By TIOL News Service

MUMBAI, FEB 05, 2019: THE appellant is engaged in the business of construction of residential complex.

Pursuant to a CERA audit on the records of the assessee and issuance of SCN dated 15.06.2016, CENVAT credit of Service Tax paid on rent-a-cab service amounting to Rs.5,79,236/- for the period between April 2012 to September 2015 was denied and an equivalent amount of penalty was imposed along with interest.

The Commissioner(A) rejected the appeal filed mainly on the ground of non-compliance of the pre-deposit provision.

The appellant is before the CESTAT and challenges this decision on the ground that it had taken CENVAT credit but not utilized the same and reversed the same Under Protest, which fact is mentioned in the impugned order in paragraphs 30 and 42; that the observation of the Commissioner(A) that the appellant had failed to produce any evidence of reversal of the said amount of Rs.5,78,923/- and failed to produce protest letter to substantiate the same, is contradictory to the averment made earlier; that vide Instruction F.No. 15/CESTAT/General/2013-14 dated 28.08.2014 it is clarified that mandatory pre-deposit of duty confirmed can be made from CENVAT credit account; that credit on rent-a-cab service was admissible since appellant had availed the said service for arranging site visit of the township for its prospective customers. Reliance is placed on the decision in M/s Marvel Vinyls Ltd. - 2016-TIOL-3071-CESTAT-DEL .

The AR supported the impugned order.

The Single Member Bench observed that the appeal was rejected on the twin grounds of not having made the pre-deposit as well as the appellant not being entitled to credit in view of the amendment to the definition of input service contained in rule 2(l) of CCR, 2004 excluding credit on 'rent-a-cab' service.

Insofar as the question of non-compliance of the pre-deposit requirement is concerned, the CESTAT observed that as pointed out by the appellant, the findings of the Commissioner(A) are contradictory. Inasmuch as since the CENVAT credit was reversed, the same ought to have been treated as sufficient compliance of mandatory pre-deposit requirement.

And, therefore, the finding of Commissioner (Appeals) in respect of non-compliance of provision of Section 35F is erroneous, the Bench held.

Nonetheless, the CESTAT observed that the lower appellate authority had also discussed the merit of the appeal and held that the appellant is not entitled to avail such benefit w.e.f. 01.04.2011 and this finding itself was indicative of the fact that compliance of provision for pre-deposit was subconsciously accepted by the Commissioner (Appeals).

It was further observed -

"…It is also referred in the said manual that after such submission of audit report, in cases where the disputed amount have not already been paid by the assessee at the spot, demand notices are issued by the department for their recoveries. EA 2000 audit was therefore held to be participative audit. Likewise, CERA audit is conducted by the Comptroller and Auditor General of India in respect of receipt and expenditure of the Government of India. It also discharges revenue audit which covers central excise, service tax and customs laws during which time the assesses were examined by CERA audit party to point out the deficiencies, leakage of revenue and non recoveries of dues by the Central Excise Department. Therefore, it cannot be said that only because audit party had found some credit availed as inadmissible, suppression of fact is made out. It cannot also be established that appellant had any malafide intention to suppress its duty liability from the department…"

Concluding that the CAG Audit cannot form the basis for invocation of extended period, the impugned order was set aside and the appeal was allowed.

In passing: Truth emerges more readily from error than from confusion - Francis Bacon

(See 2019-TIOL-373-CESTAT-MUM)