By TIOL News Service

MUMBAI, MAR 27, 2018: IN terms of ST VCES, 2013 the appellant applied for payment of taxes (payable on reverse charge basis and) which were not paid by them.

The tax liability of the appellant was scrutinized and accepted by the Revenue authorities and finally a discharge certificate in form VCES-3 was issued.

Based on the said discharge certificate, the appellant availed CENVAT credit of the tax paid by them.

Proceedings were initiated to deny the CENVAT credit on the ground that such discharge certificate is not one of the specified documents for the purposes of availment of credit u/r 9 of the CCR, 2004.

The credit was denied by the Deputy Commissioner.

In appeal, the Commissioner(A) agreed with the assessee that the said discharge certificate issued under VCES Scheme is an admissible document for the purpose of availment of credit in terms of rule 9(1)(e) of the CCR, 2004, as observed by the Board in various circulars. However, the lower appellate authority observed that the assessee should have availed the credit on the basis of challan itself vide which the tax was deposited instead of waiting for the discharge certificate. And since, in some of the cases the credit was availed after a lapse of six months from the date of issuance of challan, the same was barred by limitation.

In fine, the appeal was partly allowed by the Commissioner(A).

The appellant is now before the CESTAT challenging this order on the ground that it has gone beyond the allegations leveled in the show-cause notice.

The Bench agreed and further observed -

++ Having held that the said (discharge) certificate was a proper document, the appellate authority should have allowed the credit instead of rejecting the part on the ground of time bar.

++ In any case and in any view of the matter, I find that this specialized scheme was introduced by the Government of India for a limited period where the assessee is required to deposit duty and apply to the Revenue who would issue discharge certificate, on being satisfied about the quantum of taxes so paid by an assessee.

++ If the assessee's tax credit is on the basis of challan itself, the concurrence of the Revenue is not involved and it can be alleged that he deposited the tax and took the credit on his own without waiting for the final order of the acceptance by the proper authority. As such, it was necessary, under the scheme, to receive the discharge certificate before availing the credit, in which case, even limitation would not get involved.

The impugned order was set aside and the appeal was allowed with consequential relief.

In passing: The VCES, 2013 FAQ mentions thus –

Q22. (a) Whether the tax dues amount paid under VCES would be eligible as cenvat credit to the recipient of service under a supplementary invoice? (b) Whether cenvat credit would be admissible to the person who pays tax dues under VCES as service recipient under reverse charge mechanism ?

Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013, prescribes that cenvat credit cannot be utilized for payment of tax dues under the Scheme. Except this condition, all issues relating to admissibility of cenvat credit are to be determined in terms of the provisions of the Cenvat Credit Rules.

As regards admissibility of cenvat credit in situations covered under part (a) and (b), attention is invited to rule 9(1)(bb) and 9(1)(e) respectively of the Cenvat Credit Rules.

(See 2018-TIOL-964-CESTAT-MUM)