Case Law Details
Hindustan Construction Company Ltd. Vs Commissioner of CGST (CESTAT Mumbai)
The dispute before the CESTAT Mumbai concerned recovery of ₹11,05,642/- of CENVAT credit, along with equal penalty, under Section 73(1) of the Finance Act, 1994 read with Rule 15(3) of the CENVAT Credit Rules, 2004. The Appellant, engaged in services such as works contract, renting of immovable property, supply of tangible goods, construction and manpower supply, had availed CENVAT credit on services including rent-a-cab, car repair, health insurance, outdoor catering and insurance for the Jammu high-risk area. During EA-2000 audit for 2013-14 to June 2017, the Department found such credits inadmissible.
The Appellant accepted the objection and reversed the amount through the GST portal on 21.08.2019. It was argued that the audit itself had recorded that the Appellant maintained more than ₹2 crore balance in its CENVAT account during the relevant period, showing that the disputed credit was never utilised. Despite reversal of credit, a show-cause notice dated 28.10.2019 was issued demanding recovery and equal penalty by invoking the extended period.
The Tribunal observed that Section 73(3) of the Finance Act, 1994 provides that where an assessee pays tax liability on being pointed out by the Department and informs the Department, no notice under Section 73(1), including invocation of extended period, should be issued. It further held that Rule 14 and Rule 15(3) of the CENVAT Credit Rules apply Section 73 mutatis mutandis, thereby extending the benefit of Section 73(3).
The Tribunal noted that the show-cause notice itself acknowledged repayment of the credit and the existence of sufficient CENVAT balance demonstrating non-utilisation of the credit. Consequently, it held that issuance of the demand notice and penalty proceedings was unsustainable in law. The appeal was allowed and the order of the Commissioner (Appeals) was set aside with consequential relief.
FULL TEXT OF THE CESTAT MUMBAI ORDER
Confirmation of order passed by the Adjudicating Authority, in holding certain inputs taken by Appellant as inadmissible, by the Commissioner (Appeals) and order for its recovery to the tune of ₹11,05,642/- under Section 73(1) of the Finance Act, 1994 alongwith equal penalty on such inadmissible credit with invocation of extended period as contemplated under Rule 15(3) of CENVAT Credit Rules, 2004 read with first proviso to Sub-section 1 of Section 78 of the Finance Act, 1994, is assailed by the Assessee-Appellant before this forum.
2. Factual backdrop of the case is that Appellant has been holding registration for providing services like works contract, renting of immovable property, supply of tangible goods, business support, construction, man power supply, etc. and in the process it had availed CENVAT Credit on input services namely rent a cab, car repair, health insurance, outdoor catering and insurance at Jammu side (high risk area), which Respondent-Department found to be inadmissible during EA 2000 Audit conducted for the period from 2013-14 to June, 2017. Appellant accepted the same and paid the amount of ₹11,05,642/- on 21.08.2019/- through GST Portal and Audit had not sought for its interest as Appellant was having more than ₹2 Crores balance of CENVAT Credit in its account during the corresponding period but it was served with show-cause cum-demand notice dated 28.10.2019 for the said amount alongwith equal penalty in invocation of extended period. Appellant’s unsuccessful attempt before the Adjudicating Authority and Commissioner (Appeals) has brought the dispute to the present forum.
3. I have heard both the sides on the issue. Learned Counsel for the Appellant Mr. Mahesh Raichandani submitted that Rule 14 read with Section 73 notice was served on the Appellant after credit were reversed in pursuant to audit report and extended period was invoked when all data were taken from the Appellant’s record by the Audit itself. Further, in citing decision of this Tribunal passed in the case of GF Toll Road Private Ltd. and Others Vs. Commissioner of Central Tax & GST, Thane reported in 2020 (3) TMI 849 – CESTAT MUMBAI, learned Counsel for the Appellant submitted that there is clear findings in the said order that the credit was taken but not utilised for which its recovery with interest or penalty is unsustainable in law when both Audit report as well as show-cause notice clearly indicate that there are more than ₹2 Crores available to the credit of Appellant at the relevant time, which reinforces that the meagre amount of ₹11,05,642/- was not at all utilised, so as to proceed for its recovery. On the other hand, Learned Authorised Representative Mr. Dhananjay Dahiwale supported the reasoning and rationality of the order passed by the Commissioner (Appeals) and said that recovery proceeding was rightly initiated by invoking extended period as under Rule 2(l) of the CENVAT Credit Rules, 2004, those input were clearly inadmissible input, not supposed to be credited to Appellant’s CENVAT Credit account.
4. I have heard submissions from both the sides and gone through the appeal paper book as well as written note submitted by learned Authorised Representative. As I could observe from the statutory provision, Section 73(3) dictates that if Assessee, being pointed out about any tax liability by the Departmental Officer or upon his own ascertainment, discharges the said tax liability and informs the Department, then no recovery notice under Section 73(1) of the Finance Act, 1994 that includes its proviso covering extended period was to be served upon the Assessee. Rule 14 & 15(3) of the CENVAT Credit Rules, 2004 that deals with such recovery requires application of Section 73 of the Finance Act, 1994 mutanties mutandies, to which Section 73(3) is extendable and such penalty being demanded in terms of proviso to Sub-section 1 of Section 73 of the Finance Act, 1994, service of such show-cause cum-demand notice is itself unsustainable in law, when show-cause notice itself notes that Appellant had repaid the credits availed by it upon being pointed out during Audit and it had sufficient balance in its CENVAT Credit account that justify non-utilisation of the CENVAT Credit. Hence the order.
THE ORDER
5. The appeal is allowed and the order passed by the Commissioner of Central Tax (Appeals), Raigad vide Order-in-Appeal No. NA/93/RGD APP/2021-22 dated 05.07.2021 is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 05.05.2026)
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