Faurecia Automotive Seating India Pvt. Ltd. Vs Commissioner of Central Excise (CESTAT Chandigarh)
The appeal before CESTAT Chandigarh challenged the Commissioner’s order dated 24.04.2014 confirming a demand of Rs. 2,63,03,909 along with interest and imposing a penalty of Rs. 31,51,955 under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC(1) of the Central Excise Act, 1944. The appellant, engaged in manufacturing automotive seating parts at its Gurgaon unit, had earlier operated another manufacturing unit at Bangalore, which ceased operations in April 2007. During March 2011 to February 2012, FSA France issued ten invoices for business support services addressed to the Bangalore office. During audit, the Department alleged that the Gurgaon unit had wrongly availed and utilized CENVAT credit on invoices addressed to the Bangalore unit, which had a separate service tax registration, and issued a show cause notice proposing recovery of the credit.
The appellant submitted that service tax under the reverse charge mechanism had been discharged by the Gurgaon unit, the GAR-7 challans recorded the Gurgaon unit’s address, payment for the services had also been made by the Gurgaon unit, and the services had been received and consumed only by the Gurgaon unit since the Bangalore manufacturing unit had already become inoperative. It further contended that under Rule 9(1)(e) of the CENVAT Credit Rules, a challan evidencing payment of service tax by the recipient was a valid document for availing CENVAT credit. The appellant also submitted that the mention of the Bangalore address in the invoices was an inadvertent error by the service provider and could not result in denial of substantive CENVAT credit. It further argued that the extended period of limitation was not invocable because the credit had been disclosed in statutory returns and there was no suppression of facts or intention to evade duty.
The Department contended that the appellant had contravened Rules 3, 4(1), 4(7) and 9(1) of the CENVAT Credit Rules, 2004 and justified the denial of CENVAT credit and invocation of the extended period of limitation.
The Tribunal observed that the only issue was whether the Gurgaon unit could avail CENVAT credit where the invoices had inadvertently been addressed to the Bangalore office. It found that the Bangalore manufacturing unit had closed in April 2007 and that the Gurgaon unit was the only manufacturing unit in operation. The Tribunal also noted that service tax under reverse charge had been paid by the Gurgaon unit, the GAR-7 challans mentioned the Gurgaon address, payment for the services had been made by the Gurgaon unit, and the appellant had produced valid challans evidencing payment of service tax in terms of Rule 9(1)(e) of the CENVAT Credit Rules.
The Tribunal held that the input services could not have been consumed by any unit other than the Gurgaon unit and noted that the judicial precedents relied upon by the appellant consistently held that CENVAT credit could be availed on the basis of challans evidencing payment of duty. It further held that the incorrect address mentioned in the invoices was an inadvertent error on the part of the service provider and could not form the basis for denying CENVAT credit to the service recipient. The Tribunal also observed that CENVAT credit, being a substantial benefit, could not be denied on procedural irregularities.
On limitation, the Tribunal found that the appellant had regularly filed statutory returns, the issue came to the Department’s notice only during audit, and the Department had failed to establish suppression of facts with intent to evade payment of service tax. It therefore held that invocation of the extended period of limitation was not justified.
Accordingly, the Tribunal held that the impugned order was not sustainable in law, set it aside, allowed the appeal, and granted consequential relief, if any, as per law.
Cases Discussed
- MIV Logistics Pvt. Limited vs Commissioner of Customs, Cochin (CESTAT Bangalore), 2020 (374) ELT 277 (Tri-Bang)
- Ajanta Manufacturing Limited vs Commissioner of Customs, Kandla (CESTAT Ahmedabad), 2019 (369) ELT 1067 (Tri-Ahmedabad)
- Cargill India Pvt. Limited vs CCE, Bangalore (CESTAT Bangalore), 2016 (45) STR 124 (Tri-Bang)
- Bhalla Techtran Industries Limited vs CCE, Noida (CESTAT Delhi), 2016 (342) ELT 448 (Tri-Del)
- CCE vs Essel Propack Ltd. (Bombay High Court), 2015 (39) STR 363 (Bom)
- Krishna Maruti Limited vs CCE, Delhi-111 (CESTAT Delhi), 2012 (277) ELT 357 (Tri-Del)
- Modern Petrofils vs CCE, Vadodara (CESTAT Ahmedabad), 2010 (20) STR 627 (Tri-Ahmedabad)
- CCE, Vapi vs DNH Spinners (CESTAT Ahmedabad), 2009 (16) STR 418 (Tri-Ahmedabad)
- CCE vs Gas Authority of India Limited (Supreme Court), 2008 (232) ELT 7 (SC)
- India Glycols Ltd. vs CCE, Meerut-II (CESTAT Delhi), 2008 (11) STR 355 (Tri-Del)
- CCE vs Chemplast Sanmar Limited (CESTAT Chennai), 2007 (5) STR 18 (Tri-Chennai)
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The present appeal is directed against the impugned order dated 24.04.2014 passed by the Commissioner of Central Excise, Delhi-III, Gurgaon whereby the learned Commissioner has confirmed the demand of Rs.2,63,03,909/- along with interest and also imposed penalty of Rs.31,51,955/- under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC(1) of the Central Excise Act, 1944.
2. Briefly the facts of the present case are that the appellant is engaged in the manufacture of “Automotives Seating Parts” chargeable to Central Excise Duty under Tariff sub-heading 9401 9000 of the First Schedule of Central Excise Tariff Act, 1985. The appellant also registered with the Central Excise Department for manufacturing of these parts from its unit located at Gurgaon since February 2009. Although, in the past appellant had another manufacturing unit for the same product located in Bangalore which was in operation for the period January 1997 till April 2007. During the period from March 2011 to February 2012, FSA France issued 10 invoices to the appellant company regarding certain business support services provided to the Appellant Company. These invoices were addressed to the “Bangalore office” of the Appellant. During Audit, it was observed by the Department that the appellant had availed and utilized inadmissible CENVAT credit at its Gurgaon unit for providing services in relation to design and development of its products. Further, it was also observed that the Bangalore unit was not administrative office of the Gurgaon unit but a unit having separate registration under the Service Tax. On these allegations, a Show Cause Notice dated 07.03.2013 was issued alleging that the appellant have availed inadmissible CENVAT credit at Gurgaon unit based on the invoices raised on the Bangalore unit by its foreign company, when both units have separate registration of service tax and appellant had utilized the said inadmissible CENVAT credit for payment of Excise Duty for manufactured goods at the time of the removal. The appellant filed detailed reply to the Show Cause Notice submitting that the appellant has availed appropriate CENVAT credit of service tax paid on business support services on proper documents i.e. GAR-7 challans evidencing payment of service tax and have also utilized the same for payment of Central Excise Duty and there is no contravention of any rules. The appellant has also challenged the invocation of extended period of limitation on the ground that they have not suppressed any fact to evade payment of service tax and that substantial benefit cannot be denied for procedural lapse. After following the due process, the learned Commissioner has not agreed with the submissions of the learned counsel for the appellant and confirmed the demand. Hence, the present appeal.
3. Heard both sides and perused the records of the case.
4. Learned Counsel for the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts, the law and the binding judicial precedents. He further submits that it is not in dispute that the service tax under reverse charge (in respect of these invoices) was paid by the Gurgaon unit. The GAR-7 challans also mention the address of the Gurgaon Unit. Further, the payment for the said services has also been made by the Gurgaon unit and accordingly, the Gurgaon unit availed CENVAT credit in respect of the subject invoices. He further submits that the eligibility of the Gurgaon Unit to avail CENVAT credit in respect of these invoices is the subject matter of the present dispute and it is a matter of record that the Bangalore unit of the Appellant was inoperative since 2007 and with effect from February 2009, only the Gurgaon Unit is in operation and therefore, the subject input services could not have been consumed by any unit other than the Gurgaon unit. He further submits that Service Tax payment challan is a valid document for availment of CENVAT credit in respect of reverse charge supplies. He further submits that In terms of Rule 9(1)(e) of the CENVAT Credit Rules, the duty paying document for availment of CENVAT credit is “a challan evidencing payment of service tax by the service recipient as the person liable to pay tax.
5. Learned Counsel further submits that the Gurgaon Unit has discharged the service tax liability under reverse charge. The services were received and consumed by the Gurgaon unit and therefore, it is eligible to avail CENVAT credit on the basis of the challan evidencing payment of duty. For this submission, he relied upon the following decisions:
- CCE vs Essel Propack Ltd. [2015 (39) STR 363 (Bom)]
- Cargill India Pvt. Limited vs CCE, Bangalore [2016 (45) STR 124 (Tri-Bang)]
- India Glycols Ltd. vs CCE, Meerut-II [2008 (11) STR 355 (Tri-Del)]
6. Learned Counsel also submits that mentioning of the wrong address (viz. registered office address at Bangalore instead of Gurgaon unit) was an inadvertent error on the part of the service provider and the same cannot lead to denial of CENVAT credit at the service receiver’s end. For this submission, he relied upon the following decisions:
- Bhalla Techtran Industries Limited vs CCE, Noida [2016 (342) ELT 448 (Tri-Del)]
- Krishna Maruti Limited vs CCE, Delhi-111 [2012 (277) ELT 357 (Tri-Del)]
- CCE vs Chemplast Sanmar Limited [2007 (5) STR 18 (Tri-Chennai)|
- Modern Petrofils vs CCE, Vadodara [2010 (20) STR 627 (Tri-Ahmedabad)]
- CCE, Vapi vs DNH Spinners [2009 (16) STR 418 (Tri-Ahmedabad)
7. Learned Counsel also submits that it is well settled that the Show Cause Notice is the foundation of the case and that the Department has to rest its case only on the basis of the allegations in the show cause notice and cannot traverse beyond the allegations in the show cause notice. For this submission, he relied upon the following decisions:
- CCE vs Gas Authority of India Limited [2008 (232) ELT 7 (SC)]
- Ajanta Manufacturing Limited vs Commissioner of Customs, Kandla (2019 (369) ELT 1067 (Tri-Ahmedabad)]
- MIV Logistics Pvt. Limited vs Commissioner of Customs, Cochin [2020 (374) ELT 277 (Tri-Bang)]
8. Learned Counsel further submits that extended period of limitation is not invokable when the credit was duly disclosed in the excise returns filed by the Appellant and there is no positive finding of mens rea and intention to evade duty on the part of the appellant. He further submits that when the demand is not sustainable both on merits and limitation, interest and penalty are not imposable.
9. On the other hand, learned Authorized Representative for the Department also filed the written submissions justifying the denial of CENVAT credit and invocation of extended period of limitation on the ground that the appellant has contravened the provisions of Rule 3 of CENVAT Credit Rules and also contravened the provisions of Rules 4(1) and 4(7) and 9(1) of CENVAT Credit Rules, 2004.
10. We have considered the submissions made by both the parties and have also perused the material on record. We find that the only issue in the present case is whether the CENVAT credit can be availed by the Gurgaon unit of the appellant when the invoices had been inadvertently addressed to the Bangalore office. We also find that the appellant is presently the only unit engaged in the manufacture of the said goods and it’s another unit at Bangalore which was operative has closed down from April 2007. We also find that it is not in dispute that the service tax under reverse charge has been paid by the Gurgaon unit and GAR-7 challan also mention the address of the Gurgaon unit and payment has also been made by the appellant and therefore, according to us the Gurgaon unit is eligible to avail CENVAT credit in respect of these invoices. Further, we find that the appellant has produced on record the service tax payment challan which is a valid document for availment of CENVAT credit in terms of Rule 9(1)(e) of CENVAT Credit Rules. We also find that in the present case, the input services could not have been used by any other unit other than the Gurgaon unit being the only manufacturing unit and moreso, when they have discharged the service tax liability under reverse charge, it has been consistently held in the decisions relied upon by the appellant cited supra that CENVAT credit can be availed on the basis of challan evidencing payment of duty. We also find that mentioning of the wrong address in the invoices is an inadvertent error on the part of the service provider and the same cannot be the basis for denial of CENVAT credit on service receiver’s end which is so held in various decisions cited supra by the appellant. We also note that CENVAT credit which is a substantial benefit cannot be denied on procedural irregularities. We also note that in the present case, the appellant has been filing the Returns regularly and has not suppressed any material fact with intention to evade payment of duty. It is only during the course of audit that the Department observed that the appellant has availed inadmissible CENVAT credit. Further, we find that the Department has not been able to establish suppression on the part of the appellant with intent to evade payment of service tax and therefore, in our view, the invocation of extended period of limitation is not justified in the present case.
11. Keeping in view our discussion above, we are of the considered opinion that the impugned order is not sustainable in law and therefore, we set aside the same by allowing the appeal of the appellant with consequential relief, if any, as per law.
(Order pronounced in the open court on 07/01/2025)
