CENVAT Credit Cannot Be Denied on Procedural Lapse of Non-Disclosure in ST-3 Returns: CESTAT Grants ₹14.22 Lakhs Relief [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata Bench granted relief of ₹14.22 lakhs by holding that denial of CENVAT credit merely on the ground of non-disclosure in ST-3 returns is unsustainable.

The appellant Chakraborty Enterprise being in the business of providing construction services, was selected for audit for the period from 2012-13 to 2015-16. A Service Tax demand of ₹14.22 lakhs on advances received was raised by the Department. Along with this, other minor demands were also raised.

However, during the course of the hearing it was brought to light that the appellant had already paid Service Tax to the extent of ₹15.49 lakhs on input services received from subcontractor Deepraj Construction Pvt. Ltd.

However, the appellant had failed to disclose the same in the ST-3 returns within the due date.

The appellant had been denied the benefit of CENVAT credit on the grounds of non-compliance of procedural requirements.

The appellant claimed that the credit was legitimately allowable as Service Tax had been paid and proper invoices had been issued. The non-declaration in ST-3 returns was claimed to be merely a clerical error devoid of mala fide intent. It was further claimed that if such credit was allowed it would completely eliminate the Service Tax demand.

The revenue department claimed that the credit was not allowable in view of non-compliance with procedural requirements and time limits prescribed under the law.

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The Tribunal comprising K. Anpazhakan (Technical Member) was of the view that CENVAT credit is a substantive right and such a right cannot be denied on procedural grounds such as non-reporting in returns or delayed availing credits.

Further, It was observed that there was no dispute with regard to the payment of Service Tax and the genuineness of the transaction. The judicial precedents were relied upon by the Bench, and it was held that procedural defaults if they do not go to the root cannot be made a ground for denial.

Accordingly, the bench held that the appellant was entitled to higher CENVAT credit than what was in dispute and thus there was relief of ₹14.22 lakhs. The denial of such credit was termed unjustified and against legal principles.

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