CESTAT Upholds CENVAT Credit Availment Of Service Tax Paid On Advances
Pranav B Prem
The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled in favour of the assessee in a case concerning transitional credit under the Goods and Services Tax (GST) regime, holding that a procedural error caused by technical glitches on the GST portal cannot defeat a substantive right to avail credit of service tax already paid. The Tribunal directed that CENVAT credit of Rs. 6,15,409/-, paid on advances before the implementation of GST, be allowed to the assessee by treating the relevant declaration correctly, despite it being entered in an incorrect field on the online portal.
The bench of Anil G. Shakkarwar (Technical Member) was hearing the appeal filed by Pride Ventures (I) Pvt. Ltd., which was engaged in providing taxable services. Prior to the implementation of GST, in accordance with Rule 3(b) of the Point of Taxation Rules, 2011, the appellant had paid service tax on advances received for services to be rendered in the future. As of 30.06.2017, a service tax amount of Rs. 6,15,409/- had already been discharged by the appellant on such advances.
Following the introduction of the CGST Act, 2017 on 01.07.2017 and the cessation of the Finance Act, 1994, the appellant was eligible under clause (c) of sub-section (11) of Section 142 of the CGST Act to avail transitional credit of the service tax paid on such advances, where the service was not yet rendered. Rule 118 of the CGST Rules provided that such credit must be declared via Form GST TRAN-1, specifically at Serial No. 11 of the form.
The appellant, while attempting to file TRAN-1 online on 20.08.2017 and again on 25.12.2017, was unable to enter the said credit details at Serial No. 11 due to technical glitches in the GST portal. Consequently, the appellant entered the same amount at Serial No. 5 of the form, which corresponded to unutilized transitional CENVAT credit and not the credit under Section 142(11)(c).
The Department later issued a show cause notice dated 26.06.2019 alleging incorrect availment of CENVAT credit and denying the transitional credit of Rs. 6,15,409/-, on the grounds that the declaration was not supported by any specific document under Rule 9 of the CENVAT Credit Rules, 2004. The original adjudicating authority confirmed the denial of credit and imposed an equal penalty. The Commissioner (Appeals), Nashik, upheld this decision.
Before the Tribunal, the appellant argued that the denial was solely due to procedural error caused by technical difficulties on the GST portal, a fact recognized by the Hon’ble Supreme Court in Union of India vs. Filco Trade Centre Pvt. Ltd. [2022 (63) GSTL 162 (SC)], where the Court had directed reopening of the TRAN-1 and TRAN-2 filing windows due to widespread portal issues. The appellant submitted that had the system functioned correctly, they would have entered the amount in the correct field.
The Revenue contended that there was no documentary evidence to support the appellant’s claim that they had attempted to file the declaration under the correct field and failed due to technical glitches.
The Tribunal, after examining the facts and legal provisions, held that the appellant was clearly entitled to the transitional credit under Rule 118 of the CGST Rules and Section 142(11)(c) of the CGST Act. It noted that the misplacement of data entry in the form was only a procedural lapse and that procedural irregularities should not defeat substantial rights. The Tribunal observed: “The said violation of not entering the required data at Sr.No.11 but entering the same at Sr.No.5 is only procedural and for procedural infirmity, substantial right of the appellant cannot be denied.”
Accordingly, the Tribunal directed the Revenue to treat the entry made at Serial No. 5 of Form TRAN-1 as if it had been made at Serial No. 11 and set aside the orders of the lower authorities. The appeal was allowed.
Appearance
Shri Makarand P. Joshi, Advocate, for the Appellant
Shri Dhananjay Dahiwale, Deputy Commissioner, Authorised Representative for the Respondent
Cause Title: Pride Ventures (I) Pvt. Ltd. V. Commissioner of CE & GST, Aurangabad
Case No: Service Tax Appeal No. 86801 of 2021
Coram: Hon’ble Mr. Anil G. Shakkarwar [Member (Technical)]
[Read/Download order]
