2025 (1) TMI 1209 - AT - Service Tax

Cenvat credit for input services cannot be denied on technical grounds despite manual registers and departmental typographical errors

M/s Shriram Rayons Versus Commissioner of CGST & Central Excise, Udaipur

CESTAT NEW DELHI allowed the appeal regarding wrongly disallowed Cenvat credit for input services. The tribunal held that Cenvat credit scheme benefits ... Recovery of wrongly taken/availed Cenvat credit of Input Services - typographical error in the AG Audit report/SCN vis-à-vis. the challan numbers - HELD THAT:- It is a settled law that the Cenvat credit scheme is a beneficial scheme for the taxpayers and the benefit of this scheme cannot be blocked or taken away from the taxpayers on technical and procedural grounds. The appellate authority failed to appreciate that both Service Tax Payable Registers and Service Tax Credit Registers were signed by authorized representative at the end of each month where summary of the transactions of the month was prepared and tabulated at the month end. It appears that the appellate authority has overlooked the signatures in both the registers in discarding these registers as merely a piece of paper. The objection of the appellate authority that the registers were maintained manually is without any basis. He failed to appreciate that the Government has not mandated that records of Service Tax Payable Register and Service Tax Credit Register should be maintained by the taxpayer or on other electronic device. These records are being maintained by the appellant since beginning and no objection was raised by the Department or by the Audit Team. Hence the objection of the appellate authority to the effect that the registers are maintained manually by the appellant is without any valid basis and the same is not sustainable in the eyes of law. Disallowance of credit for want of the correct challan - HELD THAT:- The challan number in show cause notice (28067) is nothing but a typographical error. Substantial benefit which is otherwise available to the appellant cannot be denied merely on the basis of the typographical error that too, committed at the end of the department. Similar error has been committed with respect to challan filed with Entry No. 1669 dated 06.07.2017. Only one challan admittedly pertains to the said entry. Appellant has claimed it to be the Challan bearing No. 29935 dated 06.07.2017. For the same reason as above mentioning of 29936 as challan number is held to be nothing but a typographical error. Conclusion - The procedural or technical errors, such as typographical mistakes, should not hinder the entitlement to Cenvat credit, especially when the appellant provides substantial evidence to support their claim - credit remains allowed. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the appellant, M/s Shriram Rayons, was entitled to avail Cenvat credit amounting to Rs. 5,26,497/- based on certain challans, which were claimed to have typographical errors in their numbers.Whether the Commissioner (Appeals) failed to comply with the directions of the Tribunal to verify the alleged typographical errors in the challan numbers and to reassess the evidence provided by the appellant.Whether the rejection of the Cenvat credit claim by the Commissioner (Appeals) was justified based on the technical ground that the service tax register did not bear the signature of the authorized signatory.ISSUE-WISE DETAILED ANALYSIS1. Entitlement to Cenvat Credit and Typographical Errors in ChallansRelevant Legal Framework and Precedents: The Cenvat Credit Rules, 2004, and the relevant provisions of the Finance Act, 1994, govern the entitlement to Cenvat credit. The appellant argued that the benefit of Cenvat credit should not be denied on technical grounds, especially when typographical errors are involved.Court's Interpretation and Reasoning: The Tribunal observed that the appellant claimed the correct challan numbers were 28069 and 29935 instead of 28067 and 29936, as mentioned in the show cause notice. The Tribunal noted that the Commissioner (Appeals) failed to verify these claims properly, despite being directed to do so.Key Evidence and Findings: The appellant provided a service tax register indicating the correct challan numbers. However, the Commissioner (Appeals) dismissed this evidence due to the lack of signatures from the authorized signatory, questioning the document's authenticity.Application of Law to Facts: The Tribunal highlighted that the Cenvat credit scheme is beneficial and should not be denied on procedural grounds. The Tribunal found that the lack of signatures was a hyper-technical ground for rejecting the credit claim.Treatment of Competing Arguments: The Tribunal acknowledged the Department's acknowledgment of typographical errors in the audit report and show cause notice. However, it emphasized that the Department failed to produce any evidence contradicting the appellant's claims.Conclusions: The Tribunal concluded that the typographical errors in the challan numbers should not prevent the appellant from availing the Cenvat credit. The rejection of the credit claim by the Commissioner (Appeals) was deemed unjustified.2. Compliance with Tribunal's Directions on RemandRelevant Legal Framework and Precedents: Judicial discipline requires lower authorities to comply with the directions of appellate bodies, such as the Tribunal.Court's Interpretation and Reasoning: The Tribunal criticized the Commissioner (Appeals) for failing to follow its remand directions to verify the alleged typographical errors and reassess the appellant's evidence.Key Evidence and Findings: The Tribunal noted that the Commissioner (Appeals) did not raise any objections against the authenticity of the challan numbered 28069, which was produced by the appellant.Application of Law to Facts: The Tribunal emphasized that the Commissioner (Appeals) overlooked the signatures in the service tax registers, which were signed at the end of each month, and failed to appreciate the appellant's compliance with the remand directions.Treatment of Competing Arguments: The Tribunal dismissed the Department's argument regarding the manual maintenance of the registers, stating that there was no legal mandate for electronic record-keeping.Conclusions: The Tribunal concluded that the Commissioner (Appeals) failed to comply with its remand directions, resulting in an unjust rejection of the appellant's credit claim.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'It is a settled law that the Cenvat credit scheme is a beneficial scheme for the taxpayers and the benefit of this scheme cannot be blocked or taken away from the taxpayers on technical and procedural grounds.'Core principles established: The Tribunal reinforced the principle that procedural or technical errors, such as typographical mistakes, should not hinder the entitlement to Cenvat credit, especially when the appellant provides substantial evidence to support their claim.Final determinations on each issue: The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, granting the appellant the contested Cenvat credit of Rs. 5,26,497/-. The Tribunal emphasized the importance of adhering to judicial directions and ensuring that substantial benefits are not denied on procedural grounds.