2023 (1) TMI 802 - AT - Central Excise

Refund of Cenvat Credit vs Re-Credit of Cenvat Credit - Scope of SCN - Show-cause notice sought to question the suo motu reversal entry dated 31.03.2010 inasmuch as the Appellant should have sought for refund thereof under Section 11B of the Act - It is case of the Appellant that the Order-in- Original has travelled all the way beyond the Show-cause notice - HELD THAT - The Appellant had discharged the duty burden from their PLA Account and as such, there is no dispute about the same. With such payment of duty out of PLA, they have reversed the debit entry made by them in their Credit Account which was used for payment of duty earlier. Though there was no proposal in the Showcause notice to deny such re-credit, the original Adjudicating Authority went ahead and even after accepting that the duty was paid subsequently in cash, disallowed the re-credit and confirmed the duty to that extent. Once the duty has been paid in cash, earlier payments made through Cenvat Account are liable to be re-credited in the said Account and no objection that such recredit was not on the basis of any eligible document can be adopted by the Revenue. Admittedly, it is not a case of availment of credit in the ordinary course, but such re-credit was to neutralize the subsequent payment of duty in cash. Reliance placed in the case of ICMC Corporation Limited vs. CESTAT, Chennai 2014 (1) TMI 1473 - MADRAS HIGH COURT , whereby the Hon ble High Court held that the suo motu credit of Cenvat reversed earlier involved only an account entry reversal and in the process, no outflow of funds from the assesse and accordingly, filing of refund claim under Section 11B of the Central Excise Act, 1944, is not required. The impugned orders cannot be sustained and the same are set aside - Appeal allowed.

Issues:
Challenge to order of Ld. Commissioner (Appeals) | Validity of service tax payments | Reversal of input service credit | Show-cause notice for recovery | Order-in-Original exceeding scope | Appeal rejection by Order-in-Appeal | Admissibility of re-credit | Interpretation of relevant legal provisions | Judicial precedents on re-credit | Comparison of Tribunal and High Court decisions

Analysis:

1. Challenge to order of Ld. Commissioner (Appeals):
The Appellant contested the order of the Ld. Commissioner (Appeals) regarding the payment of service tax on "Renting of Immovable Property Service" for the financial years 2007-2008 and 2008-2009. The dispute arose due to the irregular payment and subsequent reversal of service tax amounts, leading to a show-cause notice for recovery based on erroneous assumptions made during audits.

2. Validity of service tax payments:
The Appellant initially paid service tax amounts for both financial years using the Cenvat Account. However, subsequent audits raised issues regarding the correctness of these payments, leading to confusion and demands for further payments based on differing interpretations of the law.

3. Reversal of input service credit:
The Appellant reversed the service tax payment made through the Cenvat Account in 2010 and subsequently faced challenges during audits in 2011 regarding the admissibility of this reversal. The dispute centered around whether the Appellant was entitled to reverse the credit without seeking a refund under Section 11B of the Act.

4. Show-cause notice for recovery:
A show-cause notice was issued for the recovery of an alleged inadmissible input service credit based on erroneous assumptions made during audits. The notice sought to question the reversal entry made by the Appellant in 2010 and raised concerns about the proper procedure for seeking refunds under the law.

5. Order-in-Original exceeding scope:
The Order-in-Original dated 08.04.2015 went beyond the scope of the show-cause notice by questioning the Appellant's actions related to the reversal of input service credit. This deviation from the original issue raised concerns about procedural fairness and adherence to legal principles.

6. Appeal rejection by Order-in-Appeal:
The Appellant's appeal against the Order-in-Original was rejected by the Order-in-Appeal, leading to the present appeal before the Tribunal. The rejection raised questions about the interpretation of relevant legal provisions and the application of judicial precedents in similar cases.

7. Admissibility of re-credit:
The Tribunal analyzed the admissibility of re-crediting the service tax amounts paid through the Cenvat Account, emphasizing that once duty is paid in cash, earlier payments through the account should be re-credited. The Tribunal relied on legal principles and judicial precedents to support its decision in favor of allowing the re-credit.

8. Interpretation of relevant legal provisions:
The Tribunal interpreted relevant legal provisions governing the payment and reversal of service tax amounts, emphasizing the need for adherence to procedural requirements and the proper application of the law in determining the admissibility of input service credit reversals.

9. Judicial precedents on re-credit:
The Tribunal considered judicial precedents, including a judgment of the Hon'ble High Court of Madras, to support its decision on the admissibility of re-crediting service tax amounts. The Tribunal highlighted the importance of following established legal principles and respecting judicial discipline in reaching its conclusion.

10. Comparison of Tribunal and High Court decisions:
The Tribunal compared its decision with the judgment of the Hon'ble High Court of Madras to ensure consistency and alignment with established legal interpretations. By following the High Court's ruling, the Tribunal set aside the impugned orders and allowed the appeal filed by the Appellant, providing consequential relief as per law.

The Tribunal's detailed analysis covered various legal issues, including the validity of service tax payments, the reversal of input service credit, challenges to audit findings, and the interpretation of relevant legal provisions and judicial precedents. The decision emphasized the importance of procedural fairness, adherence to legal principles, and consistency with established judicial interpretations in resolving the dispute.

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