2023 (9) TMI 286 - AT - Central Excise

Appeal allowed against denial of credit by Central Excise Commissioner.

The appeal was filed against the denial of credit by the Commissioner of Central Excise, Kolkata-II, and the demand for interest and penalty under the ... CENAVT Credit - procedural irregularity - credit distributed by various depots of the Appellant spread across the country - credit denied on the ground that the depots were either not having the Service Tax registrations at all, or the credit has been distributed prior to obtaining the registration - HELD THAT:- It is an undisputed fact that services received by the depots are eligible input service to the Appellant, as the depots are their place of removal and all the expenditure incurred upto the place of removal has already been included in the assessable value on which duty has been paid. It is also not in dispute that the said input services have been received by the depots and appropriate service tax has been paid. Under such circumstances, denial of CENVAT credit merely on the ground of non-registration/delay in registration of the depots is not sustainable. In the case of THE COMMISSIONER OF CENTRAL EXCISE, O/O THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX VERSUS M/S. PRICOL LTD. [2021 (2) TMI 495 - MADRAS HIGH COURT], it has been held Credit availed and distributed by respondent prior to getting registered as an input service distributor not deniable. Central Board of Excise and Customs has issued Circular No. 1063/2/2018-CX dated 16.02.2018, wherein the various decisions of the High Court have been accepted with an objective to reduce litigation and dispose of the cases on similar questions of law or identical case on facts pending with the department. In the said circular, the Board has accepted the decision of Hon’ble High Court of Gujarat in the matter of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD [2016 (2) TMI 183 - GUJARAT HIGH COURT], wherein the Hon’ble High Court dismissed the department’s appeal holding that non-registration of ISD is only a procedural irregularity for which substantial benefit of CENVAT credit cannot be denied when all the necessary records have been maintained by the respondent. Thus, substantial benefit cannot be denied merely on account of procedural infractions - Since, credit is held to be admissible the question of demanding interest and imposing penalty does not arise - appeal allowed. Issues Involved:- Denial of credit availed by the Appellant by the Commissioner of Central Excise, Kolkata-II.- Demand for interest and penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15(2) of the CENVAT Credit Rules, 2004.The present appeal was filed against the Order-in-Original denying credit availed by the Appellant and demanding interest and penalty. The dispute revolved around the credit distributed by various depots of the Appellant without Service Tax registrations or before obtaining registration. The Appellant argued that registration of depots is not a prerequisite for CENVAT credit as all expenditure up to the place of removal had been included in the assessable value on which duty was paid, making them eligible for credit of input services used up to the depots. They cited legal precedents supporting their contention, including decisions from the Madras High Court, Gujarat High Court, and Tribunal Kolkata.The Tribunal observed that the dispute centered on the credit distributed by the Appellant's depots across the country, which was denied due to lack of Service Tax registrations or pre-registration distribution. It was noted that services received by the depots were eligible input services to the Appellant, and denial of CENVAT credit based on non-registration of depots was deemed unsustainable. Legal precedents were cited, emphasizing that procedural irregularities like non-registration should not disentitle an entity from availing CENVAT credit.The Tribunal referenced various judicial pronouncements, including decisions from the Madras High Court, Gujarat High Court, and Tribunal Kolkata, which supported the Appellant's argument that substantial benefit should not be denied due to procedural infractions. It was held that denial of CENVAT credit based on non-registration or delayed registration of depots was not legally justified. The impugned order was set aside, and the appeal filed by the Appellant was allowed. The Tribunal concluded that since the credit was deemed admissible, there was no basis for demanding interest or imposing penalties.