Denial of Cenvat Credit merely on non - Registration /Delayed Registration as ISD is not Valid: CESTAT [Read Order]

In a recent case, the Kolkata bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that denial of cenvat credit merely on non - non-registration/delayed registration as ISD is not valid.

M/s Berger Paints India Ltd.,  the appellant assessee challenged the impugned order whereby the Commissioner has denied the credit Rs. 6,98,90,799 availed by the Appellant and demanded interest and equal amount of duty as penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15(2) of the CENVAT Credit Rules, 2004.

The Cenvat credit distributed by various depots of the Appellant spread across the country, on the ground that the said depots were either not having the Service Tax registrations at all, or the credit had been distributed before obtaining the registration.

It is a settled position that registration of the depots is not a pre-requisite for availment of CENVAT credit. They stated that Depots are the 'place of removal' of their finished goods, and hence all the expenditure incurred up to the place of removal has already been included in the assessable value on which duty has been paid.

The Appellant relied on the decision of the Gujarat High Court in the case of  Commissioner of Central Excise vs Dashion Ltd [2016 (41) S.T.R. 884 (Guj.)], wherein it has been held that an Input Service Distributor would not be disentitled from availing cenvat credit on the ground of non-registration, since such requirements are curable. The Appellant contended that substantial benefit cannot be denied merely on account of procedural infractions.

The credit availed by the Appellant was denied in the impugned order on the ground that the said depots were either not having the Service Tax registrations at all, or the credit had been distributed before obtaining the registration. Thus, the issue to be decided in the present appeal is whether the Appellant is eligible to avail the credit passed on by their depots without registration.

A two-member bench comprising Mr. Ashok Jindal, Member (Judicial) and Mr. K Anpazhakan, Member (Technical) observed that the Central Board of Excise and Customs has issued Circular No. 1063/2/2018-CX dated 16.02.2018, wherein the various decisions of the High Court have been accepted to reduce litigation and dispose of the cases on similar questions of law or identical case on facts pending with the department.

Further observed that the service is an eligible input service and the same has been distributed by the depots by following the procedure of input service distributor as provided in the statute. Thus, denial of CENVAT credit merely on the grounds of non-registration/delayed registration as ISD is bad in law and not sustainable.

While setting aside the impugned order, the Court held that “Substantial benefit cannot be denied on the ground of procedural infractions. Since credit is held to be admissible the question of demanding interest and imposing penalty does not arise.”

To Read the full text of the Order CLICK HERE

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