2019 (5) TMI 252 - AT - Central Excise

CENVAT Credit - denial on the ground that the bank account maintained by the appellant at Chennai shows the address of their Srikakulam unit - HELD THAT - The Andhra Bank, Chennai Branch has informed that the account pertains to the appellant at Gummidipoondi only, stating that as per the KYC norms stipulated by RBI, a different address cannot be shown for a Customer ID (PAN registration) with the same name. Such a technical difficulty cannot be a ground for disallowing the credit eligible to them for the service tax paid on the services received as input services. When the accounts are very much clear and when the appellant has furnished the certificate from the Andhra Bank, the Department ought to have accepted the explanation put forward by the appellant - credit rightly availed. Time Limitation - HELD THAT - Audit was conducted from 22.05.2014 to 29.05.2014. However, the Show Cause Notice has been issued only after two years on 27.06.2016 alleging that the appellant has availed credit on documents which are not issued in their name. In fact, when the appellant has explained the technical difficulty to open an account in their address since the PAN registration is in the address of the Srikakulam unit and when the audit has taken note of this in 2014, the Show Cause Notice issued alleging suppression of facts with intention to evade payment of duty is without any factual basis - present case does not attract any of the ingredients of Section 11AC of the Central Excise Act, 1944 - appeal therefore succeeds on limitation as well. The demand, interest or penalties imposed are required to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disallowance of CENVAT credit for input services provided by a bank to a specific unit.
2. Allegation of incorrect address on the bank account leading to credit disallowance.
3. Legal validity of disallowing credit based on address discrepancy.
4. Applicability of limitation period in issuing Show Cause Notice.

Analysis:
1. The case involved the disallowance of CENVAT credit amounting to ?9,42,035/- for the period from August 2011 to April 2014 due to the appellant availing input service credit provided by a bank to a specific unit, which was not in line with the CENVAT Credit Rules, 2004. The Original Authority confirmed the demand, interest, and imposed penalties, which were upheld by the Commissioner (Appeals), leading to the appeal.

2. The appellant had three manufacturing units with separate bank accounts for different units due to PAN-based KYC norms stipulation of RBI. The address discrepancy arose as the bank account for the Gummidipoondi unit showed the Srikakulam address due to KYC norms. Despite the appellant's explanation and a certificate from the bank confirming the account belonging to the Chennai unit, the credit was expunged based on the address discrepancy, leading to the present dispute.

3. The Tribunal found that the address discrepancy on the bank account was a technical issue arising from KYC norms and should not be a ground for disallowing the credit eligible for service tax paid on input services. The certificate from the bank clearly indicated the account pertained to the Gummidipoondi unit, and the Department should have accepted the explanation provided by the appellant. Thus, the recovery of the disallowed credit was deemed unjustified.

4. The appellant also argued on the ground of limitation, stating that the Show Cause Notice issued after two years from the audit conducted lacked factual basis. The Tribunal agreed that there was no suppression of facts with the intention to evade payment of duty, and the case did not attract the ingredients of Section 11AC of the Central Excise Act, 1944. Consequently, the demand, interest, and penalties imposed were set aside, and the impugned order was overturned, allowing the appeal with consequential reliefs as per law.