Wellknown Polyester Ltd vs C.C.E. And S.T.-Daman

The issue involved in the present case Service Tax credit can be availed when the Service Tax has been paid by virtue of a supplementary challan

issued in a case involving suppression, mis-declaration, etc., however, on a reverse charge basis by the service recipient. The issue is squarely covered

by the decision of Tribunal in the case of Nissan Motor India Pvt Ltd. 2019 (2) TMI-CESTAT, Chennai. In the said decision following has been

observed:

In Appeal E/42153/2014 the dispute relates to denial of cenvat credit invoking Rule (9) (1) (bb) and concerns alleged availment of

ineligible input service of Rs.6,12,42,362/- wherein IPR become recoverable from appellants on account of SCN dt. 13.01.2012 issued to

them demanding the equal service tax under Section 73 (1) ibid. The adjudicating authority in the impugned order has confirmed demand of

the said amount availed by the appellants as being ineligible input service tax credit taken by them. We find that entire demand relates to

Rule 9 (bb) of the CCR 2004 which reads as under:

“A supplementary invoice, bill or challan issued by a provider of output service, in terms of provisions of service tax rules, 1994 except

where the additional amount of tax became recoverable from the provider of service on account of non-levy or non-payment or short-levy

or short-payment by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of

the finance act or the rules made there under with the intent to evade payment of tax.â€​

Since the tax amount of Rs.6,21,24,362/- has been paid by them under reverse charge mechanism which specifically fits under Section 9 (e)

ibid, the credit has therefore been availed by the appellants not under Rule 9 (bb) but under Rule 9 (e) of the CCR 2004. We find this

contention to be correct in law. There is no doubt that the demand of Rs.6,21,24,362/- was made under the premise that the same was

required to be paid under reverse charge basis. This being so, such payment will only within the ambit of Rule 9(e) ibid and not Rule 9 (bb)

of the CCR 2004. We also find that the decision relied upon in Essar Oil Ltd. Vs CCE Rajkot - 2014 (303) ELT 255 (Tri.-Ahmd.) is

applicable on all fours to the issue at hand. The relevant portion of the said decision is reproduced as under :

“5.3 From the above prescription, it is evident that for the preparation of an invoice, there has to be a buyer to whom goods are sold.

Further, Rule 11(7) of the Central Excise Rules, 2002 prescribe the following : Goods to be “Rule 11. removed on invoice. - The

provisions of this rule (7) shall apply mutatis mutandis to goods supplied by a first stage dealer or a second stage dealer : Provided that in

case of the first stage dealer receiving imported goods under an invoice bearing an indication that the credit of additional duty of customs

levied on the said goods under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be admissible, the said

dealer shall on the resale of the said imported goods, indicate on the invoice issued by him that no credit of the additional duty levied under

sub-section (5) of Section 3 of the Customs Tariff Act, 1975 shall be admissible; Provided further that in case of the second stage dealer

receiving imported goods under an invoice bearing an indication that the credit of additional duty of customs levied on the said goods

under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be admissible, the said dealer shall on the resale of

such imported goods, indicate on the invoice issued by him that no credit of the additional duty levied under sub-section (5) of Section 3 of

the Customs Tariff Act, 1975 shall be admissible.

Explanation. - For the purposes of this rule, “first stage dealer†and “second stage dealer†shall have the meanings assigned to

them in Cenvat Credit Rules, 2002.â€​

A combined reading of Rule 11(3), Rule 11(7) of Central Excise Rules, 2002 and Rule 9(a)(ii) of the Cenvat Credit Rules, 2004 will convey

that in case of sale of imported goods by a first stage dealer or second stage dealer also the credit is admissible on the basis of such a sale

invoice. A similar situation will exist for supplementary invoice issued by a first stage dealer/second stage dealer under Rule 9(1)(b) of

Cenvat Credit Rules, 2004. The word „Challan‟ and „any other similar document‟ evidencing payment of additional CVD, mentioned

in Explanation to Rule 9(1)(B), will thus mean these situations where duty is paid under a „challan‟ by an importer/dealer of imported

goods who has sold the cenvatable goods. This provision relating to issue of supplementary invoice will not be applicable to the goods

imported by the appellant which are not sold. This interpretation has been upheld by Karnataka High Court in the case of Karnataka Soaps

& Detergent Ltd. v. CCE, Mysore [2010 (258) E.L.T. 62 (Kar.)]. The argument of the ld. A.R. that the „Explanation‟ added to Rule 9(1)

(b) of the Cenvat Credit Rules, 2004 was not existing when Karnataka High Court delivered the above judgment is not tenable because an

„Explanation‟ introduced in the Rule can only clarify the provisions of Rule 9(1)(b), which involve sale of goods and cannot elaborate

the scope of Rule 9(1)(b) of the Cenvat Credit Rules, 2004. In the case of import, assessment of duty is always paid by an importer under the

challans and endorsement to that effect is made on the body of Bill of Entry. In the present facts and conditions of the case, it has to be held

that payment of differential duty was paid as a result of re-assessments with respect to imported capital goods as per law laid down by Delhi

CESTAT in the case of Birla Jute Manufacturing Co. Ltd. v. CC, Calcutta (supra). In Para 7 of this judgment, inter alia, it was held that

refund claims and demands under Section 27 & Section 28 of the Customs Act, 1962 do involve re-assessment of the duty originally

assessed. Further, as per the judgment of CCE, Raipur v. Ambuja Cement Eastern Ltd. (supra) Cenvat credit will be admissible on duty

paying TR-6 challan when it is not disputed that goods were used in the manufacture of excisable goods to be cleared on payment of duty.

Further, in Para 40 of the judgment of Karnataka High Court in the case of Karnataka Soaps & Detergent Ltd. v. CCE, Mysore (supra) it is

held that documents specified in Rule 7 (present Rule 9 of Cenvat Credit Rules, 2004) of the earlier Cenvat Credit Rules is only illustrative

in nature and cannot bar taking of Cenvat credit under Rule 3 of Cenvat Credit Rules. When additional duty is paid under reassessment or

on being pointed out by the Revenue then the credit of such duty paid will be admissible as Cenvat credit to the appellant under Rule 9(1)(c)

of the Cenvat Credit Rules, 2004. In view of the above settled position of law, the credit was rightly availed by the appellant and

accordingly the appeal filed by the appellant is required to be allowed. Once on merits the issue is decided in favour of the appellant, there

is no question of imposing penalty and confiscation of capital goods as adjudicated by the lower authority.â€​

In view of above, the impugned order is not maintainable and the same is set aside. Appeal is allowed.

(Dictated and Pronounced in the open court)