Whether CENVAT credit can be taken on an earlier date where cenvatable documents were available with assessee?

PJ/CASE LAW/2015-16/2625

Case:- GAMMON INDIA LTD. Versus COMMISSIONER OF C. EX. & S.T., VADODARA

Citation:- 2015 (38) S.T.R. 211 (Tri. - Ahmd.)

Brief facts:-This appeal has been filed by the appellant M/s. Gammon India Limited with respect to O-I-A No. PJ/209/VDR-I/2013-14, dated 15-7-2013 passed by Commissioner (Appeals), Vadodara. Under this OIA dated 15-7-2013 Commissioner (Appeals) has upheld in to the OIO No. 07/Dem/ST/JC/D-III/2012, dated 24-9-2012 passed by the Adjudicating authority.

Appellant’s contention:- Shri D.R. Bhatt (Chartered Accountant) appearing on behalf of the appellant argued that out of total confirmed demand of Rs. 10,20,790/- amount of Rs. 4,36,718/- was available to them as CENVAT credit for which cenvatable documents were existing with the appellant during the relevant period on which credit was not taken by the time audit was undertaken. That this aspect was clearly brought out in their reply dated 7-7-2012 to the show cause notice. That a revised ST-3 return was also filed by the appellant and CENVAT credit was taken in the CENVAT account as if available before the visit of the audit. That actual CENVAT utilization by CERA had been taken as Rs. 29,86,623/-, as per the wrong information inadvertently provided by the appellant, as against CENVAT utilization of Rs. 24,05,767/- during April 2006. That demand of Rs. 5,80,856/- as a result of appellant’s error had been demanded by the lower authorities which in fact was not demandable. That this aspect has been duly noted by the orders of the lower authorities but no findings were given as to why the calculation errors explained by the appellant were not acceptable. So far as imposition of penalties under Section 76 and 78 of the Finance Act, 1994 were concerned, Learned Chartered Accountant argued that appellant had a reasonable cause and belief that CENVAT credit of Rs. 4,36,718/- was available on the basis of cenvatable documents and that remaining amount of Rs. 5,80,856/- was due to reconciliation errors, therefore, penalties even if imposable were required to be set-aside/waived under Section 80 of the Finance Act, 1994.

Respondent’s contention:- Shri G.P. Thomas (AR) appearing on behalf of the Revenue argued the credit of Rs. 4,36,780/- was taken on the cenvatable documents for the earlier period and which was not available in appellant’s CENVAT register during the visit of the Audit officers. That even if certain CENVAT credit was found to be admissible to the appellant afterwards the same could have been taken after the visit of the Audit officers. This aspect has been properly elaborated by the first appellate authority in Para 10 of the OIA dated 15-7-2013. That penalties have been correctly imposed upon the appellant by the lower authorities and accordingly defended the orders passed by them.

Reasoning of judgement:-It was observed that an amount of Rs. 4,36,780/-, out of the total amount demanded by the Revenue had been adjusted by the appellant by taking Cenvat credit on an earlier date, on the basis of some cenvatable documents for which no credit was taken by the appellant when the Cenvat register was verified by the visiting audit officers. Appellant cannot take Cenvat credit in the Cenvat account on a date earlier than the visit of the audit officers when such credit was not earlier reflected in the Cenvat account. If some credit was admissible on the basis of cenvatable documents existing with the appellant, but credit was not taken, then the same could have only been taken after the date of visit of the Audit officers. This aspect as discussed by the first appellate authority in Para 10 of the OIA dated 15-7-2013 was acceptable and the demand of Rs. 4,36,780/- along with interest, was sustainable against the appellant. It had been correctly held by the first appellate authority that if certain invoices were left out for which credit was not taken earlier then the same can be taken only as per the prescribed procedures and not on any date as per appellant’s choice by modifying the records at will. Appeal filed by the appellant with respect to demand of Rs. 4,36,780/- along with interest is therefore, rejected.

So far as remaining amount of demand of Rs. 5,80,856/- was concerned, it was observed that appellant gave wrong figures of Rs. 29,86,623/- as cenvat utilisation in the month of April 2004 instead of actual utilisation of Rs. 24,05,767/-. It was observed from the case records that this aspect was agitated before the lower authorities but the same was not properly appreciated by the Adjudicating authority. There was no discussion by the adjudicating authority as to why the revised claim of utilisation of Rs. 24,05,767/- CENVAT credit utilisation was not correct. This aspect of the demand was required to be remanded back to the Adjudicating authority for reconciliation after affording an opportunity of personal hearing to the appellant.

So far as imposition of penalties upon the appellant were concerned, it was observed that appellant was of the bona fide belief that CENVAT credit could be taken on an earlier date also where cenvatable documents were available with them. In the case of clandestine removal cases were admissible CENVAT credit was abated from the total demand even at the appellate stage. Further demand of Rs. 5,80,856/- is with respect to reconciliation of figures regarding taking of cenvatable credit. On the basis of above factual matrix, penalties under Section 76 and 78 of the Finance Act, 1994 were required to be set-aside under Section 80 of the Finance Act, 1994, even if extended period was invokable. Appeal filed by the appellant was required to be allowed to this extent.

In view of the above observations appeal filed by the appellant was allowed to the extent indicated hereinabove.

Decision:- Appeal allowed.

Comment:- The analogy of the case is that if certain invoices were left out for which credit was not taken earlier then the same can be taken only as per the prescribed procedures and not on any date as per appellant’s choice by modifying the records at will.

However, there is no need for imposition of penalty when there is bonafide belief of assessee.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2625

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