Relief to JSW Steel: CESTAT grants Cenvat Credit on discharge of Tax Liability [Read Order]

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), granted Cenvat Credit on discharge of tax liability, thereby granting relief to JSW Steel Ltd, the appellant.

The limited issue in this appeal of M/s JSW Steel Ltd, pertaining to disallowance of Cenvat credit of ₹ 1,11,92,198/- between August 2005 and April 2006 that was ordered to be recovered under rule 14 of Cenvat Credit Rules, 2004, along with applicable interest under section 11AB of Central Excise Act, 1944, and imposition of penalty of like amount under section 11AC of Central Excise Act, 1944.

Jurisdictional central excise authorities issued notice for recovery of this amount and for saddling other detriments which, vide, order of Commissioner of Central Excise, Customs & Service Tax, Raigad restricted disallowance to ₹ 1,11,92,198/- for the period prior to 18th April 2006 while dropping the proposal for recovery of ₹ 4,99,13,925/- for the period thereafter.

It would appear that the sole ground for denial of credit was the restriction in terms of CENVAT Credit Rules, 2004 to such tax liability discharged under section 66A of Finance Act, 1994 that was incorporated in April 2006 and the clarification issued in F.no. 345/1/2008-TRU dated 27th June 2008 of Central Board of Excise & Customs (CBEC).

A Two-Member Bench of the Tribunal comprising CJ Mathew, Technical Member and Ajay Sharma, Judicial Member observed that “In our view, the issue in dispute is simple enough and follows the dictum that, upon discharge of tax/duties on procurement of inputs/service and the said ‘service’ conforming to rule 2(l) of Finance Act, 1994, the recipient of service is entitled to avail credit of such tax. There is nothing on record to evidence that ‘service’ or ‘production’ for which the impugned goods had been deployed were not taxable/dutiable. It is also common ground that tax liability had been discharged by the appellant on the procurement of such services from abroad.”

“Discarding the authority of that provision in the Rules, as well as its subsequent declaration as ultra vires, would not impinge upon the existence of that rule for the period from 2002 till 18th April 2006 as discharge of tax liability without demur by assessee and does not alter the factum of tax having been discharged under the authority of the then prevailing law for the period prior to 18th April 2006. Nor was there any move on the part of the Central Government to return such taxes on the ground of having been collected without authority of law. In these circumstances, discharge of tax liability, even though subsequently held as lacking authority of law to be collected, cannot be disputed. Consequently, availment of credit for the period prior to 18th April 2006 cannot be denied” the Bench concluded.

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