Earlier Payments made through Cenvat Account are to be re-credited on payment of Duty in Cash: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that earlier payments made through Cenvat Account are to be re-credited on payment of duty in cash.

The Appellant, M/s Mideast Integrated Steels Ltd was issued an Audit Memo to pay Rs.4 lakhs being the service tax on Rs.36 lakhs received during the Financial Year 2007-2008 for having provided “Renting of Immovable Property Service”. The Appellant paid Rs audit memo by debit to Cenvat Account along with interest.

In the course of subsequent Audit in March, 2011, the EA-2000 Auditors erroneously assumed that the reversal credit entry was an input service credit of service tax paid by the Appellant on “Renting of Immovable Property Service” received and directed for reversal thereof with interest on the ground that such service is not an input service for the Appellant.

The appellant had discharged the duty burden from their PLA Account and as such, there is no dispute about the same. With such payment of duty out of PLA, they have reversed the debit entry made by them in their Credit Account which was used for payment of duty earlier.

The Tribunal of P. K. Choudhary, Member (Judicial) observed that “It is my considered view that once the duty has been paid in cash, earlier payments made through Cenvat Account are liable to be re-credited in the said Account and no objection that such recredit was not on the basis of any eligible document can be adopted by the Revenue. Admittedly, it is not a case of availment of credit in the ordinary course, but such re-credit was to neutralize the subsequent payment of duty in cash.”

“My view gets fortified by the judgement of the High Court of Madras in the case of ICMC Corporation Limited v. CESTAT, Chennai reported whereby the it was held that the suo motu credit of Cenvat reversed earlier involved only an account entry reversal and in the process, no outflow of funds from the assessee and accordingly, filing of refund claim under Section 11B of the Central Excise Act, 1944, is not required” the Tribunal noted.

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