2016 (7) TMI 156 - AT - Service Tax

Cenvat Credit - original duty payment document / invoices were lost / destroyed in the fire - department contended that respondent were not having original input invoices to be produced for verification and the Cenvat credit was availed in respect of non existing invoices - Held that - even though invoices have been destroyed in fire but if invoices have been recorded in the ledger and books of accounts of the respondent the Cenvat credit can not be denied. Respondent could not have recorded the invoice in the ledger unless physical invoices were available. It is not only the invoice or ledger entry but the respondent might have paid invoice value to the service provider which can also be verified from the books of account. Since this verification have not been conducted by the lower authority matter needs to be remanded to the original authority. Extended period of limitation - Held that - Even intimation of fire incidence is of no help to the respondent as from the intimation itself it cannot be said whether the invoices were existing or not therefore if it is proved that invoices were received by the respondent longer period of demand is correctly invokable. As per my above discussion I set aside the impugned order and remand the matter to the original adjudicating authority to pass a denovo adjudication order after verification of books of accounts ledger and payment particulars towards such invoices. - Decided partly in favor of revenue.

Summary

Issues:
1. Disallowance of Cenvat credit due to non-availability of original invoices.
2. Adjudication of penalty and interest under Cenvat Credit Rules, 2004.
3. Appeal against the Order-in-Appeal allowing the respondent's appeal.
4. Consideration of limitation period for issuing show cause notice.
5. Failure of the respondent to appear during the appeal proceedings.

Analysis:
1. The case involved the disallowance of Cenvat credit due to the non-availability of original invoices on which the credit was availed. The audit officers observed that the invoices were not produced as they were reportedly lost in a fire incident. The Adjudicating authority denied the credit, imposed a penalty, and demanded interest. The Commissioner(Appeals) allowed the respondent's appeal based on the submission that all invoices were recorded in the ledger, indicating receipt of invoices and credit taken. The Tribunal noted that if invoices were recorded in the ledger and books of accounts, the credit cannot be denied solely based on the physical unavailability of invoices. The matter was remanded for verification of books of accounts and ledger entries to establish the payment particulars towards such invoices.

2. The Adjudicating authority imposed a penalty and demanded interest under Rule 15(3) of Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act 1994. The Tribunal did not address this issue specifically in the judgment, as the focus was primarily on the disallowance of Cenvat credit due to non-availability of invoices.

3. The appeal was filed against the Order-in-Appeal that allowed the respondent's appeal, setting aside the Order-in-Original that disallowed the Cenvat credit. The Revenue contended that the respondent failed to produce the original invoices at any stage, and the Commissioner(Appeals) erred in allowing the appeal without appreciating the non-availability of invoices. The Tribunal set aside the Order-in-Appeal and remanded the matter for further adjudication based on the verification of books of accounts and ledger entries.

4. The issue of the limitation period for issuing the show cause notice was raised by the Revenue, arguing that the notice was issued after a gap of two years from the date of the audit. The Commissioner(Appeals) considered this limitation and found no evidence of fraud or suppression of material facts. The Tribunal disagreed with the Commissioner's finding, stating that the non-availability of invoices itself indicated a suppression of facts. The Tribunal held that the intimation of the fire incident was irrelevant if the invoices were not available, and the show cause notice was not time-barred. The matter was remanded for further adjudication.

5. Despite multiple hearing dates, the respondent failed to appear, indicating a lack of seriousness in pursuing the case. The Tribunal proceeded to dispose of the appeal based on the submissions made by the Revenue and the available record, emphasizing the importance of due process and granting opportunities for personal hearing and submission of necessary documents during adjudication.

Conclusion:
The Tribunal remanded the case to the original adjudicating authority for a denovo adjudication order after verifying the books of accounts, ledger entries, and payment particulars towards the invoices for which Cenvat credit was claimed. The judgment highlighted the significance of maintaining proper records and the need for thorough verification before disallowing credit solely based on the non-availability of physical invoices.