2010 (1) TMI 404 - AT - Central Excise

Cenvat Credit- Cenvat Credit of service tax paid on various services amounting to Rs. 2,71,935/- has been denied on the ground that when the ER-1 return filed by the appellant in the month of September 2006, the opening balance was shown as Rs. 2,71,935/- whereas there was no closing balance for the month of August 2006 equal to this amount as credit of service tax taken. The show cause notice was issued on this ground and Original Adjudicating Authority also rejected the claim on this ground and demanded the Cenvat credit and imposed equal amount as penalty. However, Commissioner (Appeals) took a totally new stand and he said that the Cenvat credit register had not at all been maintained during the period from September 2004 to August 2006 and the same appears to have been prepared in the month of September 2006 by one person using one pen and bearing signature without date. Thus the Commissioner (Appeals) rejected the claim for Cenvat credit on a totally new ground which was neither before the Original Adjudicating Authority nor was in the show cause notice. Held that- disposal of appeal while hearing stay matter heard at length and nothing much left for final hearing.

Summary

Issues:
Cenvat credit denial based on discrepancies in balance between ER-1 returns and credit register maintenance.

Analysis:
The case involved the denial of Cenvat credit amounting to Rs. 2,71,935/- due to discrepancies in the appellant's ER-1 returns and the maintenance of the Cenvat credit register. The Original Adjudicating Authority rejected the claim and imposed a penalty based on the opening balance shown in the returns. However, the Commissioner (Appeals) introduced a new ground, stating that the credit register was not maintained from September 2004 to August 2006 and appeared to have been prepared hastily in September 2006 by one person. The Commissioner rejected the claim based on this new ground not previously raised.

The appellant argued that they regularly maintained the Cenvat credit account but failed to reflect the service tax credit in the ER-1 returns. They rectified the mistake by showing it in the September 2006 return, leading to the imbalance in opening and closing balances. The appellant provided evidence of maintaining the credit account, including invoices and the credit account itself. They contended that even if prior credits were deemed ineligible, they should still be allowed to claim the credit in August or September 2006, citing Tribunal decisions allowing credit to be taken at any time.

On the other hand, the Revenue argued that since the credit was not reflected in the returns earlier, it should be considered as taken only in August or September 2006. They relied on Tribunal decisions emphasizing the immediate requirement to claim credit. However, the Tribunal noted that the failure to reflect the credit in the ER-1 return was a procedural omission and should not have led to credit denial. The Tribunal agreed with the appellant's position that credit could be taken at any time, as supported by relevant case law.

After considering both sides' submissions, the Tribunal found that the denial of credit based on the discrepancy in the ER-1 returns was unwarranted. The Tribunal concluded that the appellant was eligible for the credit, even if not immediately claimed, based on the cited Tribunal decisions. The Tribunal distinguished the decisions relied upon by the Revenue, stating they were not applicable to the case. Consequently, the Tribunal allowed the appeal, waived the pre-deposit, and granted the stay application, emphasizing the importance of final disposal over considering only a stay, in the interest of justice.