Procedural lapses cannot be ground for denying substantive benefits

S.L. Polypack Private Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)

The CESTAT, Kolkata in the matter of M/s. S. L. Polypack Private Limited v. Commissioner of CGST & CX, Howrah Commissionerate [Excise Appeal No.75342 of 2018 dated January 20, 2023] set aside the order denying CENVAT Credit to the assessee and held that, procedural lapses cannot be a ground for denying substantive benefits to the assessee. Further held that, the Show Cause Notice (“SCN”) issued before the passing of such order was barred by limitation.

Facts:

M/s. S. L. Polypack Private Limited (“the Appellant”) is a manufacturer of plastic cup and plates. The Appellant had received some input goods under the cover of input invoices issued by one M/s. L. G. Polymers India Ltd. for the period of 2007-08 and 2008-09, and had utilized the same in the manufacture of finished products and the finished goods were cleared on payment of appropriate duty. The Appellant had taken credit duty on the said inputs.

A SCN was issued to the Appellant dated August 1, 2013 (“the Impugned SCN”) proposing to recover CENVAT Credit amounting to INR 1,50,194/- on the allegations that the input invoices did not mention the credit registration number of the consignee and registration number of the carrier vehicle and the delivery of goods was made at a place other than the factory of the Appellant. The Revenue Department (“the Respondent”) alleged that the credit was taken by the Appellant on the basis of ineligible documents.

The Appellant, in their reply to the Impugned SCN, stated that the defects pointed out by the Respondent were technical or procedural lapses but there was no dispute in duty paying character of the goods, receipt of the goods and utilization of the same in the manufacture of the finished products and it submitted that technical lapses cannot stop it from claiming benefits. However, the Respondent vide order dated July 3, 2014 (“the Impugned Order”) denied credit and also imposed penalty upon the Appellant. On Appeal, the Commissioner (Appeals) upheld the decision in the Impugned Order.

The Appellant contended that it had given the registration number, which was allotted to them prior to the allotment of PAN based registration number. Further, that non-mentioning of the vehicle number is a minor procedural error and it cannot be the ground for denying credit. Further, the Circular No. 441/7/99 – CX, dated February 23, 1999 (“the Impugned Circular”) had clarified that CENVAT Credit cannot be denied for minor procedural lapses. Further, the demand was barred by limitation as the period of dispute was 2007-08 and 2008-09 and the Impugned SCN was issued on August 1, 2013.

Issue:

Whether the Impugned SCN and the Impugned Order are sustainable?

Held:

The CESTAT, Kolkata in Excise Appeal No.75342 of 2018 held as under:

• Observed that, there was no dispute with regard to the place of delivery of the goods and the goods were received at the factory and accordingly the Impugned Order denying CENVAT Credit is not correct and the Excise Duty was paid on those goods which are subject matter of the invoices.
• Stated that, guidelines have been issued in the Impugned Circular, that SCN should not be issued for procedural lapses without making proper enquiries and efforts should be made to reduce litigations.
• Noted that, the Impugned SCN was issued much after the expiry of the normal period.
• Held that, substantive benefits cannot be denied on procedural grounds and accordingly the Impugned Order cannot be sustained.
• Further held that, the Impugned SCN was barred by limitation.
• Set aside the Impugned Order.

FULL TEXT OF THE CESTAT KOLKATA ORDER

The Appellant is in Appeal assailing the order of the Ld. Commissioner of CGST & Central Excise (Appeals). The facts of the case in brief are that the Appellant is a manufacturer of Plastic Cups and Plastic Plates falling under Tariff Item No.39231090 of the Central Excise Tariff Act, 1985. During the period 2007-08 and 2008-09, the Appellant had received some inputs viz. Plastic Granules under the cover of input invoices issued by M/s. L.G. Polymers India Ltd. The Appellant received the goods in their factory and utilized the same in the manufacture of their finished products and finished goods were cleared on payment of appropriate duty. The Appellant had taken credit of duty paid on the said inputs. Show Cause Notice dated 01.08.2013 was issued proposing to recover CENVAT Credit amounting to Rs.1,50,194/- on the allegation that invoices does not mention credit registration number of the consignee, registration number of the carrier vehicle and delivery of the goods was made at a place other than the factory. It is the case of the Revenue that credit was taken on the basis of ineligible documents which resulted in contravention of Rule 9 of the CENVAT Credit Rules, 2004. In their reply to the Show Cause Notice the Appellant submitted that the defects pointed out are technical and/or procedural lapses, but there is no dispute in respect of other things like duty paying character of the goods, receipt of the goods and utilization of the same in the manufacture of the finished products. It was their submission that technical lapses cannot stand in the way of extending the benefit to them. However, the Ld. Adjudicating authority vide Order­in-Original dated 03.07.2014 denied the credit and also imposed penalty. On Appeal, the Ld. Commissioner(Appeals) upheld the adjudication order and rejected the Appeal before him. Hence the present Appeal before this Tribunal.

2. Ld.Advocate appearing on behalf of the Appellant submits that the Appellant had given registration number, which was allotted to them prior to the allotment of PAN based registration number. Non-mentioning of the vehicle number is a minor procedural lapse which cannot be a ground for denying credit. He further submits that it is not in dispute that goods were received in the factory which has been accepted by the authorities below, but inferred from the Challans with the invoice that the goods were delivered at 4, Fairlie Place, Kolkata which was their registered office and which cannot be a ground for denying the credit more particularly when the invoices show the address of the Appellant’s factory. The Department has not attached any such challan as relied upon documents along with the Show Cause Notice. The Ld.Advocate vehemently argued that the authorities below did not consider the Board’s Circular No.441/7/99-CX dated 23.02.1999 dated 23.02.1999 clarifying that CENVAT Credit cannot be denied for minor procedural lapses. He also submitted that the demand is barred by limitation since the period of dispute is 2007-08 and 2008-09 and Show Cause Notice was issued on 01.08.2018 on scrutiny of records by the Audit Team. He relied upon the decision of the Tribunal in the case of EEI Industries Ltd. v. Commissioner of Central Excise, Bhopal [2017 (49) S.T.R. 159 (Tri.-Del.)]. He also filed copies of the monthly return filed under Rule 9 of CENVAT Credit Rules, 2004 wherein all the invoices have been accounted for.

3. Authorized Representative for the Department justified the impugned orders and prayed that the Appeal filed by the Appellant may be rejected being devoid of any merit.

4. Heard both sides and perused the Appeal records.

5. I find that the issue is no more res integra and is already settled in favour of the Appellant in various cases cited by them. It is undisputed that the goods covered under the invoices were actually received at the Appellant’s factory and those goods were used for manufacture of their final products. It is also undisputed that Excise Duty was paid on those goods which are subject matter of the invoices. In view of the documents submitted by the Appellants, I find that there is no dispute that the goods have been received in the factory and accordingly the impugned order denying the CENVAT Credit in respect of the invoices is not correct. I find that the Board vide Circular No. 441/7/99-CX dated 23.02.1999 dated 23.02.1999 have issued guidelines that Show Cause Notices should not be issued for procedural lapses without making proper enquiries and efforts should be directed towards reduction of litigations. In the present case there is no dispute regarding duty paid character and receipt of the goods. The substantive benefit cannot be denied on procedural grounds and accordingly the impugned orders cannot be sustained. The Appellants have vehemently fought on the issue of limitation. They pleaded that Show Cause Notice was issued on 01.08.2013 whereas the normal period expired much before that date. Further the Show Cause Notice was issued on the basis of audit of records maintained by the Appellant and therefore extended period cannot be invoked by alleging suppression since they are also submitting/filing the statutory returns on a regular basis. The Department was free to further investigate the matter and issue timely Show Cause Notice. In view of the same I find that the Appellants have a strong case on limitation and the Show Cause Notice is barred by limitation.

6. In view of the above discussion, the impugned orders are set aside and the Appeal filed by the Appellant is allowed with consequential relief, as per law.

(Order pronounced in the open court on 20 January 2023.)

****

(Author can be reached at info@a2ztaxcorp.com)