2019 (2) TMI 1033 - AT - Service Tax

CENVAT Credit - capital goods - Rule 4(2a) of Cenvat Credit Rules, 2004 - time limitation - Held that - It is also the admitted fact that the moment this inadvertence in the books of accounts of the appellant was brought to their notice that they reversed the amount in excess from their credit balance in the month of March 2010 itself. It therefore becomes the revenue neutral situation as far as the books of accounts of the appellant are concerned and since the stage of taking or utilising the credit had not yet come, there is no occasion for revenue to suffer any loss on this account. The Order of appropriation of the reverse amount as passed by the Commissioner has no practical meaning in view of this discussion. Imposition of penalty - Held that - Since the wrongly availed cenvat credit stands reversed way back in March 2010 and since the appellant immediately has acknowledged the said wrong availment as inadvertent mistake that too in books of account only, there remains no question of any wilful intention to evade duty or to have the unjust enrichment on the part of the appellant. The question of imposition of penalty does not at all arises. Time limitation - Held that - The fact of inadvertent mistake and the reversal of wrongly availed cenvat credit in March 2010, i.e., much prior to the issuance of the impugned SCN of the year 2013 was very much in the knowledge of the Department. Seeing from any angle SCN is held barred by time. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of wrongly availed cenvat credit
- Barred by time for issuance of SCN
- Imposition of penalty
- Imposition of interest
- Applicability of statutory provisions and court decisions

Admissibility of wrongly availed cenvat credit:
The appellants were found to have wrongly availed cenvat credit amounting to ?1,21,60,874 during the month of April. Although the credit was reversed in March 2010 upon discovery, the Department issued a show cause notice (SCN) proposing recovery along with interest and penalty. The Commissioner ordered the recovery, interest, and penalty, leading the appellant to appeal to the Tribunal. The Tribunal observed that since the credit was reversed promptly upon discovery, there was no loss to the revenue, making the appropriation order meaningless.

Barred by time for issuance of SCN:
The appellant argued that the SCN issued in 2013 was time-barred as the credit was inadvertently availed in April 2009, reversed in March 2010, and brought to the Department's notice in 2009. The appellant contended that there was no intentional malafide on their part, making the penalty and interest imposition unsustainable. The Department justified the SCN, citing Rule 14 of CCR, 2004, and a Board's Circular. The Tribunal held that the SCN was indeed time-barred and set aside the order.

Imposition of penalty:
The Tribunal found no wilful intention to evade duty or unjust enrichment on the appellant's part since the wrongly availed credit was promptly reversed, indicating inadvertent mistake in bookkeeping. The Tribunal deemed the imposition of penalty irrelevant, suggesting the appellant should have been given the benefit of Section 80 of the Finance Act, 1994. The Tribunal held that the penalty was unwarranted due to the absence of wilful misrepresentation or suppression of facts.

Imposition of interest:
Regarding the imposition of interest, the Tribunal referred to statutory provisions categorizing situations where credit is taken but not utilized. As the credit in this case was neither taken nor utilized but only availed in the books and then reversed, the Tribunal found no basis for imposing interest. Citing relevant court decisions, the Tribunal concluded that interest was not payable in such circumstances, contrary to the Commissioner's decision.

Applicability of statutory provisions and court decisions:
The Tribunal highlighted the discrepancy between the Commissioner's reliance on a Board's Circular and the statutory provision governing the recovery of wrongly taken cenvat credit. The Tribunal emphasized that court decisions had consistently ruled against imposing interest when credit was only taken and not utilized. The Tribunal concluded that the Circular could not supersede established statutory laws and court decisions, leading to the setting aside of the order and allowing the appeal.