The Allahabad Bench of Customs, Excise, & Service Tax Appellate Tribunal ( CESTAT ) set aside a recovery order concerning M/s Veena Enterprises, which had availed CENVAT credit instead of seeking a refund and utilised the same for the payment of central excise duty.
The appellant, M/s Veena Enterprises, engaged in manufacturing tiles of aluminium and iron & steel, was also registered with the Service Tax Department for payment of service tax under the category of Transport of Goods by Road/Goods, Transport Agency Services.
During an audit, it was discovered that the appellant had wrongly availed CENVAT credit of Rs. 3,06,692/- in July 2016, without proper documents or invoices to support the claim.
A show cause notice was issued, questioning why the credit of Rs. 3,18,906/- (including service tax and central excise) should not be recovered, along with interest and penalties.
The Order-in-Original issued by adjudicating authority, confirmed the recovery of CENVAT credit amounting to Rs. 3,18,906/- and imposed corresponding penalties and interest.
Pravin Sharma, the counsel for the appellant, argued that the amount of Rs. 3,06,692/- was indeed paid by the appellant and was due for a refund, which was reflected in their ER-1 return.
The counsel contended that the appellant had no malafide intention and had declared the credit in their returns, arguing against the invocation of the extended period of limitation.
Sandeep Pandey, the authorised representative for the respondent, maintained that the appellant should have claimed a refund through proper procedures under Section 11B of the Central Excise Act, 1944.
The respondent argued that the appellant’s action constituted misdeclaration/suppression of facts, justifying the extended period for demand and the penalties imposed.
The bench of Sanjiv Srivastava (Technical Member), acknowledged that the appellant was entitled to a refund of the service tax paid. However, it noted that instead of claiming a refund, the appellant availed the amount as CENVAT credit and used it to pay central excise duty, which was not a prescribed document for availing credit under Rule 9 of the CENVAT Credit Rules, 2004.
The tribunal observed that since the credit taken was reflected in the appellant’s ER-1 return, there was no suppression of facts, and the authorities should not have invoked the extended period of limitation as the appellant declared the credit in their returns.
Additionally, Rule 9(e) of the CENVAT Credit Rules does prescribe a challan evidencing payment of service tax by the service recipient as a valid document for availing credit. Thus, the tribunal set aside the impugned order and allowed the appeal.
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