Company Reversed Wrongfully Availed CENVAT Credit with Interest and Paid Penalty: CESTAT Quashes SCN Invoking Extended Period [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the extended period of limitation under the service tax law cannot be invoked when the assessee has already reversed the wrongly availed CENVAT credit with interest and paid a partial penalty.

Development Consultants Private Limited, the appellant, is a company engaged in providing consulting engineering services. During an audit, the department found that the appellant had availed CENVAT credit of Rs. 32,23,866 on input services, but the records had missing invoice details. In some cases, the documents did not mention service tax, making the credit appear irregular.

The department issued a show cause notice on 11.04.2012, invoking the extended period of limitation to demand recovery of the credit along with interest and penalty.

The appellant’s counsel argued that the extended period could not be invoked because the company had regularly filed returns and the relevant details were available with the department. The counsel further argued that the appellant had already reversed Rs. 26,94,123 along with interest and paid a penalty of Rs. 8,65,439, and that these payments were sufficient to resolve the matter.

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The revenue’s counsel argued that the demand was valid, as the irregular availment of credit came to light only during the audit, justifying the invocation of the extended period.

The two-member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) observed that the audit was conducted in April 2011, and the show cause notice was issued in April 2012 for the period 2004-05 to 2008-09.

The tribunal observed that the appellant had already reversed the credit with interest and paid the partial penalty, which was sufficient to meet the ends of justice in the case. The tribunal also considered the appellant’s reliance on the decision in Vandana Global Ltd., which held that the extended period of limitation should not be invoked in similar circumstances.

The tribunal held that the demand had already been reversed by the appellant with interest, and the penalty paid would stand, and the remaining demand raised by invoking the extended period was not sustainable. The appeal was disposed of, providing consequential relief to the appellant.

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