The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that under cenvat credit cannot be denied for belatedly filing ER1 Returns.The bench of M. Ajit Kumar (Technical Member) has observed that in the CENVAT scheme, there is no one-to-one correlation between the inputs and the final product. There was no time limit during which credit had to be taken...
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that under cenvat credit cannot be denied for belatedly filing ER1 Returns.
The bench of M. Ajit Kumar (Technical Member) has observed that in the CENVAT scheme, there is no one-to-one correlation between the inputs and the final product. There was no time limit during which credit had to be taken on duty-paid documents. In the absence of any allegation of fraud or that the documents on which the credit was availed were not proper or that the inputs were not at all used for the manufacture of the final product, the credit cannot be denied. Procedural issues like the ER1 returns being belatedly filed, etc. should not come in the way of substantial justice when the law does not bar such a relief.
The appellant/assessee, a manufacturer of steel forgings falling under Chapter 73 of the Central Excise Tariff Act, 1985 (CETA, 1985), shifted their unit situated in Chrompet to another of their units in Appur village during the period from July 2007 to November 2007. They ceased manufacturing activity at their Chrompet Unit in October 2007. The appellant requested permission for the transfer of CENVAT credit available in their CENVAT credit account from Chrompet Unit to that of Appur Unit.
The authorities permitted the transfer of the balance of credit lying unutilized as of October 31, 2007, of Rs. 3,64,704 (excise duty) and Rs. 36,620 (service tax), along with a credit of Rs. 16,334 (capital goods) taken on October 31, 2007.
The department informed the appellant that the credit taken beyond October 2007 is not eligible for transfer as the unit at Chrompet had stopped production and was merged with the Appur unit.
An amount of Rs. 12,44,192 lying unutilized in the CENVAT account was permitted to be transferred to the Appur unit, but the remaining amount was not permitted to be transferred for the reason that they involved service tax credits taken after the closure of operations in their Chrompet unit and that ER1 returns informing the availment of credits in November 2007 were filed after a lapse of one and a half years, i.e., June 2009.
The appellant preferred to appeal before the appellate authority. The Appellate Authority rejected the appeal.
The assessee contended that the order of the learned CCE (Appeals) is wrong in concluding that the entire credit (for which credit was taken in November 2007) was input service tax. The amount also included Rs. 61,992 for seven items of capital goods received between January 2007 and November 2007 in their Chrompet unit. No CENVAT credit could be taken at Chrompet Unit for the input services availed between October 2006 and October 2007, as there was a statutory restriction on availing credit for input services in the absence of appellants having failed to make the payment to the service providers. There was no stipulation that the transfer of CENVAT credit and the continuation of manufacturing activities should co-exist.
The tribunal, while allowing the appeal, held that procedural issues like the ER1 returns being belatedly filed, etc. should not come in the way of substantial justice when the law does not bar such a relief.
The tribunal order approving the rejection of the appellant's request for a transfer of credit is set aside.
Counsel For Appellant: R. Parthasarathy
Counsel For Respondent: N. Satyanarayanan
Case Title: M/s. El Forge Ltd. Versus Commissioner of GST & Central Excise
Case No.: Excise Appeal No.42145 of 2014