2015 (12) TMI 1308 - AT - Central Excise

Transfer of CENVAT Credit from service tax to central excise - Rule 14 of Cenvat Credit Rules 2004 read with proviso to Section 11A(1) of the Central Excise Act 1944 - respondents have taken Service Tax Credit in their ST3 return and transferred the said amount to ER1 return and utilized the same for payment of Excise duty but, the respondent had not debited the said amount from the said ST3 return - Held that - Appellant had taken credit of Service Tax of the said amount in their ER1 return for the month of November and December 2005. It has been alleged in the show cause notice that the respondent had wrongly availed the credit of the said amount in their ER1 return which is recoverable under Rule 14 of Rules 2004, which provides recovery of Cenvat Credit wrongly taken or erroneously refunded, where the Cenvat Credit has been taken and utilized wrongly or has been erroneously refunded, the same alongwith interest shall be recovered from the manufacture or the provider of the output service. By Interim Order No 226/2015 dtd 1.5.2005 the Tribunal directed the Learned Authorised Representative of the Revenue to place the verification report dtd 7.4.2010 as mentioned in the impugned order, before the Bench. The amount of credit shown against the invoices issued by the service provider listed in the statement attached has been verified and original invoices found to be correct. The Commissioner (Appeals) passed the order on the basis of the said report - It is clear from the record that the credit of the Service Tax taken by the respondent is correct as per the report dtd 7.4.2010 of the Asstt. Commissioner, Central Excise, which was not disputed in the grounds of appeal. Thus, there is no scope to recover the said amount which was taken correctly under Rule 14 of the Rules, 2004. - Decided against Revenue.

Summary

Issues:
Appeal against order of Commissioner (Appeals) setting aside adjudication order on the grounds of wrongly utilized Cenvat Credit, procedural lapses, and verification report.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner (Appeals) where the adjudication order was set aside. The case involved the respondent, engaged in the manufacture of Textile Yarn, who was alleged to have wrongly utilized Cenvat Credit of a specific amount recoverable under Rule 14 of Cenvat Credit Rules 2004. The dispute period was November 2005 to December 2005. The Adjudicating Authority confirmed the demand of Cenvat Credit along with interest and imposed a penalty equal to the Cenvat Credit amount. However, the Commissioner (Appeals) set aside this order, leading to the appeal by the Revenue.

2. The Revenue contended that the respondent had taken Service Tax Credit of a specific amount in their ST3 return, transferred it to the ER1 return, and utilized it for Excise duty payment without debiting the amount from the ST3 return. The Revenue argued that irregularities would be evident in the year-end ST3 return and the Service Tax credit receivable ledger account maintained by the respondent.

3. On behalf of the respondent, it was argued that the Service Tax credit should have been initially shown in the ST3 return before transferring it to the ER1 return. However, in this case, the respondent directly took the Service Tax credit in the ER1 return instead of the ST3 return. The Commissioner (Appeals) based their decision on a verification report dated 7.4.2010, which certified that the credits were indeed taken in the ER1 return. The respondent emphasized that since the Revenue did not challenge this report, the appeal should be dismissed.

4. The Tribunal found that the respondent correctly took credit of Service Tax in their ER1 return for November and December 2005. The show cause notice alleged that the respondent wrongly availed the credit in the ER1 return, leading to a demand for recovery under Rule 14 of the Cenvat Credit Rules 2004. The Tribunal directed the Revenue to present the verification report before the Bench, which confirmed the correctness of the credit taken by the respondent. As the report was not disputed by the Revenue, the Tribunal concluded that there was no basis for recovery under Rule 14.

5. Considering the discussions and evidence presented, the Tribunal upheld the order of the Commissioner (Appeals) and rejected the appeal filed by the Revenue. The Tribunal found no reason to interfere with the decision based on the procedural lapses and verification report confirming the correctness of the credit taken by the respondent.