In a major relief to BSNL, the Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that Cenvat Credit cannot be denied for procedural inadequacies.
The Department disputed availment of such credit on the ground that the document on which credit has been taken is not a proper document under Rule 9(g) of CENVAT Credit Rules read with Rule 4A(2) of Service Tax Rules, 1994 and that the ISD themselves did not have proper proof of payment to the service provider; accordingly, a show-cause notice dated 12.08.2013, invoking extended period, was issued to the appellants seeking demand of Rs.1,32,21,806/- under Rule 14 of CENVAT Credit Rules, 2004; the demand was confirmed along with equal penalty vide impugned order dated 05.12.2014.
The counsel for the appellant submitted that cenvat credit is a substantive benefit and as such, the same cannot be denied on the basis of procedural defects of minor nature; the credit distributed by M/s BSNL was along with a proper statement containing the details like supplier’s invoice; name of the service provider; contract details; taxable service and service tax amount paid and that Department vide Circular dated 16.02.2018 clarified that credit cannot be denied for procedural irregularities.
The Authorized Representatives for the Department, took the Bench through the provisions of Rule 4A(1) and Rule 4A(2) of Service Tax Rules, 1994; Notification No.27/2005-ST dated 07.06.2005; CENVAT Credit Rules, 2004 and particularly, Rule 9 ibid and Circular No.97/8/2007-ST dated 23.08.2007 and submits that neither the appellant nor the ISD Registrant have complied with the provisions of the Rules and therefore, cenvat credit cannot be allowed on the plea that it is a mere procedural lapse.
A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “In view of the above, we find that when the availment of services and admissibility of credit are not questioned at the end of the appellant or the ISD, CENVAT credit cannot be denied; substantive benefit of CENVAT credit cannot be denied just because there were some procedural infractions.”
“The Department requires to prove the inadmissibility of credit or any lapses on the part of the appellant in a positive proactive manner rather than on the averment that the appellants failed to supply the requisite information. However, as the admissibility of CENVAT credit not being in dispute, we are of the considered opinion that the same cannot be denied for procedural inadequacies, more so, when Department neither disputed the documents submitted by the appellants nor conducted any further verification” the Bench noted.
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