Case Law Details
Vodafone Essar East Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)
Introduction: The case of Vodafone Essar East Limited Vs Commissioner of CGST & CX, as heard by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Kolkata, revolves around the disallowance of cenvat credit inadvertently availed by the appellant. The central issue pertains to whether the interest is payable in a scenario where there is ample cenvat credit available in the account.
1. Background of the Case:
The appellant, Vodafone Essar East Limited, received services from M/s. Indus Towers Ltd. During the payment of advance for these services, the appellant availed cenvat credit. Subsequently, when invoices were issued, the appellant took cenvat credit for the full invoice amount. Realizing that they had inadvertently availed excess cenvat credit on the advance payment, the appellant adjusted this over-availed credit with another cenvat credit that was available to them. The revenue contended that the appellant had taken cenvat credit twice without providing any evidence of reversing the inadvertently taken credit, leading to the issuance of the impugned order.
2. Tribunal’s Decision:
Upon hearing the arguments of both parties and examining the case records, the Tribunal found the following:
- The appellant had initially availed cenvat credit on the advance payment.
- Subsequently, the appellant availed cenvat credit for the full amount of the invoice.
- The appellant had voluntarily corrected their mistake by availing lesser cenvat credit, equivalent to the amount corresponding to the advance payment.
- Both parties did not dispute these facts.
In light of these facts, the Tribunal concluded that the appellant had indeed reversed the excess cenvat credit, thereby eliminating the need for further reversal of cenvat credit. Additionally, the Tribunal noted that there was sufficient cenvat credit available in the cenvat credit account.
3. Legal Precedent:
The Tribunal cited the decision of the Hon’ble Karnataka High Court in the case of Commissioner of Central Excise & Service Tax, LTU, Bangalore v. Bill Forge Private Limited [2012 (279) E.L.T. 209 (Kar.)]. This case established that:
- Interest is compensatory in nature, imposed on an assessee who withholds the payment of tax when it’s due and payable.
- Interest is levied on the actual amount withheld and the extent of delay in tax payment.
- If there’s no liability to pay tax, there’s no liability to pay interest.
- Interest cannot be claimed from the date of wrong availment of Cenvat credit, but rather from the date Cenvat credit is taken or utilized wrongly.
The Court’s decision affirmed that interest is payable when there is a delay in paying due duty. Therefore, since the appellant had rectified their error promptly and reversed the erroneously availed cenvat credit, they were not liable to pay interest. The key principle emphasized was that the interest is imposed to compensate for actual tax losses incurred by the government due to delayed payments.
Conclusion: The Vodafone Essar East Limited Vs Commissioner of CGST & CX case heard by CESTAT Kolkata delivers a significant legal perspective on the application of interest concerning cenvat credit. The judgment highlights that interest is only applicable in cases where tax payments are delayed and does not arise when no duty is payable, especially if errors are corrected promptly. The case reaffirms the importance of compensatory interest in taxation matters and sets a valuable precedent for similar situations in the future.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order wherein cenvat credit availed inadvertently by the appellant have been disallowed.
2. The facts of the case are that the appellant received certain services from M/s. Indus Towers Ltd. and at the time of payment of advance, they have taken cenvat credit on the advance payment. Later on, invoices were raised to the appellant and on whole of the amount of invoice, the appellant took cenvat credit. Thereafter, realizing that he appellant has taken excess cenvat credit on the advance paid by them, they adjusted the advance availment of cenvat credit with availment of another cenvat credit available to the the appellant. The revenue is of the view that the appellant has taken cenvat credit twice and have not produced any proof or evidence that they have reversed the cenvat credit taken inadvertently, therefore, the impugned order has been passed. Aggrieved from the said order, the appellant is before me.
3. Heard the parties and perused the records.
4. On perusal of the records, I find that it is a fact on record that the appellant has taken cenvat credit on advance payment made by them and the cenvat credit was also taken on full amount raised by the service provider, but later on the appellant has availed less cenvat credit on the amount equivalent to the amount of cenvat credit pertaining to the advance paid by them. As this fact has not been disputed by either of the sides, therefore, it is concluded that the appellant has reversed the excess cenvat credit and are not liable to reverse the cenvat credit again.
5. Further, I found that there is ample cenvat credit lying in the cenvat credit account, therefore, no payment of interest is required to be made by the appellant in the light of the decision of the Hon’ble Karnataka High Court in the case of Commissioner of Central Excise & Service Tax, LTU, Bangalore v. Bill Forge Private Limited [2012 (279) E.L.T. 209 (Kar.)], wherein the Hon’ble High Court has held as under:-
“21. Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly.
22. In the instant case, the facts are not in dispute. The assessee had availed wrongly the Cenvat credit on capital goods. Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry. Thus the assessee did not take the benefit of the wrong entry in the account books. As he had taken credit in a sum of Rs. 11,691-00, a sum of Rs. 154-00 was the interest payable from the date the duty was payable, which they promptly paid. The claim of the Revenue was, though the assessee has not taken or utilized this Cenvat credit, because they admitted the mistake, the assessee is liable to pay interest from the date the entry was made in the register showing the availment of credit. According to the Revenue, once tax is paid on input or input service or service rendered and a corresponding entry is made in the account books of the assessee, it amounts to taking the benefit of Cenvat credit. Therefore interest is payable from that date, though, in fact by such entry the Revenue is not put to any loss at all. When once the wrong entry was pointed out, being convinced, the assessee has promptly reversed the entry. In other words, he did not take the advantage of wrong entry. He did not take the Cenvat credit or utilized the Cenvat Credit. It is in those circumstances the Tribunal was justified in holding that when the assessee has not taken the benefit of the Cenvat credit, there is no liability to pay interest. Before it can be taken, it had been reversed. In other words, once the entry was reversed, it is as if that the Cenvat credit was not available. Therefore, the said judgment of the Apex Court has no application to the facts of this case. It is only when the assessee had taken the credit, in other words by taking such credit, if he had not paid the duty which is legally due to the Government, the Government would have sustained loss to that extent. Then the liability to pay interest from the date the amount became due arises under Section 11AB, in order to compensate the Government which was deprived of the duty on the date it became due. Without the liability to pay duty, the liability to pay interest would not arise. The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise.”
6. In the facts and circumstances of the case, no penalty is imposable on the appellant.
In these terms, I set aside the impugned order and allow the appeal with consequential relief, if any.
(Dictated and pronounced in the open Court.)
