2025 (9) TMI 996 - AT - Service Tax

Appeal allows CENVAT credit; demand based only on third-party income-tax data ruled unsustainable; documents upheld

M/s Kristal City Cable Digital Versus Commissioner, CGST & Central Excise, Ujjain

CESTAT allowed the appeal, holding that CENVAT credit availed by the appellant was valid and demand based solely on third-party income-tax data was ... Disallowance of CENVAT Credit - entries of invoices were not available in the ledgers and the consolidated entries of the appellant did not match with the invoices - demand proposed merely on the basis of third party data as was received from income tax authorities - HELD THAT:- As per Rule (9) of CCR, 2004 invoice issued by the service provider is relevant document for the availment of Cenvat credit. The said invoices have been generated with such particulars as are required under the said Rule (9). It is also observed that as per sub-rule 2 of Rule 9, the proviso thereof, it is clear that even if all particulars are not contained in the requisite document/invoice the particulars only about details of service tax payable, distribution of provider of output service if available the document/invoice still has to be considered as the proper document for availment of Cenvat credit. These observations are sufficient to hold that the findings arrived at by the adjudicating authority were not correct. Though, there is no mention of the invoices to have been produced before him but it is apparent from the show cause notice itself that the documents as demanded vide letter dated 26.10.2018 and 21.5.2019 were duly provided. Para 7 of show cause notice recites that even Chartered Accountant of the appellant appeared before the original departmental authority. The production of certificate of Chartered Accountant is also an admitted fact in the impugned order in appeal, still Commissioner (Appeals) has recorded such findings. It becomes clear that the Chartered Accountant certificate and the reconciliation statement along with the copies of respective invoices are wrongly held to be the insufficient documents. It has been settled position of law that the Chartered Accountant’s certificate is admissible evidence. Department has not produced any evidence which may falsify or contradict the said admissible document. The certificate is held to be conclusive proof of correct availment of Cenvat credit by the appellants. The Hon’ble Supreme Court also in the case of M/s Gian Chand & Brothers Vs. Ratan Lal [2013 (1) TMI 267 - SUPREME COURT] has held that the books of account maintained in regular cause of business should not be rejected without any kind of rebuttal. In the present case, the adjudicating authorities have rejected the Cenvat register and other documents produced by the appellants without any cogent basis. It is also observed that investigation initiated based on the income tax data. Nothing is produced by the department to show that the appellant was not eligible for the availment of Cenvat credit. In these circumstances, the demand merely based on third party evidence is not sustainable. The appellant is held to have rightly availed the Cenvat credit. Service tax to the extent of utilized Cenvat credit cannot be demanded again - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the Cenvat credit of Rs. 14,61,989/- was rightly disallowed on the ground that invoice entries were not shown in ledgers and consolidated ledger entries did not match invoices. 2. Whether copies of invoices, reconciliation statement and Chartered Accountant (CA) certificate constitute sufficient and admissible evidence for availment of Cenvat credit under Rule 9 of Cenvat Credit Rules, 2004. 3. Whether a demand for service tax already discharged by availment of Cenvat credit can be sustained where the department relies on third-party data (income tax records) without independent rebuttal of the assessee's documentary evidence. 4. Whether the limited demand of Rs. 425/- as late fee for delayed filing of ST-3 returns is properly confirmed. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of denial of Cenvat credit due to non-matching/consolidated ledger entries Legal framework: Rule 9(1) and Rule 9(2) (and proviso) of the Cenvat Credit Rules, 2004 prescribe the documents and particulars required in invoices and relevant papers for availment of Cenvat credit; books of account and Cenvat registers are relevant to verify receipt and utilization. Precedent treatment: The Tribunal relied on authorities holding that regular books of account should not be rejected without rebuttal and that CA certificates and balance sheets are admissible evidence indicating correctness of entries. Interpretation and reasoning: The adjudicating authority rejected credit because invoice entries allegedly were not found in ledgers and consolidated ledger entries did not match invoices; it inferred non-receipt of services. The Tribunal observed that the requisite invoices were produced and that Rule 9 requires invoice particulars; the proviso to Rule 9(2) permits acceptance of a document as proper even if some particulars are missing provided essential details (service tax payable and distribution etc.) are present. The Tribunal found no cogent basis to reject the Cenvat register, invoices or reconciliation submitted; consolidated ledger entries alone cannot be a ground to deny credit where invoices and CA certificate are on record and not specifically discredited by the department. Ratio vs. Obiter: Ratio - Ledger consolidation does not automatically disqualify Cenvat credit if proper invoices and admissible supporting documents are produced and not rebutted by the department. Obiter - comments on accounting practices and reconciliation weight where detailed contrary evidence exists. Conclusion: The Cenvat credit denial on the ledger-matching ground was incorrect; the appellant was held to have rightly availed the Cenvat credit of Rs. 14,61,989/-. The order denying this credit was set aside. Issue 2 - Admissibility and evidentiary value of Chartered Accountant certificate, reconciliation statement, invoices and books Legal framework: Evidence and procedural rules recognise books of account, balance sheets, CA certificates and statutory invoices as relevant documents for proving taxable transactions and availment of credit. Precedent treatment: Tribunal and Supreme Court authorities cited hold that books maintained in the regular course of business and CA certificates are admissible and cannot be rejected absent rebuttal; public documents like balance sheets and P&L reflect income and corroborate returns. Interpretation and reasoning: The Tribunal observed that the appellant produced invoices bearing necessary particulars and a CA reconciliation certificate; the department produced no evidence to falsify these documents. The Commissioner (Appeals) erred in dismissing the CA reconciliation as unsupported because the CA certificate and invoices were on record. The Tribunal treated the CA certificate and reconciliations as admissible and conclusive proof in the absence of contrary material from the department. Ratio vs. Obiter: Ratio - Where invoices required by Rule 9 and a CA certificate/reconciliation are produced and not rebutted, they constitute sufficient admissible evidence to support availment of Cenvat credit. Obiter - observations on the weight to be accorded to CA certificates versus primary source documents where tangible contradiction exists. Conclusion: CA certificate, reconciliation statement and invoices were admissible and sufficient; rejection of these documents by lower authorities lacked cogent basis and led to erroneous denial of credit. Issue 3 - Reliance on third-party data (income tax information) to sustain demand for service tax already paid by Cenvat credit Legal framework: Departmental reliance on third-party data may initiate investigation, but confirmation of demand requires independent proof that the assessee was not entitled to credit; invocation of extended or differential demand requires concrete evidence of suppression or misstatement. Precedent treatment: Authorities relied upon (including Supreme Court decisions) stress that books of account maintained in the regular course cannot be discarded without rebuttal and that third-party information alone cannot sustain a demand where primary documents stand unrebutted. Interpretation and reasoning: The Tribunal noted the investigation arose from income tax data but the department failed to produce evidence contradicting the invoices, Cenvat register and CA certificate. Absence of specific rebuttal or material showing ineligibility meant the demand, premised on third-party data, was unsustainable. The Tribunal drew support from precedent that departmental reliance on third-party evidence cannot substitute for proof of ineligibility. Ratio vs. Obiter: Ratio - A service tax demand based solely on third-party data is not sustainable where assessee produces proper invoices, books and CA certification and the department produces no contrary evidence. Obiter - remarks on the propriety of investigations relying on third-party records without follow-up verification. Conclusion: The demand for service tax to the extent of Cenvat credit utilization could not be sustained; the Tribunal set aside the order confirming that demand. Issue 4 - Confirmation of late fee/differential limited demand (Rs. 425/-) Legal framework: Filing requirements for ST-3 returns and provisions for levy/confirmation of late fee where returns are filed after prescribed period. Precedent treatment: Not necessary to distinguish; established principle that delayed filing attracts late fee and may be confirmed when delay is admitted. Interpretation and reasoning: The Tribunal observed there was no denial that ST-3 returns for specified periods were filed late (delay of 187 days for a period noted). No deliberation was required; confirmation of late fee of Rs. 425/- was proper. Ratio vs. Obiter: Ratio - Late filing of statutory returns justifies confirmation of applicable late fee where delay is admitted. Obiter - none. Conclusion: The limited demand of Rs. 425/- as late fee is upheld and the order is confirmed to that extent.