Pranav B Prem

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that railway receipts and Service Tax Certificates for Transportation of Goods (STTG Certificates) issued by Indian Railways are valid documents for availing CENVAT credit even for the period prior to August 27, 2014. Setting aside the disallowance of credit, interest and penalty, the Tribunal allowed the appeal filed by ITC Limited.

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The Bench comprising R. Muralidhar, Judicial Member, and K. Anpazhakan, Technical Member, was hearing an appeal arising from an order passed by the Principal Commissioner of CGST and Central Excise, Kolkata North Commissionerate, which had disallowed CENVAT credit availed by the assessee on the basis of railway receipts and STTG certificates for the period prior to 27.08.2014.

The appellant, ITC Limited, PSPD Unit at Tribeni in West Bengal, is engaged in the manufacture of paper and paperboard falling under Chapter 48 of the Central Excise Tariff Act, 1985. Proceedings were initiated against the assessee by issuance of a show cause notice dated November 1, 2016, alleging that it had wrongly availed and utilised CENVAT credit amounting to ₹49,16,972 on input services relating to transportation of goods by rail on the basis of railway receipts and STTG certificates for the period prior to 27.08.2014.

The Department’s case was founded on the amendment made to Rule 9(1) of the CENVAT Credit Rules, 2004 by Notification No. 26/2014-CE (NT) dated August 27, 2014, which expressly introduced STTG certificates issued by Indian Railways as prescribed documents for availing CENVAT credit. According to the Revenue, since this amendment was prospective, railway receipts and STTG certificates could not be treated as valid documents for availing credit prior to that date. On this basis, the adjudicating authority disallowed the credit, and the order was upheld by the Commissioner (Appeals).

Challenging the disallowance, the assessee argued before the Tribunal that service tax on transportation of goods by rail was introduced with effect from December 1, 2012 and that for the period from December 1, 2012 to August 27, 2014, railway receipts containing all the particulars prescribed under Rule 9(1) of the CENVAT Credit Rules, 2004 constituted valid documents for availing credit. It was contended that there was no provision in law which prohibited availment of credit on the basis of such documents merely because STTG certificates were formally prescribed later. The assessee also relied on earlier decisions of the Tribunal, including Jai Balaji Industries Ltd. v. CGST & Central Excise, Bolpur and JSW Steel Ltd. v. Commissioner of CGST, Navi Mumbai, to submit that the issue was no longer res integra.

The Revenue, on the other hand, reiterated that STTG certificates were recognised as eligible documents only with effect from August 27, 2014 and therefore credit availed prior to that date was inadmissible.

After examining the statutory provisions and the records, the Tribunal noted that Rule 9 of the CENVAT Credit Rules, 2004 prescribes documents for taking credit, while the admissibility of credit is governed by Rule 3. It observed that the insertion of clause (fa) in Rule 9(1) with effect from August 27, 2014 only introduced STTG certificates as an additional prescribed document and did not render railway receipts invalid for the earlier period.

The Bench held that railway receipts which contain all the relevant details required under Rule 9(1) continue to be relevant documents for availing CENVAT credit both prior to and after August 27, 2014. It further observed that even STTG certificates issued prior to that date could not be discarded, as they also contained all the necessary particulars prescribed under the Rules. The Tribunal emphasised that procedural requirements under Rule 9 cannot be applied in a manner that defeats substantive entitlement to credit when duty or tax payment and receipt of services are not in dispute.

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Relying on its earlier decisions as well as judgments of the Bombay High Court, the Tribunal reiterated that once the payment of service tax and receipt of input services are not disputed, credit cannot be denied merely on technical grounds relating to the nature of documents. In view of these findings, the CESTAT set aside the impugned order and allowed the appeal, holding that the assessee was entitled to avail CENVAT credit of ₹49,16,972 on the basis of railway receipts and STTG certificates for the period prior to 27.08.2014. Consequentially, the demands of interest and penalty were also quashed, and the assessee was granted consequential relief as per law.

Appearance

Counsel for Appellant/ Assessee: Arnab Chakraborty

Counsel for Respondent/ Department: S.K. Dikshit

Cause Title: M/s. ITC Limited v. Commissioner of C.G.S.T. and Central Excise

Case No: Excise Appeal No. 77011 of 2018

Coram: R. Muralidhar, Judicial Member,K. Anpazhakan, Technical Member