TaxTMI 
TaxTMI 
2026 (5) TMI 1741
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.... of service provider registration number and/or description of services etc.) and lack of nexus for certain services. By the OIO, the Commissioner disallowed credit of Rs.69,76,573/- under section 73(1) of the Finance Act, 1994 read with Rule 14 of the CENVAT Credit Rules, 2004 (CCR, 2004), and dropped a part of the demand; ordered recovery with interest; and imposed penalty of Rs.14,00,000/- under Rule 15(1) of the CCR, 2004. The OIO further confirmed demand of Rs.18,13,455/- of which (a) Rs.7,70,080/- was for absence of Service Tax registration number on invoices; and (b) Rs.10,43,375/- for absence of nature/description of services on invoices. The appellant is before us, aggrieved by the impugned order. 3. The Ld. Advocate Shri Harish Bindhumadhavan appeared for the appellant and Ld. Authorized Representative Smt. G. Kripa appeared for the respondent. Submissions made by the Appellant 3.1 Shri Harish Bindhumadhavan the Ld. Counsel for the appellant submitted that the above demand is unsustainable on the following grounds: A. SCN fundamentally defective The Show Cause Notice (SCN) was issued hastily and based solely on an Excel shee....
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....ondent-Revenue 3.2 The Ld. Authorized Representative Smt. G. Kripa appeared for the respondent, submitted that: A. The SCN sets out the grounds of proposed denial and encloses separate annexures with invoice-wise break-up for each category. The dispute in Annexures I & II involve two questions: (i) whether CENVAT credit is admissible when invoices lack mandatory particulars (such as the service provider's Service Tax Registration Number and/or description of services) as required under Rule 4A of the STR, 1994 read with Rule 9 of the CCR, 2004; and (ii) whether credit has been taken on services that do not qualify as eligible "input services" under the CCR, 2004. B. Invoices were not produced for Rs. 7,70,080/- (balance in Annexure I) and Rs. 10,43,375/- (entire Annexure II), despite multiple hearing opportunities (25.02.2015, 05.03.2015, 12.03.2015 and 16.03.2015) and a reminder dated 27.04.2015. The Taxpayer failed to submit invoices aggregating to Rs. 18,13,455/-. Accordingly, credit of Rs. 18,13,455/- is denied for non-production of prescribed documents under Rule 9 of the CCR, 2004. C. Credit is admissible only where the input se....
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....ind that the computation of tax demanded has purportedly been shown Annexure wise to the SCN, which unfortunately, as stated earlier, have not been made a part of the Appeal Memorandum. From the impugned order it can be gleaned that Annexure I of the SCN relates to details of invoices in which the Service Tax registration number of the service provider was absent. Annexure II pertains to invoices which did not contain the nature/ description of service received. Annexures III & IV relates to the availment of credit on ineligible services. We take up the issues and submissions made by the rival parties, Annexure wise. Annexures I & II of the SCN 6. Rule 9 of the CCR, 2004 deals with the availment of eligible credit and the documentation requirements. It admits no ambiguity: eligible CENVAT credit can be availed only on prescribed documents supported by proper records. The proviso to Rule 9(2) is a narrow exception, not a charter to regularise defective claims. It operates only where the document contains the core particulars and the proper officer is satisfied that the goods or services were in fact received and duly accounted for. In the present appeal, it is Revenue's case t....
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....provider of output service taking such credit. (emphasis added) 6.1 The aforesaid Rule, therefore, demarcates the particulars contained in an input credit document into two distinct categories, namely, (A) the core area, which comprises: (i) the particulars relating to the duty or service tax payable; (ii) the description of the goods or taxable service; (iii) the assessable value; (iv) the Central Excise or Service Tax registration number of the person issuing the invoice, as the case may be; and (v) the name and address of the factory, warehouse, premises of the first or second stage dealer, or the provider of output service. The remaining particulars would fall within (B) the penumbra area, namely, all other details reflected in the document. The particulars constituting the core area are foundational in character and are, by their very nature, readily capable of verification-some from the face of the document itself, such as whether the duty bears nexus to the assessable value, and others upon minimal enquiry so as to establish that the document has been lawfully issued. An invoice is not a mere piece of paper; it is a vital....
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.... unjust the result may be. The words, 'dura lex sed lex' which mean 'the law is hard but it is the law.' may be used to sum up the situation. Therefore, even if a statutory provision causes hardship to some people, it is not for the Court to amend the law. A legal enactment must be interpreted in its plain and literal sense, as that is the first principle of interpretation. 20. In Mysore State Electricity Board Vs Bangalore Woolen, Cotton & Silk Mills Ltd. & Ors., AIR 1963 SC 1128 a Constitution Bench of this Court held that, 'inconvenience is not' a decisive factor to be considered while interpreting a statute. 21. In Martin Burn Ltd. v. The Corporation of Calcutta, AIR 1966 SC 529, this Court, while dealing with the same issue observed as under:- 'A result flowing from a statutory provision is never an evil. A Court has no power to ignore that provision to relieve what it considers a distress resulting from its operation. A statute must of course be given effect to whether a Court likes the result or not.' (See also: The Commissioner of Income Tax, West Bengal I, Calcutta v. M/s Vegetables Products Ltd., AIR 1973 SC 927;....
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....ture, only in such a case can the Court modify the language; j. Equity and taxation are strangers. But if construction results in equity rather than injustice, such construction should be preferred; k. It is not a function of the Court in the fiscal arena to compel the Parliament to go further and do more; l. When a word used in a taxing statute is to be construed and has not been specifically defined, it should not be interpreted in accordance with its definition in another statute that does not deal with a cognate subject. It should be understood in its commercial sense. Unless defined in the statute itself, the words and expressions in a taxing statute have to be construed in the sense in which the persons dealing with them understand, that is, as per the trade understanding, commercial and technical practice and usage." 6.4 The burden of establishing the admissibility of eligible CENVAT credit squarely rests upon the manufacturer or the provider of output service who claims such credit. The appellant cannot be permitted to circumvent this statutory burden merely by producing defective invoices along with proof of payment. Such material, by itself, ....
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....concession extended to the dealer under the statutory scheme and that concession can be received by the beneficiary only as per the scheme of the statute. It was held as below: "34. The input credit is in the nature of benefit/concession extended to the dealer under the statutory scheme. The concession can be received by the beneficiary only as per the scheme of the statute. Reference is made to the judgment of this Court in Godrej & Boyce Mfg. Co. (P) Ltd. v. CST, (1992) 3 SCC 624. Rules 41 and 42 of the Bombay Sales Tax Rules, 1959 provided for the set-off of the purchase tax. This Court held that the rule-making authority can provide curtailment while extending the concession. In para 9 of the judgment, the following has been laid down: (SCC pp. 631-32) '9. In law (apart from Rules 41 and 41-A) the appellant has no legal right to claim set-off of the purchase tax paid by him on his purchases within the State from out of the sales tax payable by him on the sale of the goods manufactured by him. It is only by virtue of the said Rules-which, as stated above, are conceived mainly in the interest of public-that he is entitled to such set-off. It is really a conc....
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....duce the relevant materials required under the said rule. Without producing the specified documents as prescribed thereunder a dealer cannot claim the benefits provided under Section 8 of the Act. Therefore, we are of the opinion that the requirements contained in Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 are mandatory.'" 24.3. The other legal proposition of law that taxing statute is to be interpreted literally and further it is in the domain of the legislature as to how much tax credit is to be given and under what circumstances was also clearly stated as below: "36. This Court had the occasion to consider the Karnataka Value Added Tax Act, 2013 in State of Karnataka v. M.K. Agro Tech. (P) Ltd., (2017) 16 SCC 210. This Court held that it is a settled proposition of law that taxing statutes are to be interpreted literally and further it is in the domain of the legislature as to how much tax credit is to be given under what circumstances. The following was stated in para 32: (SCC p. 223) '32. Fourthly, the entire scheme of the KVAT Act is to be kept in mind and Section 17 is to be applied in that context. Sunflower oil cake is....
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....dealing with any other aspect dehors the issue of ITC as per Section 19 of the VAT Act, possibly the arguments of Mr Bagaria would have assumed some relevance. But, keeping in view the scope of the issue, such a plea is not admissible having regard to the plain language of sections of the VAT Act, read along with other provisions of the said Act as referred to above.'" 25. It is thus clear that unless all the conditions stipulated in Section 16(2) of the CGST Act are fulfilled as required under the law, a registered person is not entitled to take ITC. *****. *****. ***** 28. A conjoint reading of the provisions contained in Section 16 of the CGST Act and the Rules, referred to herein above, would reveal that mere receipt of invoice does not entitle the registered dealer to claim to be entitled to ITC without fulfillment of other conditions enumerated therein. Various conditions incorporated therein, including submission of details of invoices or debit notes furnished in the statement of outward supplies in Form GSTR-1 [as amended in Form GSTR-1A (if any)] and communication of details of ITC in respect of such invoice or debit notices to the registered perso....
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....tially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict complia....
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....first time under this Notification and thereafter before the 15th day of April of each financial year. As found by the forums below, including CEGAT, factually, the declaration and the undertaking were not submitted by the appellants. This is not an empty formality. It is the foundation for availing the benefits under the Notification. It cannot be said that they are mere procedural requirements, with no consequences attached for non-observance. The consequences are denial of benefits under the Notification. For availing benefits under an exemption Notification, the conditions have to be strictly complied with. Therefore, CEGAT endorsed the view that the exemption from operation of Rule 174, was not available to the appellants. On the facts found, the view is on terra firma. We find no merit in this appeal, which is, accordingly, dismissed." (emphasis added) 6.8 The Hon'ble Apex Court in The State of Karnataka Vs M/s Ecom Gill Coffee Trading Private Limited. [Civil Appeal No. 230 OF 2023 / 2023 (3) TMI 533 SC]. examined the relevance of the 'burden of proof' as per Section 70 of the KVAT Act, 2003, which is similar to Rule 9(5) & (6) of the CCR, 2004. The relevant portions ar....
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.... delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The aforesaid information would be in addition to tax invoices, particulars of payment etc. In fact, if a dealer claims Input Tax Credit on purchases, such dealer/purchaser shall have to prove and establish the actual physical movement of goods, genuineness of transactions by furnishing the details referred above and mere production of tax invoices would not be sufficient to claim ITC. In fact, the genuineness of the transaction has to be proved as the burden to prove the genuineness of transaction as per section 70 of the KVAT Act, 2003 would be upon the purchasing dealer. At the cost of repetition, it is observed and held that mere production of the invoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as per section 70 of the Act, 2003. 10. Even considering the intent of section 70 of the Act, 2003, it can be seen that the ITC can be claimed only on the genuine transactions of the sale and purchase and even as per section 70(2) if a dealer knowingly issues or produces a false tax invoice, credi....
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....aterials, such purchasing dealer shall not be entitled to Input Tax Credit. 12. Despite the findings of fact recorded by the Assessing Officer on the genuineness of the transactions, while refusing to allow the ITC, which came to be confirmed by the first Appellate Authority, the second Appellate Authority as well as the High Court have upset the concurrent findings given by the Assessing Officer as well as the first Appellate Authority, on irrelevant considerations that producing invoices or payments through cheques are sufficient to claim ITC which, as observed hereinabove, is erroneous. As observed hereinabove, over and above the invoices and the particulars of payment, the purchasing dealer has to produce further material like the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods including actual physical movement of the goods, alleged to have been purchased from the concerned dealers. 13. Now so far as the reliance placed upon Rules 27 and 29 of the Karnataka Value Added Tax Rules, 2005 and the submission on behalf of the purchasing dealers that....
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....elivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. and the actual physical movement of the goods by producing the cogent materials, the Assessing Officer was absolutely justified in denying the ITC, which was confirmed by the first Appellate Authority. Both, the second Appellate Authority as well as the High Court have materially erred in allowing the ITC despite the concerned purchasing dealers failed to prove the genuineness of the transactions and failed to discharge the burden of proof as per section 70 of the KVAT Act, 2003. The impugned judgment(s) and order(s) passed by the High Court and the second Appellate Authority allowing the ITC are unsustainable and deserve to be quashed and set aside and are hereby quashed and set aside. The orders passed by the Assessing Officer denying the ITC to the concerned purchasing dealers, confirmed by the first Appellate Authority are hereby restored. 16. The instant appeals are accordingly allowed. However, there shall be no order as to costs." (emphasis added) The principle flowing from the above judgement as applicable in the present conte....
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.... SCC 125], is the judgment which is relevant for present case. In the above case, this Court had occasion to interpret provisions of Tamil Nadu Value Added Tax Act, 2016, Section 19(20), Section 3(2) and Section 3(3). Validity of Section 19(20) was under challenge in the said case. This Court after noticing the scheme under Section 19 noticed following aspects in paragraph 11: - "11. From the aforesaid scheme of Section 19 following significant aspects emerge: (a) ITC is a form of concession provided by the legislature. It is not admissible to all kinds of sales and certain specified sales are specifically excluded. (b) Concession of ITC is available on certain conditions mentioned in this section. (c) One of the most important condition is that in order to enable the dealer to claim ITC it has to produce original tax invoice, completed in all respect, evidencing the amount of input tax." 38. This Court further held that it is a trite law that whenever concession is given by a statute the conditions thereof are to be strictly complied with in order to avail such concession. In paragraph 12, following has been laid down: - "12. I....
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....ted steps in dispute resolution, as tax laws seek to move from adversarial litigation to reliance on consensual and participatory mechanisms. They have now become a part of the tax statute. Hence Adjudicating Authorities should not resist the transparency that sharing of factual reports bring. This is to be differentiated from confidential internal reports rendering subjective opinion called for by the Authority from subordinates and would be governed by his discretionary jurisdiction. A copy of the report after fresh verification are conducted may hence be provided to the appellant, allowing it to state its objections if any or after recording the appellants satisfaction in writing in case of a joint verification, before deciding the matter. Annexures III & IV of the SCN 8. Annexure III & IV relates to the availment of credit on ineligible services. The dispute pertains to the period April 2012 - March 2013. It would be apposite to extract Rule 2(l) of CCR, 2004 at this stage. The earlier Rule 2(l) was amended by Notification dated 01.03.2011, with effect from 01.04.2011 and it is reproduced below : With effect from 01.04.2011 "2(l) "input service" means any serv....
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.... - the exclusions made in the said rule after 01.04.2011 are highlighted - is also reproduced below: Prior to 01.04.2011 "2(l) "input service" means any service,- (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;" With effect from 01.07.2012 "2(l) "input service" means any service,- (i) used by a provider of output service for provid....
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....e" a wide ambit, allowing credit where the service had a real and sufficient nexus with the assessee's output service and the chain of credit remained unbroken. A direct one-to-one correlation was not necessary. In Commissioner of Central Excise Vs Manikgarh Cement, 2010 (20) S.T.R. 456 (Bom.), following Maruti Suzuki Ltd. Vs Commissioner of Central Excise, Delhi, AIR 2009 SC 534, the Hon'ble Bombay High Court held that unless a nexus is established between the services rendered and the business carried on by the assessee, the benefit of CENVAT credit was not allowable. Further the expression 'relating to business' in Rule 2(l) of CCR, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee. Post 01.04.2011 the definition of 'input service' was amended, primarily removing the phrase 'activities relating to business' and excluding certain specific services including services used primarily for personal use or consumption of any employee, from its definition. 8.2 The Principal Bench of this Tribunal at New Delhi had an occasion to examine the issue, post the amendment of the definition of....
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....ervice, accordingly, the Cenvat credit is admissible. Further, the Board through its Circular No. dated 29-4-2011 has clarified that renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input services. Hence the said input credit is an eligible credit. (ii) Vehicle hire and repair. The appellant has stated that the service is used for taxable output services and not for personal use of the employees. The eligibility of input credit is covered by the Order of the Coordinate Bench in Shoreline Hotels Vs Commissioner (A), 2019 (6) TMI 70 (CESTAT Mumbai); Marvel Vinyls Vs CCE, 2016 (11) TMI 1128 (CESTAT New Delhi)]. (iii) Sales promotion and customer engagement. The appellant has stated that the service is for engaging customers as part of advertisement and sales promotion and not for personal use. The same is covered by the Order of a coordinate Bench in Reliance Communication Vs CST - 2018 (5) TMI 488 (CESTAT Mumbai). (iv) Membership fees. The appellant has stated that the service is provided by industry/business ....