The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has remanded the case of M/s Divine Autotech Private Limited back to the Commissioner for re-examination of the denial of CENVAT credit. The tribunal emphasised the necessity for specific invoice-wise reasons and justifications for rejecting CENVAT credit claims.
M/s Divine Autotech Private Limited, a dealer of Renault cars, was embroiled in a service tax dispute for the period from April 2011 to March 2015. The Central Tax authorities issued a show cause notice demanding differential service tax and also proposed to deny CENVAT credit amounting to Rs. 1,28,80,013. The Commissioner confirmed these demands through an order dated 25.07.2018.
The appellant represented by Atul Gupta and Anmol Gupta contended that it had provided all necessary invoices and documents to substantiate its CENVAT credit claims during the personal hearing. However, the Commissioner dismissed these claims, leading to the appeal before CESTAT.
The respondent revenue, Commissioner of Central Tax, represented by Shri Anand Narayan contended that M/s Divine Autotech Private Limited failed to provide proper invoices and documentation to justify their CENVAT credit claims.
It was also argued that discrepancies in the submitted invoices, such as missing or illegible details, invalid service tax registration numbers, and non-qualifying service descriptions, warranted the denial of the entire claimed CENVAT credit for the period from 2011-12 to 2014-15.
The CESTAT found that the Commissioner had not adequately considered the invoices submitted by the appellant. It was also noted that a general observation was made to deny the entire CENVAT credit without specific invoice-wise reasons. This, CESTAT stated, was not sufficient for denying such a significant amount of CENVAT credit.
The bench held that the burden of proof lies with the revenue to specify why CENVAT credit against each invoice is being denied and the legal basis for such denial. The bench emphasised that without providing clear, specific reasons for each invoice, the denial of CENVAT credit is unjustified.
In result, the two-member bench of the CESTAT comprising Ms. Binu Tamta (Judicial Member) and Mr. P. V. Subba Rao (Technical Member) remanded the matter back to the Commissioner, instructing a thorough re-examination of the invoices and a detailed explanation for any denial of CENVAT credit.
It clarified that vague and general observations are insufficient for denying credit claims, and specific, justified reasons must be provided for each invoice.
In addition to remanding the CENVAT credit issue, CESTAT also addressed other aspects of the service tax demand on M/s Divine Autotech, providing significant relief on various counts.
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