Dept. Action In Demanding Alleged Wrongly Availed Credit By Invoking Extended Period Of Limitation Is Not Justified: CESTAT

Date:

The Chennai Bench Of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the action of the department in proposing and demanding the allegedly wrongly availed credit by invoking the extended period of limitation is justified.

The bench of P. Dinesha (Judicial Member) has observed that nothing is brought out on record to indicate as to what prevented the department from issuing the show cause notice immediately, after noticing the wrong availment etc. during audit. Why or what prompted them to wait for three more years to issue the show cause notice, also remains conspicuous. More than these, even when the same was brought to the notice through their reply to the SCN, the same has not been considered at all.

The appellant/assessee is engaged in the manufacture of Industrial Valves and its spares falling under Chapter Heading 84818030 and 84819090. During the audit of accounts of the appellant by CERA for the period 2008-2011 and other connected records relating to input service tax credit received for the year 2009-2010 issued by the Corporate Office at Chennai which is having ISD certificate revealed that the input services to Unit II was taken as credit by the appellant (Unit I). 

On perusal of the documents and the details of Head Office Service Tax distributed to utilization account through ISD for the month December 2009 was Rs.30,07,771/-. The appellant vide their letter dated 26.02.2013 also confirmed that service of fabrication of steel structure was done only at their Unit-II. As per Rule 4 (2) of Service Tax Rules, 1944, the Input Service Distributor (ISD) distributing credit shall issue an invoice containing certain particulars including the name and address of the recipient of the credit distributed. 

It appeared to the Department that appellant could not have received the input service and hence not eligible to take credit as the input service tax credit document did not contain the name and correct address of the assessee, hence credit availed in respect of invoice not relevant to their unit. 

Therefore, a show cause notice came to be issued to appellant denying/recovering the cenvat credit taken on input services to the extent of Rs.30,07,771/- along with interest and also proposing to impose equal penalty. The appellant appeared to have filed a detailed reply to SCN. 

After due process of law, the Original Authority confirmed the demand along with interest and imposed equal penalty under Rule 15 of Cenvat Credit Rules, 2044 read with Section 11AC of Central Excise Act, 1994.

The tribunal held that the manner in which the ineligible credit was availed by the appellant clearly pointed to the fact that the recovery of such credit warranted invocation of extended period of limitation. 

The CESTAT allowed appeal and held that the department has not satisfactorily proved the invoking of extended period of limitation while raising the impugned demand and the order that has upheld the above demand cannot sustain.

Read More: GSTN Issues Advisory For Biometric-Based Aadhaar Authentication And Document Verification For GST Registration 

Case Details

Case Title: M/s.Xomox Sanmar Ltd. Versus The Commissioner of GST & Central Excise

Case No.: Excise Appeal No. 41192 of 2016

Date: 28.01.2025

Counsel For Appellant: Radhika Chandrasekar

Counsel For Respondent: O.M. Reena

Mariya Paliwala
Mariya Paliwalahttps://jurishour.in/
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.

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