CESTAT allows Rs. 183 crore CENVAT credit appeal, sets aside demand on merit and limitation grounds

CESTAT Kolkata allowed the appellant's appeal against disallowance of CENVAT credit worth Rs. 183,36,81,368/- along with interest and penalties. The department denied credit claiming no service was rendered and payments were capital investment reimbursements. The Tribunal held that CENVAT credit cannot be denied when service tax payment is undisputed at service provider's end, citing established precedent. The extended limitation period invocation was unsustainable as no suppression, fraud, or collusion was proven. Being a PSU, appellant enjoyed presumption of bona fide conduct, and credit availment was disclosed in periodic returns. The demand was set aside on both merit and limitation grounds.

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Issues involved:
The denial of Cenvat credit to the Appellant based on the nature of payments made to contractors and the invocation of the extended period of limitation for demanding reversal of Cenvat credit.

Details of the judgment:

Issue 1: Denial of Cenvat credit based on nature of payments:
The appeal was filed against the Order-in- Original disallowing Cenvat credit of Rs. 183,36,81,368/- availed by the Appellant for payments made under Build, Own, Operate and Transfer agreements. The denial was primarily on the grounds that the payments were reimbursement of capital investment and not for any service provided. The Appellant argued that Cenvat credit cannot be denied when service tax payment is not disputed by the service provider. The Tribunal agreed, citing relevant case law, and set aside the demand for Cenvat credit, interest, and penalty.

Issue 2: Invocation of extended period of limitation:
The demand for reversal of Cenvat credit for the period April 2015 to June 2017 was made beyond the normal 2-year period prescribed under Section 11A of the Central Excise Act. The impugned order confirmed the demand without conclusive evidence of suppression or intent to evade tax by the Appellant. Given the Appellant's status as a PSU, there was a presumption of bona fide, and without concrete evidence, allegations of suppression could not be sustained. The Tribunal held that the demand based on the extended period of limitation was not valid and set aside the demands confirmed in the impugned order on the ground of limitation.

Conclusion:
The Tribunal allowed the appeal filed by the Appellant, setting aside the impugned order on merit and limitation. The denial of Cenvat credit was deemed unsustainable, and the demands confirmed in the order were held liable to be set aside. The Appellant was granted consequential relief as per law, and the Miscellaneous Application for additional submission was disposed of accordingly.

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