2025 (1) TMI 421 - AT - Central Excise

CENVAT credit can be availed by the Gurgaon unit of the appellant when the invoices had been inadvertently addressed to the Bangalore office - Extended period of limitation - HELD THAT - The appellant is presently the only unit engaged in the manufacture of the said goods and it s another unit at Bangalore which was operative has closed down from April 2007. It is also found that it is not in dispute that the service tax under reverse charge has been paid by the Gurgaon unit and GAR-7 challan also mention the address of the Gurgaon unit and payment has also been made by the appellant and therefore, the Gurgaon unit is eligible to avail CENVAT credit in respect of these invoices. Further, the appellant has produced on record the service tax payment challan which is a valid document for availment of CENVAT credit in terms of Rule 9(1)(e) of CENVAT Credit Rules. It is found that in the present case, the input services could not have been used by any other unit other than the Gurgaon unit being the only manufacturing unit and moreso, when they have discharged the service tax liability under reverse charge, it has been consistently held in the decisions relied upon by the appellant that CENVAT credit can be availed on the basis of challan evidencing payment of duty. The Department has not been able to establish suppression on the part of the appellant with intent to evade payment of service tax and therefore, the invocation of extended period of limitation is not justified in the present case. The impugned order is not sustainable in law - Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment are:

Whether the Gurgaon unit of the appellant is eligible to avail CENVAT credit on invoices addressed to the Bangalore unit, which was inoperative during the relevant period.
Whether the mentioning of the wrong address on the invoices constitutes a valid reason to deny CENVAT credit.
Whether the invocation of the extended period of limitation by the Department is justified in this case.
Whether the imposition of interest and penalty by the Commissioner is sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility of Gurgaon Unit to Avail CENVAT Credit

Relevant Legal Framework and Precedents: The CENVAT Credit Rules, 2004, particularly Rule 9(1)(e), which specifies that a challan evidencing payment of service tax by the service recipient is a valid document for availing CENVAT credit. Precedents cited include decisions from various tribunals supporting the availment of credit based on such documents.
Court's Interpretation and Reasoning: The court noted that the service tax under reverse charge was paid by the Gurgaon unit, and the payment was evidenced by GAR-7 challans mentioning the Gurgaon address. The court reasoned that since the Bangalore unit was inoperative, the services could only have been consumed by the Gurgaon unit.
Key Evidence and Findings: The appellant provided GAR-7 challans and other documentation proving that the Gurgaon unit paid the service tax and consumed the services.
Application of Law to Facts: The court applied Rule 9(1)(e) of the CENVAT Credit Rules, determining that the Gurgaon unit was eligible to avail the credit as the services were received and consumed by it.
Treatment of Competing Arguments: The Department argued that the credit was inadmissible due to the invoices being addressed to Bangalore. The court dismissed this, citing procedural errors should not deny substantial benefits.
Conclusions: The court concluded that the Gurgaon unit was eligible to avail CENVAT credit as the services were consumed there, and the procedural error of the wrong address did not justify denial of credit.

Issue 2: Invocation of Extended Period of Limitation

Relevant Legal Framework and Precedents: The Central Excise Act, 1944, particularly the provisions regarding the invocation of the extended period of limitation, which requires proof of suppression or intent to evade duty.
Court's Interpretation and Reasoning: The court noted that the appellant had regularly filed returns and there was no evidence of suppression or intent to evade duty.
Key Evidence and Findings: The appellant's consistent filing of returns and the lack of evidence of suppression were critical to the court's reasoning.
Application of Law to Facts: The court found that the Department failed to prove suppression or intent to evade duty, making the invocation of the extended period unjustified.
Treatment of Competing Arguments: The Department claimed contravention of rules, but the court found no evidence of intent to evade duty.
Conclusions: The court concluded that the extended period of limitation was not applicable.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "CENVAT credit which is a substantial benefit cannot be denied on procedural irregularities."
Core Principles Established: Substantial benefits like CENVAT credit should not be denied due to procedural errors, and the extended period of limitation requires evidence of suppression or intent to evade duty.
Final Determinations on Each Issue: The court set aside the impugned order, allowing the appeal and concluding that the Gurgaon unit was eligible for CENVAT credit and that the extended period of limitation was not applicable.

The judgment ultimately favored the appellant, recognizing the procedural nature of the error and the lack of intent to evade duty, leading to the dismissal of the demand, interest, and penalty imposed by the Commissioner. The court emphasized the importance of substantive justice over procedural technicalities, aligning with established legal precedents.

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