Court denies CENVAT credit for pre-deposit under SVLDRS, emphasizes compliance with Rule 6

The High Court held that the respondent was not entitled to claim CENVAT credit as a pre-deposit under the SVLDRS due to non-compliance with Rule 6 of the CENVAT Credit Rules, 2017. The Designated Committee's decision to disallow the credit was upheld, emphasizing that time-barred claims cannot be adjusted under the Scheme. The writ appeal was allowed, setting aside the Single Judge's order in favor of the respondent.

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Issues Involved:
1. Entitlement to CENVAT credit as pre-deposit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS).
2. Compliance with Rule 6 of the CENVAT Credit Rules, 2017.
3. Authority of the Designated Committee under SVLDRS to modify the SVLDRS-3 form.
4. Applicability of the Frequently Asked Questions (FAQs) by CBIC.
5. Consideration of time limits for claiming CENVAT credit.

Issue-wise Detailed Analysis:

1. Entitlement to CENVAT Credit as Pre-deposit under SVLDRS:
The respondent, a partnership firm providing Advertising Agency Services, was issued a show cause notice on 7.9.2018 for non-payment of service tax amounting to Rs. 13,06,07,137/-. The respondent claimed CENVAT credit of Rs. 4,15,14,081/- in their service tax returns filed in July and August 2018. The respondent applied under the SVLDRS on 28.12.2019, declaring a payable amount of Rs. 1,45,87,081/- after accounting for pre-deposit, including the CENVAT credit. The Designated Committee, however, disallowed the CENVAT credit, estimating the payable amount as Rs. 5,62,21,162/-. The learned Single Judge ruled in favor of the respondent, directing the Committee to accept the CENVAT credit as pre-deposit. However, on appeal, the High Court found that the respondent was not entitled to claim CENVAT credit as pre-deposit under the Scheme, as it was inadmissible due to non-compliance with Rule 6 of the CENVAT Credit Rules, 2017.

2. Compliance with Rule 6 of the CENVAT Credit Rules, 2017:
The crux of the matter was whether the respondent could claim CENVAT credit on input services amounting to Rs. 4,15,14,081/- as pre-deposit under the Scheme. The High Court emphasized that Rule 6 of the CENVAT Credit Rules, 2017, stipulates that CENVAT credit cannot be claimed after one year from the date of the invoice. The respondent submitted invoices from 2013-2014 in 2019, well beyond the one-year limit. Thus, the claim was inadmissible.

3. Authority of the Designated Committee under SVLDRS to Modify SVLDRS-3 Form:
The High Court clarified that the Designated Committee under the SVLDRS does not have the authority to modify the SVLDRS-3 form once issued. The Committee had correctly disallowed the CENVAT credit claim of Rs. 4,15,14,081/- as it was inadmissible under the CENVAT Credit Rules.

4. Applicability of the Frequently Asked Questions (FAQs) by CBIC:
The learned Single Judge had relied on Section 52 of the FAQs by CBIC, which the High Court found to be misapplied. The FAQs cannot override statutory provisions, and the respondent’s claim for CENVAT credit was not permissible under the existing rules.

5. Consideration of Time Limits for Claiming CENVAT Credit:
The High Court reiterated that CENVAT credit is a concession, not a vested right, and must be claimed within the stipulated time frame. The respondent’s claim was time-barred as they failed to file the requisite forms within the prescribed period, and their right to claim the credit had lapsed.

Conclusion:
The High Court set aside the order of the learned Single Judge, ruling that the respondent was not entitled to claim the CENVAT credit as pre-deposit under the SVLDRS. The Designated Committee's decision to disallow the credit was upheld, and the writ appeal was allowed. The statutory provisions under the CENVAT Credit Rules, 2017, were given precedence, emphasizing that time-barred claims cannot be adjusted under the Scheme.

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