Cenvat credit cannot be denied for procedural mismatches when invoices and records support eligibility and service nexus

Cenvat credit on disputed input services was treated as eligible where the same services had earlier been accepted and the department could not re-open the nexus objection on the same factual basis. The Tribunal also applied the principle that a mismatch between ITC statements and ST-3 returns, by itself, does not justify denial of credit when invoices and records support the claim. Procedural defects in documentation were not enough to defeat substantive credit, although the excess credit already reversed remained undisturbed.

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Issues: (i) whether Cenvat credit taken on the disputed input services was ineligible for want of nexus with the output services; (ii) whether credit could be denied merely because of a difference between the ITC statement and the ST-3 returns or for alleged absence of documentary proof; (iii) whether credit could be denied for documentation defects, and whether the excess credit of Rs. 87,794/- already reversed could still be sustained as a demand.

Issue (i): Whether Cenvat credit taken on the disputed input services was ineligible for want of nexus with the output services.

Analysis: The disputed services had already been examined in the appellant's own case for an earlier period, where the same category of services was accepted as eligible for credit. The Tribunal treated that prior determination as materially relevant and found that the department could not re-agitate the same eligibility issue on the same factual foundation. The demand founded on alleged absence of nexus was therefore not sustainable.

Conclusion: The credit on the disputed input services was held eligible and the demand based on alleged ineligibility was rejected in favour of the assessee.

Issue (ii): Whether credit could be denied merely because of a difference between the ITC statement and the ST-3 returns or for alleged absence of documentary proof.

Analysis: The Tribunal applied the principle that credit cannot be denied solely because of a numerical mismatch between statements where the underlying invoices and records support the claim. The earlier remand had specifically required fresh verification rather than rejection based only on the difference in figures. On examination of the invoices, the Tribunal found that the credit reflected in the ST-3 return was correct and that the mismatch did not by itself establish inadmissibility.

Conclusion: The denial of credit on the basis of the ITC statement and ST-3 variance was set aside and the credit was allowed in favour of the assessee.

Issue (iii): Whether credit could be denied for documentation defects, and whether the excess credit of Rs. 87,794/- already reversed could still be sustained as a demand.

Analysis: The Tribunal noted that the remand had specifically required consideration of whether omissions in invoices could be condoned under the credit rules. It further found that the appellant had produced invoices and had also reversed the excess credit of Rs. 87,794/-. In these circumstances, the Tribunal accepted that the procedural defects did not justify denial of the substantive benefit, except to the extent the appellant had itself reversed the amount in question.

Conclusion: The documentation-based denial was not fully sustainable, but the reversal of Rs. 87,794/- was noted, and no further relief was granted on that amount.

Final Conclusion: The appeal succeeded only in part. The Tribunal upheld the appellant's entitlement to Cenvat credit on the disputed services and on the amount denied for mismatch between the ITC statement and ST-3 returns, while leaving intact the treatment of the reversed excess credit of Rs. 87,794/-. Consequently, the impugned order stood modified to that extent.

Ratio Decidendi: Cenvat credit cannot be denied merely on procedural or accounting discrepancies when the underlying records establish eligibility, and substantive credit should not be defeated by documentary omissions unless inadmissibility is shown on merits.

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