2024 (1) TMI 583 - AT - Service Tax

CENVAT Credit - proper document under Rule 9(g) of CENVAT Credit Rules read with Rule 4A(2) of Service Tax Rules, 1994 or not - ISD themselves did not have proper proof of payment to the service provider - Extended period of Limitation - HELD THAT - When the availment of services and admissibility of credit are not questioned at the end of the appellant or the ISD, CENVAT credit cannot be denied; substantive benefit of CENVAT credit cannot be denied just because there were some procedural infractions. Learned Commissioner seeks to confirm the demand on the basis of the finding that the appellants have not provided further requisite information. However, ongoing through the records of the case, it is found that audit was conducted on 26.04.2010, 27.04.2010 and 25.08.2010; Department sought certain clarifications vide letter dated 01.10.2010 and the appellants have submitted the same vide letter dated 22.12.2010.Thereafter, the Department did not conduct any enquiries for three long years and have issued a show-cause notice dated 12.08.2013. It was open to the Department to collect whatever information that was required to satisfy themselves before the issuance of show-cause notice. The Department requires to prove the inadmissibility of credit or any lapses on the part of the appellant in a positive proactive manner rather than on the averment that the appellants failed to supply the requisite information. However, as the admissibility of CENVAT credit not being in dispute, the same cannot be denied for procedural inadequacies, more so, when Department neither disputed the documents submitted by the appellants nor conducted any further verification. Time limitation - HELD THAT - The audit was conducted on 26.04.2010, 27.04.2010 and 25.08.2010; Department sought certain clarifications vide letter dated 01.10.2010 and the appellants have submitted the same vide letter dated 22.12.2010; thereafter, for three years, Department did not take any action and the show-cause notice was issued on 12.08.2013; the appellants have been regularly submitting the ST-3 Returns. Moreover, keeping in view the fact that the appellants are a PSU, it is found that no mala fide intention can be attributed to the appellant. The appeal is allowed both on merits and limitation.

Summary

Issues Involved:
1. Eligibility of CENVAT credit based on document conformity.
2. Invocation of the extended period for issuing the show-cause notice.

Summary:

Issue 1: Eligibility of CENVAT Credit Based on Document Conformity

The appellant, M/s Bharat Sanchar Nigam Ltd. (BSNL), faced a dispute regarding the availment of CENVAT credit on the ground that the document used was not proper under Rule 9(g) of CENVAT Credit Rules read with Rule 4A(2) of Service Tax Rules, 1994. The Department contended that the input service distributor (ISD) did not have proper proof of payment to the service provider, leading to a demand of Rs.1,32,21,806/- along with an equal penalty. The appellant argued that the credit was denied solely due to procedural defects of minor nature and relied on several case laws to support their claim that substantive benefits cannot be denied for procedural irregularities. The Tribunal found that the dispute was related to the nature of the documents issued by the ISD, which did not conform to the requirements under Rule 9(1)(g) of CENVAT Credit Rules, 2004 and Rule 4A(2) of Service Tax Rules, 1994. However, it was noted that the Department did not dispute the availment of services or the admissibility of credit, nor did they initiate proceedings against the ISD for excess distribution or wrongful credit. The Tribunal cited precedents indicating that credit cannot be denied due to procedural lapses when the substantive benefit is not in question.

Issue 2: Invocation of Extended Period for Issuing Show-Cause Notice

The appellant contended that the invocation of the extended period was improper as there was no evidence of fraud, collusion, wilful mis-statement, or suppression of facts. The Department had raised the issue based on an audit conducted in 2010, but the show-cause notice was issued only in 2013, beyond the statutory period of limitation. The Tribunal found that the Department failed to establish any of the ingredients required for invoking the extended period. The appellant, being a Public Sector Undertaking, could not be alleged to have any mala fide intention to evade payment of duty. The Tribunal noted that the Department had ample time to seek clarifications and conduct further verification but failed to do so within the statutory period. Consequently, the Tribunal held that the demand was time-barred and set aside both the demand and the penalty.

Conclusion:

The Tribunal allowed the appeal on both merits and limitation, holding that CENVAT credit cannot be denied for procedural inadequacies when the substantive benefit is not in dispute, and the invocation of the extended period was not justified.

(Pronounced on 12/01/2024)