The responsibility to demonstrate Intentional Misuse of Tax Credit Provisions lies with the Excise Department: CESTAT [Read Order]

A single member bench of CESTAT set aside the order against assesse on the ground that there was no grounds for initiating proceeding against the asseesee.

The appellant, Sarda Energy and Mineral Ltd was engaged in manufacture of sponge iron, ferro alloys etc. and was availing the benefit of CENVAY credit of duty paid on inputs/input services and capital goods under CENVAT Credit Rules, 2004. The department, during the course of audit, observed that the appellant had availed CENVAT Credit of duty paid on the services which were not received in the factory of the appellant but were received and used by their captive mines at Raigarh.  Hence, availment of that credit was proposed as inadmissible to the appellant.

Resultantly, a show cause notice was served upon the appellant proposing recovery of inadmissible Cenvat credit amounting to Rs.2,50,49,518/- (Two Crore Fifty Lakhs forty Nine Thousand Five Hundred Eighteen only) alongwith the appropriate interest and proportionate penalty. An amount of Rs.46,21,582/- as was already reversed by the appellant was proposed to be appropriated against the said demand. The said proposal was partly accepted by the order under challenge wherein the demand of Rs.46,21,582/-only had been confirmed and equal penalty of the amount had been imposed upon the appellant.

The appellant, M/s Sarda Energy and Minerals Ltd contended that the appellants have availed Cenvat credit of the services as were received by their captive coal mines. They had been held eligible for such credit vide earlier order of this Tribunal in their own case. The appellant accepted the wrong availment of CENVAT credit. The appellant contended that the said amount was immediately reversed by the appellant. Appellant contended that in view of the said reversal much prior to issuance of impugned show cause notice, no question arose for imposition of penalty upon the appellant.

Revenue contended that the availament of credit by the appellant subsequent to 01.03.2011 could be revealed only after the audit of appellant records was conducted by the department. Revenue contended that it had not been detected by the Department during audit, the said amount would have not been paid by the Noticee and it would have resulted in excess availment of Cenvat Credit on inputs/inputs service utilized at Noticee’s captive mines after 23.03.2011, creating huge loss to the government exchequer.

The bench observed that “the present case is merely a case of non discharge of tax liability, the same cannot be equivalent to an intentional and positive act to evade payment of duty. The onus to prove such an act is upon the department. I do not observe any iota evidence proving any positive intentional act of the appellant to evade the duty. The appellant was regularly/claiming credit of duty paid on coal as their input i.e. coal was exempted till 1.3.2011. They continued availing said credit for subsequent few more months due to inadvertence or ignorance on the part of the appellant to take into consideration the amendment which came into effect on 1.3.2011 making coal as an excisable goods. Thus it is far a different situation than an intention to evade payment of duty.”

The bench observed that the show cause notice should not have been issued in view of proviso to section 73 of the Finance Act, 1994. The bench also observed that amountunt which is ordered to have been appropriated was reversed much prior to issuance of SCN.CESTAT set aside impugned order.

The appellant was represented by J.M.Sharma(Consultant) and Pooja Agarwal (Chartered Accountant)

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