2018 (11) TMI 346 - AT - Central Excise

100% EOU - CENVAT Credit - credit denied on the ground that appellant availed benefit of N/N. 22/2003-CE dated 31.3.2003 - Held that - In the present case, the appellant made a declaration on 30th December 2013, in respect of the dues not paid by him during the period July 2009 to March 2012. As such the service tax, which was required to be paid by the head office from July 2009 to March 2012, was not being paid and was ultimately, by taking the benefit of the said scheme, was declared on 30.12.2013. This leads to the inevitable conclusion that there was suppression or mis-statement by way of non-payment of tax on the part of the assessee s head office, which was ultimately paid by taking the shelter under the said scheme. The facts clearly leads to the conclusion that tax was not being paid during the relevant period and as such it can be concluded that there was suppression or mis-statement on the part of the assessee, thus leading to non-availability of credit to them. Applicability of Board s Circular No. 170/5/2013-ST dated 8.8.2013 - Held that - There is no clarification to the effect that the duty/tax paid under the said scheme would be admissible as a credit. It only clarifies that the Cenvat credit would be governed by the Cenvat credit Rules, 2004 - the said rule deny availing the credit in respect of the tax/duty paid under suppression or mis-statement - the said circular is not applicable to the facts of the case. The appellant is entitled to the credit of ₹ 2,78,19,091/- and the demand along with penalty is set aside - appeal disposed off.

Summary

Issues involved:
1. Availment of credit of duty paid by the supplier against CT-3 certificates by a 100% EOU.
2. Denial of credit of service tax paid by the appellant's head office under VCES, 2013.

Comprehensive Analysis:

Issue 1:
The appellant, a 100% EOU, procured goods from suppliers against CT-3 certificates without duty payment. However, in some cases, goods were procured with duty payment, and the appellant availed credit of the duty paid. The Revenue contended that since the supplier was entitled to an exemption, the duty should not have been paid, making the appellant ineligible for credit. The Tribunal noted that the Revenue did not object when duty was accepted from the supplier, and the DGFT policy did not bar the appellant from availing credit. Relying on precedent decisions, the Tribunal ruled in favor of the appellant, allowing the Cenvat credit of duty paid by the manufacturer supplier, setting aside the demand and penalty.

Issue 2:
Regarding the denial of credit of service tax paid by the appellant's head office under VCES, 2013, the Tribunal found that the head office declared unpaid taxes from 2009 to 2012 under the scheme in 2013, indicating suppression or misstatement. As per Cenvat Credit Rules, credit is not allowed if tax is paid under suppression. The Tribunal rejected the appellant's reliance on a circular, stating that it does not permit credit for taxes paid under the scheme. Referring to a Tribunal decision, the Tribunal differentiated it as the Revenue did not challenge the credit's admissibility. Consequently, the Tribunal upheld the denial of service tax credit but set aside the penalty due to a genuine interpretation issue, confirming the demand and interest.

In conclusion, the Tribunal allowed the appellant's Cenvat credit claim for duty paid by the supplier but denied the credit for service tax paid by the head office under VCES, 2013. The penalty was waived due to a genuine interpretation issue.