CESTAT Quashes Rs. 1.56 Crores Demand Against IRCTC For Alleged Wrong Cenvat Credit Availment
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has quashed a demand of ₹1.56 crores against the Indian Railway Catering and Tourism Corporation Ltd. (IRCTC) for alleged wrongful availment of Cenvat credit, holding that the show cause notice (SCN) issued by the department was time-barred and lacked justification for invoking the extended limitation period.
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The division bench comprising Judicial Member Ms. Binu Tamta and Technical Member Mr. P.V. Subba Rao found that the department failed to establish any fraud, willful misstatement, suppression of facts, or deliberate contravention of statutory provisions by the assessee, which are preconditions for invoking the extended limitation under the proviso to Section 73(1) of the Finance Act, 1994.
The appeal was filed by IRCTC against an order dated 29.10.2015 passed by the Principal Commissioner of Service Tax, Delhi, confirming a demand of ₹1,56,66,722 under Rule 6 read with Rule 14 of the Cenvat Credit Rules, 2004, along with interest under Section 75 and penalties under Sections 76 and 78 of the Finance Act. The Commissioner had, however, dropped a separate demand of ₹12,39,255 relating to the financial year 2006–07, and no appeal was filed by the Revenue in that regard.
The case pertained to the period from 2004–2005 to 2007–2008. According to statutory timelines, the last return for this period was due by 25.04.2008, and the department was required to issue any show cause notice within one year. The SCN in this matter was issued on 09.10.2009—well beyond the permissible one-year period under the main provision of Section 73(1).
The department attempted to justify the delayed notice by invoking the extended limitation period of five years under the proviso to Section 73(1), claiming that IRCTC had suppressed facts by not declaring the value of exempted services in their ST-3 returns and had availed inadmissible Cenvat credit without maintaining separate records, as required under Rule 6(2) of the Cenvat Credit Rules. The Commissioner held that IRCTC neither maintained separate accounts nor declared its position by filing appropriate statements or annexures to the returns, and therefore the extended period was invokable.
However, CESTAT, after examining the provisions of the Finance Act and the Cenvat Credit Rules, found the department’s arguments unsustainable. It emphasized that under the self-assessment system introduced by the Finance Act, 2001, the responsibility of assessing tax correctly lies initially with the assessee, but the scrutiny of the returns and the issuance of timely demand notices lie with the department. The Tribunal stated: “Evidently, once the Return is filed, it is the responsibility of the officer to scrutinize the return… and issue a notice for recovery… within the normal period of one year… If the officer fails to complete the scrutiny and raise a demand within the period and the demand gets barred by limitation, the responsibility for that rests squarely on the officer who failed in his duty.”
The Tribunal rejected the Commissioner’s conclusion that failure to furnish separate records or declarations amounted to suppression. It held that there was no material on record to establish that IRCTC had fraudulently or willfully misrepresented any facts or acted with an intention to evade payment of service tax.
Quoting from the order, the Tribunal held: “Neither the fact that the assessee is operating the self-assessment procedure nor that it had failed to assess the tax liability etc. correctly means that the assessee had committed a fraud or colluded or willfully mis-stated or suppressed any fact…”
Further, the Tribunal noted that the very basis of the SCN arose out of a detailed audit conducted long after the return filing dates. It held that the availability of relevant facts in the records and the delay in departmental scrutiny cannot be used as grounds for invoking the extended limitation: “All that is evident from the SCN and from the order is that the assessee furnished its returns on time as required and it is the officer who failed to scrutinize the returns in time… the responsibility for that rests clearly on the officer.”
In conclusion, the Tribunal ruled that the entire demand was barred by limitation and did not examine the merits of the case. As a result, it set aside the impugned order and allowed the appeal, granting full consequential relief to IRCTC. The order was pronounced in open court on 23.04.2025.
Appearance
Shri S.C. Kamra, Advocate for the appellant.
Shri Manoj Kumar, Authorized Representative for the Department
Cause Title: M/s Indian Railway Catering and Tourism Corporation Ltd. V. The Commissioner of Service Tax
Case No: Service Tax Appeal No. 50169 Of 2016
Coram: Hon’ble Ms. Binu Tamta [Member (Judicial)], Hon’ble Shri P.V. Subba Rao [Member (Technical)]
[Read/Download order]
