2024 (12) TMI 1238 - AT - Central Excise

CESTAT allows Rs. 49 lakh CENVAT credit appeal, ruling procedural invoice lapses cannot deny legitimate service credits

National Engineering Industries Limited Versus Commissioner, CGST And Central Excise, Jaipur

CESTAT New Delhi allowed the appeal, setting aside denial of CENVAT credit totaling Rs. 49,07,655. The tribunal held that credit cannot be denied for ... Denial of CENVAT Credit - duty paying documents - case of Revenue is that appellant has availed input service tax credit on the basis of invoices which are not the prescribed documents as per Rule 4(7) and Rule 9 of Cenvat Credit Rules, 2004 (CCR) as well as Rule 4(a) of Service Tax Rules, 1994 - denial of credit also on the ground that challans deposited against C&AG report based whereupon the said Cenvat credit has been availed, are not the prescribed documents as per Rule 9(1)(bb) of CCR, 2004 - Extended period of limitation. The denial of Cenvat credit of Rs. 16,12,208/- on the ground that the invoices issued by the input service providers are not the valid documents - HELD THAT:- Cenvat credit cannot be denied merely on the ground that the documents does not contain all the particulars required to be contained in the invoice when there is no dispute regarding receipt of service - Reference made to decision in the case of Kemwell Biopharma Pvt. Ltd. Versus Commr. of C.Ex. & ST, LTU, Bangalore [2016 (6) TMI 229 - CESTAT BANGALORE]. In this case, the Tribunal hold that mere non-mentioning of registration number of service provider on invoices is only a procedural lapse with regard to duty paying documents. In absence of any evidence of services not having been received or utilized, substantive benefit of credit, not deniable for such procedural lapse. In the present case also there is no dispute regarding receipt of input services as well as tax paid on such services. The only allegation is that the address is wrongly mentioned on the invoices. Admittedly, the appellant is Input Service Distributor. Resultantly, the substantive benefit of credit provided in Rule 3 of CCR cannot be denied by resorting to procedural requirements under Rule 4(7) and Rule 9(2) of CCR Rules. It is also an apparent fact on record that those suppliers had mentioned the incorrect address but once the said discrepancy was noticed the service providers rectified the mistake and issued the supplementary invoices by mentioning the correct address of the appellant. The supplementary invoices are also on record. It is held that Cenvat credit availed on such invoices has rightly been availed - the order directing reversal of Cenvat credit is therefore, held liable to be set aside. The denial of Cenvat credit of an amount of Rs. 32,95,447/- alleging that the challans deposited against C&AG report based whereupon the said Cenvat credit has been availed, are not the prescribed documents as per Rule 9(1)(bb) of CCR, 2004 - HELD THAT:- Apparently the entire liability of service tax was paid by the appellant under Reverse Charge Mechanism vide the said challans pursuant to C&AG audit report. The said challans evidencing the payment of service tax are enclosed on record. Once the payment of tax is made under RCM, it is Rule 9(1)(e) as shall be relevant. Rule 9(1)(bb) of CCR which provides that Cenvat shall be taken by manufacturer/service provider/input service distributor on the basis of supplementary invoices/bill or challan issued by the provider of output service, except where the additional amount of tax be recovered from the provider of service on account of non-levy or non-payment or short levy or short payment by reason or fraud or collusion or suppression of facts with intent to evade the payment of service tax. On the other hand, Rule 9(1) (e) CCR provides that Cenvat credit shall be taken by the manufacturer or the provider of output service or input service distributor, inter alia, on the basis of challan evidencing payment of service tax, by the service recipient as the person liable to pay service tax. Perusal of both these provisions when read in light of the fact that the impugned amount of service tax was paid by the appellant under Reverse Charge Mechanism it becomes clear that Rule 9(1)(bb) shall not be applicable - it is held that department has wrongly invoked Rule 9(1)(bb) while denying the Cenvat credit of Rs. 32,95,447/- confirmation of said demand is, therefore, liable to be set aside. Extended period of limitation - HELD THAT:- Admittedly the appellant has been regularly filing his returns mentioning the amount of Cenvat credit availed. There can be no possibility of any suppression as is alleged by the department. It is also an admitted fact that the service tax was duly been paid under forward or as well as under Reverse Charge Mechanism vis-à-vis issue No. (1) and issue No. (2) respectively. The question of any evasion of tax is, therefore, absolutely redundant - no evidence is produced by the department for proving any positive act of the appellant which may amount to suppression - there was no occasion to invoke the extended period of limitation. The impugned order is hereby set aside. Consequent thereto, the appeal is hereby allowed. Issues Involved:1. Denial of Cenvat credit of Rs. 16,12,208/- due to invoices not being valid documents.2. Denial of Cenvat credit of Rs. 32,95,447/- based on challans not being prescribed documents under Rule 9(1)(bb) of CCR, 2004.3. Invocation of the extended period of limitation for recovery.Issue-wise Detailed Analysis:Issue No. 1: Denial of Cenvat Credit on Invalid InvoicesThe primary contention revolves around the denial of Cenvat credit amounting to Rs. 16,12,208/-. The department argued that the invoices issued by the input service providers did not qualify as valid documents under Rule 4(7) and Rule 9(2) of the Cenvat Credit Rules, 2004, and Rule 4(A) of the Service Tax Rules, 1994, due to incorrect addresses. The appellant countered this by asserting that the substantive right to avail Cenvat credit under Rule 3 of CCR, 2004, cannot be denied due to procedural lapses. The appellant provided evidence that the invoices contained all necessary details, such as duty or service tax payable, description of goods or services, and registration numbers, which should suffice for credit eligibility. The Tribunal agreed, emphasizing that the name and address of the service recipient are not mandatory for credit eligibility if the service is received and accounted for. The Tribunal referenced multiple judicial precedents supporting the view that procedural lapses should not hinder substantive rights, especially when there is no dispute regarding the receipt of services or payment of taxes. Consequently, the reversal of Cenvat credit on these grounds was deemed unsustainable.Issue No. 2: Denial of Cenvat Credit on ChallansThe second issue concerned the denial of Cenvat credit of Rs. 32,95,447/-, which was availed based on challans deposited against a C&AG report. The department argued that these challans were not prescribed documents under Rule 9(1)(bb) of CCR, 2004. However, the appellant contended that the entire service tax liability was paid under the Reverse Charge Mechanism (RCM) and should be governed by Rule 9(1)(e), which allows credit on the basis of challans evidencing payment of service tax by the service recipient. The Tribunal found merit in the appellant's argument, noting that Rule 9(1)(bb) was incorrectly invoked by the department, as the tax was paid under RCM. The Tribunal cited relevant case law to support its decision, ultimately setting aside the demand for reversal of credit on these grounds.Issue No. 3: Invocation of Extended Period of LimitationThe department had invoked the extended period of limitation, alleging suppression of facts by the appellant. The appellant argued that they had regularly filed returns disclosing the Cenvat credit availed, negating any possibility of suppression. The Tribunal observed that the service tax was duly paid, and there was no evidence of tax evasion. Furthermore, the issue involved interpretation of rules, which does not constitute suppression. The Tribunal found no justification for invoking the extended period of limitation, referencing judicial decisions that support this view.Conclusion:The Tribunal concluded that both the denial of Cenvat credit on the grounds of invalid invoices and challans was unjustified. Additionally, the invocation of the extended period of limitation was unwarranted. Consequently, the impugned order was set aside, and the appeal was allowed.