By TIOL News Service

MUMBAI, JULY 01, 2014: CENVAT credit of Rs.1,08,263/- was denied to the appellant by the lower authorities on the ground that the documents on the strength of which credit has been taken were not specified under the Rules.

The appellant is before the CESTAT and submits that the only ground for denial is that they had taken credit on the basis of extra copy, Xerox/photo copies of the duty paid documents; otherwise there is no finding to the effect that the appellant is not eligible for credit. For contending that denial of CENVAT Credit for procedural infraction is not permissible in law, the appellant relied on a plethora of decisions. Another plea taken is that the SCN was issued in December, 1994 and adjudication was done only in the month of February 2007 i.e. after a hiatus of 12 years and on this ground alone the proceedings needed to be set aside. In this regard, reliance is placed on the Bombay High Court decision in the case of Shirish Harshavadan Shah vs. Deputy Director, ED.

The Revenue representative supported the order of the lower authorities by relying on the decision in DSM Sugar 2012-TIOL-1906-CESTAT-DEL wherein the denial of CENVAT Credit taken on duplicate copy of invoice/extra copy of invoices was upheld on the ground that these are not prescribed documents.

The Bench held -

++ The CENVAT Credit scheme adopted and operationalized in India is based on the Tax Credit Method which relies upon sanctity of the documents. That is why certain documents have been prescribed statutorily for availing of the credit. If those documents are not submitted, there is no vested right accruing to the assessee for taking the credit.

++ The argument that credit can be taken even when there are procedural infraction is not acceptable for the reason that the Apex Court in the case of Hari Chand Sri Gopal - 2010-95-SC-CX-LB and in Indian Oil Corporation Ltd. 2012-TIOL-04-SC-CX held that in order to claim the benefit under the law, substantial compliance is not enough and the procedures prescribed in the statute should be mandatorily followed.

++ This ratio prevails over the case laws relied upon by the appellant. Therefore, I hold that the appellant was ineligible to take CENVAT Credit on the strength of documents which are not statutorily prescribed.

As regards the second argument taken by the appellant that there was inordinate delay on part of the department in initiating the adjudication proceedings and the reliance placed on the Bombay High Court decision, the Bench observed -

++ I note that this point has not been raised either before the adjudicating authority or before the lower appellate authority. Having failed to raise this ground before the adjudicating authority as well as first appellate authority and having participated in and acquiesced to the proceedings before the adjudicating authority, the appellant cannot now be heard to say that there was inordinate delay and therefore, proceedings should be dropped. It is also on record that the appellant has already reversed the CENVAT Credit wrongly taken.

Holding that there is no merit in the appeal, the same was dismissed

(See 2014-TIOL-1165-CESTAT-MUM)