustan Zinc Ltd. And M/s Hindustan Zinc Ltd. Versus Union of India - 2020 (33) G. S. T. L. 36 (Raj.) Issues:
1. Recall of order dated 13.09.2019 in D.B. Misc. Application No. 82/2019
2. Error in passing order in D.B.Central Excise Appeal No.96/2018
3. Interpretation of Rule 4(7) of the Cenvat Credit Rules, 2004 in D.B.Central Excise Appeal No.126/2017

Recall of Order:
In D.B. Misc. Application No. 82/2019, the High Court allowed the application and recalled the order dated 13.09.2019 based on the reasons stated in the application.

Error in Passing Order:
In D.B.Central Excise Appeal No.96/2018, it was acknowledged by both parties that the order dated 13.09.2019 was erroneously passed instead of in D.B.Central Excise Appeal No.126/2017. The appeal was withdrawn as the tax effect was less than Rs. 1 crore as per a circular issued by the Ministry of Finance.

Interpretation of Rule 4(7) - D.B.Central Excise Appeal No.126/2017:
The main issue in this case was the interpretation of Rule 4(7) of the Cenvat Credit Rules, 2004. The question raised was whether the assessee could avail Cenvat credit of service tax on the value of services not fully paid at the time of taking credit. The case involved an assessee engaged in manufacturing seeking Cenvat credit on excise duty paid on inputs and capital goods, as well as service tax on input services. The dispute arose when the full payment for input services was allegedly not made to the service providers. The Adjudicating Authority dropped the demand, but the Excise Department appealed to the CESTAT. The CESTAT allowed the appeal based on a circular dated 30.04.2010, which raised doubts on the requirement of full payment for availing credit.

The circular clarified issues related to availing Cenvat credit in cases of reduced payments or withheld amounts. It addressed whether credit could be claimed for payments made through debit/credit notes or when the service receiver did not pay the full invoice value and service tax due to various reasons. The circular emphasized that if the service charges and service tax were paid in any prescribed manner, credit should be allowed. It also stated that in cases of reduced payments, the final settled amount should be considered as the final payment, allowing the service receiver to take credit proportionately reduced. The CESTAT relied on this circular to allow the credit in the present case.

The Court analyzed the Revenue's argument that performance guarantee amounts withheld were not covered by the circular. However, the Court disagreed, stating that the circular encompassed withholding amounts towards various counts, including security and performance guarantee. The Court answered the question of law against the Revenue and dismissed the appeal accordingly.