2018 (7) TMI 272 - AT - Service Tax

CENVAT Credit - capital goods - Rule 4(2) of CCR 2004 - Held that - Though the assessee is entitled to cenvat credit of 50% on the capital goods in the year of receipt/ balance 50% is available to them in subsequent year. Availing credit @ 100% on some invoices and not availing any credit in respect of other invoices in the same year cannot be appreciated - the matter is remanded to the Adjudicating Authority to verify the documents eligible for availing the cenvat credit under Cenvat Credit Rules, 2004 and to pass an order in accordance with law - appeal allowed by way of remand.

Summary

Issues Involved: Alleged contravention of Rule 4(2) of Cenvat Credit Rules, 2004 regarding availing and utilization of duty paid on capital goods in the same financial year, and alleged irregular availment of CENVAT credit on capital goods.

Analysis of the Judgment:

1. Contravention of Rule 4(2) of Cenvat Credit Rules, 2004:
The case involved an allegation against the respondent assessee for availing and utilizing 100% duty paid on capital goods in the financial year 2006-2007, contrary to Rule 4(2) of the Cenvat Credit Rules, 2004. The Adjudicating Authority found that the assessee had paid excess Service Tax and Education Cess, amounting to ?94,22,954 during the said period. The authority accepted the explanation provided by the assessee and concluded that the demand for Service Tax and Education Cess was not sustainable, leading to no imposition of penalty or interest. The Revenue appealed against this order, arguing that recovery of 50% of the duty paid on capital goods should be made due to the violation of Rule 4(2). The Appellate Tribunal remanded the matter to the Adjudicating Authority for verification of documents and proper assessment, allowing the appeal filed by the Revenue.

2. Irregular Availment of CENVAT Credit on Capital Goods:
The second issue revolved around the alleged irregular availment of CENVAT credit on capital goods amounting to ?77,50,386 during the financial year 2006-2007. The Revenue contended that recovery should be made for the 100% credit availed on some invoices, as opposed to the required 50% under the rules. The Tribunal noted that while the assessee had inadvertently availed 100% credit on some invoices, they had actually availed 50% of the total credit available to them. The Tribunal accepted the submission of the assessee, stating that no excess credit was taken. The matter was remanded to the Adjudicating Authority for further verification and proper assessment, allowing a reasonable opportunity of hearing to the respondent assessee.

In conclusion, the judgment addressed the issues of contravention of Rule 4(2) of Cenvat Credit Rules, 2004 and irregular availment of CENVAT credit on capital goods. The Tribunal remanded both matters to the Adjudicating Authority for proper assessment and verification of documents, providing an opportunity for the respondent assessee to be heard.