2018 (3) TMI 1420 - AT - Central Excise

VCES Scheme - time limitation - CENVAT credit - denial on the ground that such discharge certificate is not one of the specified documents for the purpose of availment of credit under rule 9 of Cenvat Credit Rules, 2004 and as such credit cannot be allowed to them - Held that - Having held that the said certificate was a proper document, the appellate authority should have allowed the credit instead of rejecting the part on the ground of time bar. If the assessee s tax credit is on the basis of challan itself, the concurrence of the Revenue is not involved and it can be alleged that he deposited the tax and took the credit on his own without waiting for the final order of the acceptance by the proper authority. As such, it was necessary, under the scheme, to receive the discharge certificate before availing the credit, in which case, even limitation would not get involved. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of Voluntary Compliance Encouragement Scheme (VCES) for payment of taxes on reverse charge mechanism.
2. Validity of discharge certificate issued under VCES for availing CENVAT credit.
3. Interpretation of rule 9(1)(e) of Cenvat Credit Rules, 2004 regarding specified documents for credit availment.
4. Consideration of time limitation for availing credit based on challan issuance.

Analysis:
1. The appellant, a manufacturer of synthetic food colors, was liable to pay taxes on services under reverse charge mechanism. They utilized VCES to pay the outstanding taxes and received a discharge certificate after depositing the tax amount.

2. The appellant applied for CENVAT credit based on the discharge certificate issued under VCES. However, a show-cause notice was issued challenging the validity of the certificate for credit availment under rule 9 of Cenvat Credit Rules, 2004.

3. The Commissioner (Appeals) acknowledged the validity of the discharge certificate as per circulars issued by the Board, allowing credit under rule 9(1)(e). However, it was noted that credit should have been availed based on the challan itself, not waiting for the discharge certificate. Some credits availed after six months were disallowed due to time limitation.

4. The appellate authority found the Commissioner's decision to partially disallow credit based on time limitation beyond the scope of the show-cause notice. The specialized VCES required the receipt of a discharge certificate before credit availment to ensure proper tax payment verification without time limitations.

5. Consequently, the impugned order was set aside, and the appeal was allowed, granting relief to the appellant for availing CENVAT credit based on the discharge certificate issued under VCES.