Payments Made Through Cenvat Account Is Liable To Be Re-Credited If Excise Duty Is Paid In Cash: CESTAT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that once the duty has been paid in cash, earlier payments made through the Cenvat Account are liable to be re-credited to the Account and no objection that such re-credit was not on the basis of any eligible document can be adopted by the department.

The bench of P.K. Choudhary (Judicial Member) has observed that the suo motu credit of Cenvat reversed earlier involved only an account entry reversal and, in the process, no outflow of funds from the assessee, and accordingly, filing of a refund claim under Section 11B of the Central Excise Act, 1944, is not required.

The appellant/assessee was issued an Audit Memo to pay Rs. 4,44,960 as the service tax on Rs. 36,00,000 received for having provided "Renting of Immovable Property Service." The appellant paid Rs. 4,44,960 by debit to the Cenvat account along with interest.

On the same day, the appellant paid Rs. 9,85,086 suo motu by debit to the Cenvat account towards service tax on "Renting of Immovable Property Service" rendered during the Financial Year 2008–2009. These payments were intimated to the Range Officer via a letter dated March 31, 2009.

On March 8, 2010, the appellant paid Rs. 9,85,086 from its current account. When informing the jurisdictional range officer about the payment of Rs. 9,85,086 from the current account, the appellant stated that they would reverse the use of input service credit in March 2010, which was originally adjusted in the March 2009 ST-3 Return after payment was made. Accordingly, a credit entry for Rs. 9,85,086 was made in the Cenvat Account on March 31, 2010.

The EA-2000 Auditors incorrectly believed that the reversal credit entry was an input service credit of service tax paid by the appellant on "Renting of Immovable Property Service" received during the course of the subsequent audit in March 2011. On the grounds that the appellant's service is not an input service, the auditors directed reversal with interest.

A show-cause notice was issued for the recovery of the inadmissible input service credit alleged on the erroneous premises.

The tribunal, while allowing the appeal, noted that the appellant had discharged the duty burden from their personal ledger account (PLA), and as such, there is no dispute about the same. They have reversed the debit entry made in their credit account, which was previously used for payment of duty, with this payment of duty out of PLA. Though there was no proposal in the show-cause notice to deny such a re-credit, the original adjudicating authority went ahead and, even after accepting that the duty was paid subsequently in cash, disallowed the re-credit and confirmed the duty to that extent.

Case Title: M/s Mideast Integrated Steels Ltd. Versus Commissioner of CGST & Excise

Citation: Excise Appeal No.76841 of 2018

Date: 19.01.2023

Counsel For Appellant: Advocate K.K.Acharya

Counsel For Respondent: Authorised Representative A.Roy

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