In a recent judgement, the New Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) held that Rule 9( 1 )( e ) of the Cenvat Credit Rules, ( CCR ), 2004 is applicable to Reverse Charge Mechanism ( RCM ) and set aside the denial of Cenvat credit amounting to Rs. 32.95 lakh against the appellant, National Engineering Industries Limited.
In this case, the department issued a show-cause notice issued to the appellant, challenging the eligibility of Cenvat credit claimed on two grounds. First, a sum of Rs. 16.12 lakh was denied on the observation that input service invoices did not contain the correct address of the appellant.
Secondly, Rs. 32.95 lakh was disallowed on the findings of observation that credit availed against challans issued under the Comptroller and Auditor General’s ( C& AG ) audit findings was impermissible under Rule 9( 1 )( bb ) of the Cenvat Credit Rules.
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One of the issues involved is the denial of the CENVAT credit of Rs. 32.95 lakhs
The assessee’s counsel contended that the Rs. 32,95,447 Cenvat credit availed has also been wrongly denied and that Rule 9 ( 1 )( bb ) of CCR has wrongly been invoked.
The CESTAT noted that Rule 9 ( 1 )( e ) of the Cenvat Credit Rules allows credit based on challans evidencing service tax payments under the Reverse Charge Mechanism. The bench noted that the department was wrong in applying Rule 9 ( 1 )( bb ) as this provision relates to supplementary invoices issued due to tax recoveries involving fraud or suppression.
The Tribunal observed that the payments in question were duly made following C & AG audits, without any allegation of evasion or suppression of facts.
In conclusion, Dr. Rachna Gupta (Judicial Member), held that the denial of both credit amounts was not sustainable.
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