2025 (12) TMI 448 - AT - Central Excise

CENVAT credit on railway freight allowed based on receipts, Rule 9(1) documents; sub-rule (fa) held additional only

M/s. ITC Limited Versus Commissioner of C.G.S.T. and Central Excise, Howrah Commissionerate

CESTAT allowed the appeal, holding the appellant eligible to avail CENVAT credit of Rs. 49,16,972 on transportation of goods by Indian Railways based on ... Eigibility towards availment of CENVAT Credit in respect of transportation of goods by the Indian Railways on the basis of railway receipts and STTG Certificates - period prior to 27.08.2014 - demand of interest and penalty - HELD THAT:- It is observed that the appellant has been availing CENVAT Credit in respect of transportation of goods by Indian Railways in accordance with Rule 9 of the CENVAT Credit Rules, 2004 on the basis of railway receipts and STTG certificates issued by the Indian Railways. With effect from 27.08.2014, sub-rule (fa) has been inserted in Rule 9 (1) of the CENVAT Credit Rules, 2004. The Service Tax Certificate for Transportation of goods by Rail is an additional document prescribed for allowing the CENVAT Credit. That does not mean that railway receipts or STTG certificates, cannot be considered as a relevant document for availing CENVAT Credit. It is observed that even after the introduction of sub-rule (fa) in Rule 9 (1) of the CENVAT Credit Rules, 2004, railway receipts containing all the relevant factual details continue to be a relevant document for availment of credit. STTG issued prior to 27.08.2014 was also a valid document for availing CENVAT Credit, as the same contains all details as prescribed under Rule 9(1) of the CENVAT Credit Rules, 2004. The appellant has availed the credit on the basis of railway receipts/ STTG certificates, which contained all details as required under Rule 9(1) of the CENVAT Credit Rules, 2004. Thus, the appellant is eligible for availing the credit amounting to Rs. 49,16,972/-. Hence, the disallowance of credit ordered in the impugned order set aside. Accordingly, the credit availed by the appellant allowed on the basis of railway receipts and STTG certificates for the period prior to 27.08.2014. Demand of interest - HELD THAT:- There is no irregularity in the availment of credit by the appellant. Under these facts and circumstances, the demand of interest is not sustainable. Consequently, the demand of interest, as confirmed in the impugned order set aside. Levy of penalty - HELD THAT:- As the credit availed by the appellant was not irregular, no penalty can be imposed on the appellant - the penalty imposed on the appellant in the impugned order set aside. The impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether CENVAT credit of service tax paid on transportation of goods by rail, availed on the basis of railway receipts and STTG Certificates for the period prior to 27.08.2014, is admissible under Rule 9 of the CENVAT Credit Rules, 2004. 1.2 Whether insertion of clause (fa) in Rule 9(1) of the CENVAT Credit Rules, 2004, with effect from 27.08.2014, excludes railway receipts and pre-27.08.2014 STTG Certificates as valid documents for availing CENVAT credit for the earlier period. 1.3 Whether interest and penalty are sustainable when CENVAT credit has been availed on railway receipts/STTG Certificates containing all particulars prescribed under Rule 9(1) of the CENVAT Credit Rules, 2004. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Admissibility of CENVAT credit on the basis of railway receipts and STTG Certificates prior to 27.08.2014; effect of insertion of Rule 9(1)(fa) Legal framework (as discussed) 2.1 The Court noted that Rule 9(1) of the CENVAT Credit Rules, 2004 prescribes the documents on the basis of which CENVAT credit may be taken. By Notification No. 26/2014-CE(NT) dated 27.08.2014, clause (fa) was inserted in Rule 9(1), prescribing 'a Service Tax Certificate for Transportation of goods by Rail (STTG Certificate) issued by the Indian Railways, along with the photocopies of the railway receipts mentioned in the STTG certificate' as a specified document. 2.2 The Court referred to the reasoning of the Tribunal in an earlier decision (JSW Steel) that Rule 9 regulates the nature of documents, is subservient to Rule 3 regarding admissibility of credit, and that Rule 9(2) read with Rule 4A of the Service Tax Rules permits acceptance of any document containing the prescribed particulars as a proper duty-paying document. Interpretation and reasoning 2.3 The Court held that insertion of clause (fa) by Notification No. 26/2014-CE(NT) did not have retrospective effect and operated prospectively from 27.08.2014, but such insertion only prescribed an additional specified document; it did not render railway receipts or pre-27.08.2014 STTG Certificates invalid for availing credit. 2.4 It was observed that the appellant had availed CENVAT credit on transportation of goods by Indian Railways on the basis of railway receipts and STTG Certificates, which contained all relevant factual details required under Rule 9(1) of the CENVAT Credit Rules, 2004. 2.5 Relying on the earlier Tribunal decision (JSW Steel) and its own subsequent decision (Jai Balaji Industries), the Court accepted that: (i) Rule 9 only prescribes forms of documents and cannot, by itself, determine substantive eligibility where the conditions of Rule 3 are satisfied; (ii) where the duty/tax payment, genuineness of the document, and receipt of input services are not in dispute, credit cannot be denied merely on technical objections as to the nature of the document; and (iii) documents like railway receipts and STTG Certificates, containing all particulars prescribed under Rule 9(1), are to be treated as valid duty-paying documents even for the period prior to 27.08.2014. 2.6 The Court emphasized that even after introduction of clause (fa), railway receipts containing all relevant details continued to be valid documents for availment of CENVAT credit, and STTG Certificates issued prior to 27.08.2014 also remained valid for this purpose because they contained all prescribed particulars. Conclusions 2.7 The Court concluded that CENVAT credit of Rs. 49,16,972/-, availed on the basis of railway receipts and STTG Certificates for the period prior to 27.08.2014, was correctly taken and is admissible to the appellant. 2.8 The disallowance of CENVAT credit based on the ground that STTG Certificates were prescribed as eligible documents only from 27.08.2014 was held to be unsustainable, and the denial of credit in the impugned order was set aside. Issue 3: Sustainability of interest and penalty Interpretation and reasoning 3.1 Having held that the appellant was entitled to the CENVAT credit on the basis of railway receipts and STTG Certificates, the Court found that there was no irregularity or illegality in the availment of such credit. 3.2 Since the basic demand of CENVAT credit itself was unsustainable, there was no question of any liability to pay interest on such credit, nor any occasion to impose penalty. Conclusions 3.3 The demand of interest confirmed in the impugned order was set aside. 3.4 The penalty imposed on the appellant in the impugned order was also set aside. 3.5 The appeal was allowed with consequential relief as per law.