2019 (6) TMI 1275 - AT - Service Tax

CENVAT credit - irregular availment of cenvat credit on various Bills of Entry - it was alleged that appellant had not produced Bills of Entry for defacement as required by law that prevailed during the relevant period - it was alleged that they have availed credit of ₹ 4,73,349/- 2/3 days prior to receipt of the inputs within the factory - also alleged that they have availed irregular credit of ₹ 27,446/- on goods which were not received in the factory at all. Disallowance of credit to the tune of ₹ 4,73,349/- and ₹ 27,446/- the allegation is that with respect to ₹ 4,73,349/- the credit entered in RG.23A Part II was made before receipt of the goods into the factory - HELD THAT - Their mere allegation is that credit has been availed on the inputs before receipt of such goods into the factory. There is also no case that such inputs were not used in manufacture of finished products. Taking these facts into consideration, I am of the view that the availment of credit by making entries in RG.23A prior to receipt of the goods into the factory is only a procedural one and the substantive beneficial right of credit cannot be denied for such procedural lapse. Denial of credit of ₹ 27,446/- HELD THAT - appellant has failed to establish that inputs were actually received into the factory. Credit in respect of ₹ 27,446/- is therefore disallowed and the demand is sustained along with interest. However, penalty in this regard is set aside as the penalty imposed is only composite penalty for both the issues. Further, the appellant has put forward explanation that these irregular availments occurred only because there was large number of documents to be entered and due to inadvertence the entries were omitted. The credit availed in respect of ₹ 4,73,349/- is eligible and the demand in respect of the same requires to be set aside - appeal allowed in part.

Summary

Issues Involved:
1. Alleged irregular availment of cenvat credit on various Bills of Entry.
2. Disallowance of credit amounting to ?4,73,349 and ?27,446.

Analysis:

Issue 1: Alleged irregular availment of cenvat credit on various Bills of Entry
The appellants were issued a show cause notice alleging irregular availment of cenvat credit on Bills of Entry. The demands were raised based on three counts: failure to produce Bills of Entry for defacement, availing credit before receipt of goods within the factory, and irregular credit on goods not received in the factory. The appellant argued that the credit entries were made prior to receipt of goods due to inadvertent procedural errors, and they had actually received the goods. The department emphasized the importance of Material Receipt Report to validate credit availed. The tribunal found that procedural lapses should not deny substantive credit rights, and upheld the credit amount of ?4,73,349 while disallowing the credit of ?27,446 due to lack of evidence establishing receipt of goods.

Issue 2: Disallowance of credit amounting to ?4,73,349 and ?27,446
Regarding the credit amount of ?4,73,349, the tribunal determined that although entries were made before goods were received in the factory, there was no evidence that the inputs were not used in manufacturing finished products. Thus, the substantive right to credit could not be denied for procedural lapses. However, for the credit of ?27,446, the tribunal noted that despite the submission of Material Receipt Report, the appellant failed to establish actual receipt of goods into the factory, leading to disallowance of this credit. The tribunal set aside the penalty imposed due to inadvertent errors in credit availment. Consequently, the tribunal allowed the appeal in part, upholding the credit of ?4,73,349 and disallowing the credit of ?27,446, with consequential benefits as per law.

This comprehensive analysis of the judgment addresses the issues involved, the arguments presented by both parties, and the tribunal's reasoning leading to the final decision on the alleged irregular availment of cenvat credit on Bills of Entry.