Common Credit Only Applies for Rule 6(3A) Reversal: CESTAT Allahabad

Bharat Heavy Electricals Limited Vs Commissioner CGST & Central Excise (CESTAT Allahabad)

Summary: The Customs, Excise & Service Tax Appellate Tribunal, Allahabad Regional Bench, allowed the appeal filed by Bharat Heavy Electricals Limited against the order confirming a service tax demand of Rs. 10,99,10,976/- for 2014-15 and 2015-16 arising from alleged short reversal of CENVAT credit under Rule 6(3A) of the CENVAT Credit Rules, 2004. The Appellant, a public sector undertaking providing taxable services including Works Contract Services and Repair and Commissioning Services and also engaged in trading activity, had opted for proportionate reversal and had disclosed the reversals in its ST-3 Returns.

In computing the reversal, it considered only common CENVAT credit rather than total CENVAT credit, excluding credit relating exclusively to taxable output services or dutiable goods. The Department, following investigation by DGGI Gurugram, alleged that total CENVAT credit was required to be used in the formula and issued a Show Cause Notice dated 17.09.2020 under Section 73 of the Finance Act, 1994 read with Rule 14 of the CENVAT Credit Rules, invoking the extended period of limitation, together with interest and penalty. The Tribunal first examined limitation and observed that invocation of the extended period requires the statutory conditions to be established, including deliberate suppression or wilful misstatement with intent to evade duty.