CENVAT Credit cannot be Denied if Service Invoice was Addressed to Architect Entrusted by Construction Company [Read Order]

The Chennai Bench of the Customs, Excise andService Tax Appellate Tribunal (CESTAT) recently held that Central Value Added Tax (Cenvat)Credit cannot be denied merely because an invoice for construction services was addressed to the company’s architect rather than to the company itself. The Tribunal also set aside the penalties imposed on the assessee, while partly upholding the denial of credit relating to workstation furniture.

The Bench delivered the ruling while considering an appeal filed against Order-in-Appeal passed by the Commissioner of Service Tax (Appeals-II), Chennai which had sustained the confirmation of Cenvat Credit demand to the extent of ₹11.65 lakh on a contractor’s invoice and ₹1.24 lakh relating to workstation items.

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Interlace India, engaged in providing maintenance and repair services for program-logic-controlled operations at thermal power stations, was subjected to an internal audit during which the Department alleged wrongful availment of Cenvat Credit.

The primary objection was that one of the construction invoices issued by M/s Karuppaiah & Sons, the contractor engaged for building work at the appellant’s Siruseri plant, was addressed to the appellant’s architect, M/s Uma Shankar & Associates, who supervised the construction. The Department viewed this as a fatal defect and denied credit on the invoice.

The appellant argued that although the contractor addressed the final bill to the architect, the invoice clearly mentioned Interlace India’s name and Siruseri plant address, and the services were undeniably rendered to the appellant. The contractor had also issued a written certification acknowledging that the invoice was inadvertently addressed to the architect and subsequently corrected. M/s Uma Shankar & Associates further confirmed that they had never claimed credit on the said invoice, removing any possibility of double-availment. The payment for the service was made directly by the appellant to the contractor.

The CESTAT bench comprising Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) found merit in these submissions and held that a mere technical defect in the address cannot disentitle an assessee from legitimately earned credit, particularly when the transaction was genuine, the services had been received, and there was no competing claim over the credit.

The Bench relied on the Gujarat High Court’s decision in Vimal Enterprise v. Union of India (2006) to reiterate that Modvat/Cenvat provisions are intended to prevent cascading of taxes and should not be frustrated by trivial procedural lapses. The Tribunal observed that suspicion regarding potential double-claim of credit cannot be sustained in the absence of any evidence and that the authorities should have guided the assessee instead of rejecting the claim outright.

However, with respect to Cenvat Credit of ₹1,24,782 on workstations supplied by Fuego Furniture Pvt. Ltd., the Tribunal upheld the denial. It held that the items were classifiable as “furniture” under CETH 9403 and did not fall within the definition of “capital goods” under Rule 2(a) of the Cenvat Credit Rules, 2004.

Despite sustaining this portion of the demand, the Tribunal deleted all penalties, holding that the credit on workstations was taken under a bona fide but mistaken belief.

Accordingly, the Tribunal modified the impugned order, allowed the appeal to the extent of the credit denied on the Karuppaiyah Sons invoice, upheld the denial of credit on workstations, and set aside all penalties imposed on the assessee.

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