Whether ordering pre deposit proper if credit was denied for reason that it was taken on improper documents?

PJ/Case Law/2014-15/2348

Case:- MEDICARE SERVICES (INDIA) PVT. LTD. V/S CESTAT, KOLKATA

Citation:- 2014 (303) E.L.T. 490 (Cal.)

Brief facts:-The brief facts of the case is that by the impugned order, the CESTAT disposed of two applications namely, an application for correction and/or rectification of the mistakes as well as an application seeking waiver of the deposit of duty to maintain the appeal.

So far as the first order is concerned, the petitioner is not aggrieved as the CESTAT has allowed the said application permitting the petitioner to amend and/or rectify the mistakes. But so far as the second application is concerned, the CESTAT has directed the deposit of 25% of the service tax amount and 10% of Cenvat credit amount within eight weeks.

Though the petitioner claims that the services so provided falls under the heading “services by club or association” but the assessing authority at the time of passing the assessment order held that the said services are coming under the head “insurance auxiliary services”. Precisely, the aforesaid dispute is a subject matter of an appeal before the CESTAT which is yet to attain finality. On perusal of the impugned order this Court finds that the CESTAT had disposed of the said application seeking waiver of the deposit of duty on plea that the Cenvat credit claims by the petitioner on the basis of the document which is not prescribed.

Appellant’s contentions:-The learned advocate appearing for the petitioner submits that the technicality should not stand in the way of dispensation of justice, if the other materials and documents availed with the authorities justify the credit to be availed by the assessee and placed reliance upon judgments of the tribunal at Delhi in case of Cosmos Casting India Ltd. V. Commissioner of Central Excise, Raipur reported in 2011 (23) S.T.R. 44 and in case of Wichitra Auto Ltd. V. Commissioner of Central Excise, Chennai- II reported in 2012 (284) E.L.T. 231.

The petitioner further submits that one of the criteria for the undue hardship is a financial incapacity and the tribunal has not recorded any finding on such aspect. In support of the aforesaid contention, reliance is placed upon a Co-ordinate Bench decision of the Court in case of Amitava Saha v. CESTAT reported in 2007 (215) E.L.T. 173 (Cal.).

Respondent’s contentions:-The respondent authorities, however, submit that the petitioner was, in fact, providing “insurance auxiliary services” and not the “services by club or association” and therefore, the Cenvat credit which they availed was rightly reversed by the assessing authority. It is further submitted that considering the facts and documents produced before tribunal, the tribunal it self granted the waiver to the extent of 75% and 90% against the service tax amount and the Cenvat credit respectively and the said order should not be interfered with.

Reasoning of judgment:- After hearing the respective submissions, it appears that the CESTAT had proceeded to dispose of the aforesaid application filed by the petitioner on the plea that the petitioner was allowed the Cenvat credit on the basis of the documents which are not prescribed under 9(1) of the Cenvat Credit Rules, 2004.

Although the Tribunal recorded that it has considered the financial hardship but there is no finding of facts recorded therein. There is no dispute to the proposition that if there is a prescribed method for availing the Cenvat credit the same are to be adhered to and followed. But it is equally true that technicalities should not stand in the way of dispensation of the justice if the necessary ingredients required for availing of such credit under the prescribed forms are otherwise available. It cannot be decipher either from the findings recorded by the CESTAT nor from the department side that the documents on which the Cenvat credit was availed is not sufficient to grant such credit. Though the judgments rendered by the Tribunal does not bind this Court but the same may have persuasive value. The tribunal in this aspect, as it appears from the aforesaid reports, consistently held that if the particulars are contained in the documents as required to be done as proviso to sub-rule (2) of rule 9, this will not deny the Cenvat credit on hyper technicalities. This Court must record that the Tribunal must record the reasons either for allowing the waiver or refusal to waiver on the materials as well as the pleadings made before it. Mere quoting the provision does not absolve the Tribunal from its responsibility and obligation to record the reasons on each and every issue that has been raised before it. Since this Court finds that the application seeking waiver is disposed of solely on the ground that the availability of Cenvat credit on the basis of documents not prescribed under sub-rule (1) of rule 9 of the Cenvat credit rules, 2004 this Court, therefore, finds that the said order suffers from illegality and/or infirmity.

This Court, therefore, quash and set aside the portion of an order dated 7-10-2013 by which an application seeking waiver of deposit of duty is disposed of. The Tribunal is directed to consider the said application afresh and while doing so, shall also take into consideration the pleadings as well as the documents relied on or sought to be relied on provided the same is otherwise permissible under the procedural law, by recording the reasons thereupon in accordance with law. The entire exercise shall be completed by the Tribunal within three weeks from the date of communication of this order.

It is needless to mention that this Court has no occasion to go into the merits of the said application filed by the petitioner and the Tribunal shall be free to decide the same independently and without being influenced by any observation made herein in accordance with law.

Decision:- The petition disposed off.

Comment:- The analogy of the case is that when it is settled position that the benefit of Cenvat credit cannot be denied solely for procedural lapses. Hence, ordering pre-deposit for denial of credit due to the reason that the documents on the basis of which credit was taken were not prescribed under rule 9(1) of Cenvat Credit Rules, 2004 suffers from illegality, infirmity. Moreover, inspite of the fact that there was financial difficulty, the High Court opined that the Tribunal should reconsider the stay application afresh.

Prepared by: Monika Tak

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PJ/Case Law/2014-15/2348

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