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2018 (5) TMI 603 - AT - Central ExciseCENVAT credit - inward freight - denial on the ground that appellant has availed CENVAT credit before the payment of service tax to the Government of India - Held that - in the absence of any dispute that appellant has discharged the tax liability as per the provisions of service tax rules and there also being no dispute as to eligibility to avail CENVAT credit of the said service tax payable by them under reverse charge mechanism, availing CENVAT credit before few days in advance is only a procedural lapse - credit cannot be denied on this basis. Extended period of limitation - Held that - the SCN was issued to the appellant by invoking the extended period while it is on record that appellant had regularly filed the monthly returns with the authorities indicating there on the availment of CENVAT credit for particular month - demand is time barred. Penalty - Held that - since demand is time barred, penalty also do not arise. Appeal allowed - decided in favor of appellant.
Issues: Denial of CENVAT credit on service tax paid on inward freight, reversal of CENVAT credit availed before payment, imposition of penalty, applicability of interest, limitation period for show cause notice.
In this case, the appeal was made against Order-in-Original No. 26/2010 regarding the denial of CENVAT credit on service tax paid on inward freight. The appellant had discharged the service tax liability under reverse charge mechanism but availed the CENVAT credit before payment of service tax to the Government of India. The Adjudicating Authority confirmed the demands for reversal of CENVAT credit availed, imposed interest, and penalties under relevant rules. The appellant contended that they were eligible to avail CENVAT credit as per Central Excise Rules, and the demand for reversal was incorrect, citing a Tribunal case precedent. They argued against the imposition of interest and invoked a judgment regarding the limitation period for show cause notice. Upon review, the Tribunal found that the service tax liability and its discharge were not disputed, but the appellant had availed the service tax credit before discharging it to the Government. The Tribunal considered this as a procedural lapse and referred to a precedent where denial of credit was set aside, emphasizing that premature availing of credit should not be a reason for denial. The Tribunal held that since the credit was only availed for claiming a refund and not utilized for payment, interest was not applicable. The demands for reversal of CENVAT credit were set aside on merits and limitation grounds, as the show cause notice was time-barred due to the appellant's regular filing of returns indicating credit availed. Consequently, the penalty was deemed unnecessary as the demands were set aside. In conclusion, the impugned order was set aside, and the appeal was disposed of in favor of the appellant based on the findings related to the denial of CENVAT credit, interest, and the limitation period for the show cause notice. The Tribunal's decision was pronounced in open court at the conclusion of the hearing.
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