2025 (8) TMI 891 - AT - Central Excise

Appeal allows CENVAT credit of Rs.2,35,024; demand set aside, penalty under Rule 15(2) read with s.11AC quashed

CESTAT MUMBAI - AT allowed the appeal, holding that input services were eligible for CENVAT credit (some received prior to April 2011 and others ... CENVAT Credit - denial on the ground that original invoices have not been produced and, only photocopies of invoices have been produced - input services as defined under Rule 2(1) of the Credit Rules - levy of penalties - HELD THAT:- The impugned SCN dated 19.02.2015 has been issued for the same financial year for denial of credit on input services amounting to Rs.12,33,115/-. Vide the Order-In-Original dated 26.11.2015, credit of Rs.4,89,670/- was allowed and Rs.7,43,445/- was disallowed. Penalty of Rs.7,43,445/- was imposed. Vide the Order-In-Appeal dated 08.08.2016 the Order- In-Original dated 26.11.2015 was upheld. On appeal before the Tribunal, the Tribunal vide the order dated 24.11.2017 remanded the matter to verify duplicate demand as another SCN dated 18.02.2015 for the same financial year for denial of credit on input services was issued. Vide the Order-In-Original dated 26.03.2021, credit of Rs.2,65,132/- was allowed on merits and credit of Rs.4,78,313/- was disallowed. Vide the impugned Order-In- Appeal dated 14.02.2022, the demand of Rs.1,68,303/- was set aside on the ground of duplication and the balance demand of Rs.3,09,971/- has been confirmed and equal amount of penalty was imposed. It is found from the records that the Appellant has already deposited an amount of Rs.74,345/-. This pre-deposit was done during the first round of litigation and this has been recorded in paragraph 2 of the Impugned Order. The Impugned Order cannot be sustained since the various input services were received prior to April 2011 and hence their eligibility to credit was covered by the provisions of statute as prevailing prior to April 2011. Even otherwise, the various services are in the nature of input services as per the definition prevailing during the period from April 2011 to March 2012. The Impugned Order is bad since it refers to the OIA dated April 29, 2016 (passed in another notice for the same period wherein credit eligibility has been upheld) but does not follow the said order which has attained finality. In any event, the Impugned Order is not sustainable as the entire demand is barred by limitation inasmuch as credit for the period 2011-12 is proposed to be denied by issuance of a notice on February 19, 2015. The credit of Rs.2,35,024/- is held to be as eligible credit. The demand is set aside. The penalty imposed under Rule 15(2) of the CENVAT Credit Rules read with Section 11AC of the Central Excise Act, 1944 is also set aside. Appeal allowed. 1. ISSUES PRESENTED and CONSIDERED Whether CENVAT credit can be denied on the ground of non-production of original invoices when photocopies or verified invoices are produced later. Applicability of the definition of 'input services' under the CENVAT Credit Rules prior to April 2011 versus post-April 2011 amendments for credit eligibility. Whether credit taken for services received prior to April 2011 but claimed during April 2011 to March 2012 period is eligible. Whether penalty under Rule 15(2) of the CENVAT Credit Rules read with Section 11AC of the Central Excise Act is justified in case of procedural lapses without deliberate suppression. Whether the demand for credit denial is barred by limitation when the Show Cause Notice is issued after the prescribed period. Whether overlapping or duplicate demands raised in multiple proceedings for the same credit amount are sustainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Denial of CENVAT Credit Due to Non-Production of Original Invoices Legal Framework and Precedents: CENVAT Credit Rules require production of invoices to claim credit. However, verified invoices or photocopies may be considered if originals are unavailable due to circumstances beyond control. Court's Reasoning: The Appellant initially could not locate original invoices due to shifting of the unit, but later produced invoices verified by the Adjudicating Authority. Photocopies were produced where originals were unavailable. Key Findings: Verified invoices were accepted by authorities in part, and the inability to produce originals was due to factors beyond the Appellant's control, not deliberate suppression. Application of Law to Facts: The Court recognized that procedural lapses without mala fide intent do not warrant denial of credit outright. Competing Arguments: Revenue argued non-production of originals justifies denial; Appellant emphasized verified invoices and lack of suppression. Conclusion: Credit cannot be denied solely for non-production of original invoices when verified invoices or photocopies are produced and no deliberate suppression is established. Issue 2: Applicability of Input Services Definition Pre- and Post-April 2011 Legal Framework: Prior to April 2011, definition of input services was broad ('activities related to business'). Post-April 2011 amendments narrowed the scope. Court's Reasoning: Majority of services were received prior to April 2011, though credit was taken during April 2011 to March 2012. The Court held that eligibility should be governed by the law prevailing at the time services were received. Key Evidence: SCN and records showed services were received before April 2011; credit taken later. Application of Law: The broader pre-April 2011 definition applies to services received before that date, making the credit eligible. Competing Arguments: Revenue relied on amended definition applicable from April 2011; Appellant relied on prior definition for services received earlier. Conclusion: Credit for services received prior to April 2011 is eligible under the earlier broader definition despite credit being availed later. Issue 3: Eligibility of Credit for Services Received Prior to April 2011 but Claimed Later Legal Framework: Credit eligibility depends on the time of receipt of services and applicable law at that time. Court's Reasoning: The Court emphasized that credit eligibility should be assessed based on when services were received, not when credit was claimed. Findings: Majority of services were received before April 2011; hence, credit is eligible. Application: The Appellant's claim for credit during April 2011-March 2012 for services received earlier is valid. Conclusion: Credit taken for services received prior to April 2011 is eligible despite being claimed later. Issue 4: Imposition of Penalty under Rule 15(2) CENVAT Credit Rules and Section 11AC Central Excise Act Legal Framework: Penalty can be imposed for wrongful availment of credit or suppression of facts. Court's Reasoning: The Court found no deliberate suppression or mala fide intent by the Appellant; procedural lapses were due to shifting and loss of documents. Application: Without deliberate suppression, penalty is not justified. Conclusion: Penalty imposed under Rule 15(2) and Section 11AC is set aside. Issue 5: Limitation for Issuance of Show Cause Notice Denying Credit Legal Framework: Proceedings for denial of credit are subject to limitation periods under Central Excise laws. Court's Reasoning: The SCN dated February 19, 2015, proposed denial of credit for the financial year 2011-12, which is beyond the limitation period. Application: Demand for credit denial is barred by limitation. Conclusion: The entire demand for denial of credit is barred by limitation and hence unsustainable. Issue 6: Duplication of Demand in Multiple Proceedings Legal Framework: Duplicate demands for the same credit amount in different proceedings are impermissible. Court's Reasoning: The Tribunal had earlier remanded the matter to exclude overlapping demands raised in two SCNs for the same financial year. Findings: Part of the demand was set aside on the ground of duplication. Application: Demand overlapping with another proceeding is not sustainable. Conclusion: Demand for credit disallowance to the extent overlapping with other proceedings is set aside. Additional Observations The Court noted that prior litigation on similar facts for the same financial year had resulted in confirmation of credit eligibility after remand and verification. The impugned order failed to follow the earlier final order upholding credit eligibility, rendering it unsustainable. The Appellant had already deposited a portion of the disputed amount during earlier proceedings, which was recorded in the impugned order. Final Conclusions CENVAT credit amounting to Rs. 2,35,024/- is held eligible as per the provisions applicable at the time of receipt of services. The demand for denial of credit and penalty imposed under Rule 15(2) and Section 11AC is set aside. The appeal is allowed with consequential relief in accordance with law.