2022 (11) TMI 801 - AT - Service Tax

CENVAT Credit - contravention of provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 and Rule 3 and Rule 4(1) of the CENVAT Credit Rules, 2004 - whether the 3rd Proviso of Rule 4(1) of CENVAT Credit Rules, 2004 as introduced w.e.f. 01.09.2014, has got retrospective effect? - HELD THAT - The 3rd proviso was introduced w.e.f. 01.09.2014 and there is no stipulation in the amending Notification that the same shall apply retrospectively. Rules of interpretation provide that whenever any statute is newly added, the same has got only prospective effect unless it is specifically provided in the amending statute or the amendment is by way of substitution of an existing provision mainly by way of clarification or removal of defects - the said proviso to Rule 4(1) of CENVAT Credit Rules, 2004 has got only prospective effect. Tribunal in the case of M/S. VOSS EXOTECH AUTOMOTIVE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2018 (3) TMI 1048 - CESTAT MUMBAI has observed that Notification No.21/2014-CE(NT) dated 11.07.2014 should be applicable to those cases, wherein the invoices were issued on or after 11.07.2014 for the reason that Notification was not applicable to the invoices issued prior to the date of Notification. Therefore, at the time of issuance of invoices, no time limit was prescribed and limitation of six months cannot be made applicable. Appeal allowed - the issue stands decided in favour of the assessee.

Summary

Issues:
1. Disallowance of CENVAT Credit under Rule 14 of CENVAT Credit Rules, 2004
2. Imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004

Analysis:

Issue 1: Disallowance of CENVAT Credit under Rule 14 of CENVAT Credit Rules, 2004
The primary issue in this appeal was whether the CENVAT Credit of Rs.29,481/- had been rightly disallowed under Rule 14 of the CENVAT Credit Rules, 2004. The appellant, a service provider, had taken CENVAT Credit on invoices of input services after six months of the date of the invoices, leading to allegations of irregular availment of credit. The appellant argued that the proviso to Sub-Rule (7) of Rule 4 of CENVAT Credit Rules, 2004, introduced w.e.f. 01.09.2014, did not affect documents issued prior to that date. The appellant contended that the credit had been taken within the permissible time frame. However, a Show Cause Notice alleged contravention of various rules and imposition of irregular CENVAT Credit to evade Service Tax. The appellate authority upheld the disallowance of credit and imposed a penalty. The Tribunal analyzed the retrospective effect of the 3rd Proviso of Rule 4(1) of CENVAT Credit Rules, 2004 and held that it had only prospective effect. Citing a previous decision, the Tribunal ruled in favor of the assessee, stating that the time limit of six months could not be retrospectively applied. Consequently, the impugned orders were set aside, and the appeal was allowed with consequential relief.

Issue 2: Imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004
In addition to the disallowance of CENVAT Credit, the appellant faced a penalty under Rule 15 of CENVAT Credit Rules, 2004, read with section 78 of the Finance Act, 1994. The penalty was imposed for allegedly availing irregular credit with the intent to evade Service Tax. The Tribunal's decision on the retrospective effect of the relevant proviso also impacted the penalty issue. As the Tribunal ruled in favor of the assessee regarding the prospective application of the proviso, it followed that the penalty imposed based on the alleged irregular credit was also set aside. The Tribunal's decision to allow the appeal with consequential relief encompassed the penalty issue as well, providing a comprehensive resolution to the entire dispute.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented, and the Tribunal's decision, ensuring clarity on the legal aspects and implications of the case.