2024 (12) TMI 883 - AT - Service Tax

Recovery of wrongly availed CENVAT Credit with interest and penalties - Credit taken on the basis of Cover note - Extended period of limitation. Credit taken on the cover notes - HELD THAT - Appellant have taken the credit on the basis of cover note again of the entire amount claiming the same to be in respect of the same invoices. The said fact whether there was no duplication of the credit, once on the basis of the invoice and second time on the basis of cover note needs to be factually verified. As appellant had taken credit of entire amount against these cover notices subsequently, he reversed the excess credit as claimed by them vide GAR challan dated 05.12.2011. No findings has been recorded either in the impugned order with regards to the availment of credit against the invoice in question. The fact in respect of credit taken against the corresponding invoices and cover notes was subject to verification- whether the credit has been taken twice against the same supply of goods/services. The matter needs to go back to the Original Authority for verification. Extended period of limitation - penalties - HELD THAT - The appellant is public sector undertaking. Even if the extended period is invokable for the reason of inadmissible credit taken by the appellant, and penalty imposable on them under section 78. Penalty should have been set aside by invoking the provisions of Section 80 of the Finance Act, 1994. Appeal allowed in part and the matter remanded back to original authority.

Issues Involved:

1. Admissibility of Cenvat credit on the basis of cover notes.
2. Admissibility of Cenvat credit on the basis of Advice of Transfer (ADT).
3. Admissibility of Cenvat credit for reimbursement of fuel expenditure.
4. Imposition of penalties under the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on the Basis of Cover Notes:

The adjudicating authority confirmed the demand of Cenvat credit taken on the basis of cover notes, amounting to Rs. 68,41,900/-. The appellant argued that the credit was taken on the basis of invoices, and the cover notes were issued for claiming the balance amount. The appellant had a policy of making 50% payment at the time of invoice receipt and the remaining 50% after installation verification. The adjudicating authority found that the appellant availed Cenvat credit on cover notes, which are not legitimate documents under Rule 9 of Cenvat Credit Rules, 2004. The Tribunal noted that the issue required factual verification to determine whether there was duplication of credit. The matter was remanded back to the Original Authority for verification of the admissible credit.

2. Admissibility of Cenvat Credit on the Basis of Advice of Transfer (ADT):

The demand for credit taken on the basis of ADT was confirmed. The Tribunal referenced previous decisions where similar issues were adjudicated, noting that procedural lapses should not deny Cenvat credit if the genuineness of invoices is not disputed. The Tribunal remanded the matter back to the Original Authority for re-determination of admissibility of Cenvat credit based on the decision of the Hon'ble High Court, which required verification of documents.

3. Admissibility of Cenvat Credit for Reimbursement of Fuel Expenditure:

The adjudicating authority initially confirmed the demand for credit taken for reimbursement of fuel expenditure. However, the Tribunal set aside this demand, noting that the appellant had taken credit on service provider invoices for AMC services, which included inputs like diesel and electricity. The Tribunal found no merit in the adjudicating authority's findings and set aside the demand, interest, and penalty related to this issue.

4. Imposition of Penalties under the Finance Act, 1994:

The adjudicating authority imposed a penalty equivalent to the amount of Cenvat credit confirmed. The Tribunal, however, set aside the penalties by invoking the provisions of Section 80 of the Finance Act, 1994, acknowledging the appellant as a public sector undertaking and considering the circumstances of the case. The Tribunal noted that even if the extended period was invokable, the penalty should have been set aside.

Conclusion:

The appeal was partly allowed, with the Tribunal remanding the issues related to credit on cover notes and ADT back to the Original Authority for verification. The demand related to fuel expenditure was set aside, and penalties were nullified. The Tribunal directed the adjudicating authority to finalize the remand proceedings within three months.

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