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March 2016

[2016] 65 taxmann.com 128 (Ahmedabad-CESTAT) Commissioner of Central Excise, Ahmedabad- II vs. Nova Petrochemicals Ltd.

By Puloma Dalal
Jayesh Gogri
Mandar Telang Chartered Accountants
Reading Time 2 mins
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Recovery under Rule 14 of CENVA T credit Rules cannot be initiated merely because instead of making transfer through ST-3 return, manufacturer-cum-service provider assessee availed input service tax credit directly in ER-1 return.

Facts
The Assessee, a manufacturer availed service tax credit which was utilised for making payment of excise duty. The credit was directly claimed in ER-1 return without reflecting the same in ST-3. Department issued SCN for recovery of alleged wrong utilisation of CENVAT credit by invoking Rule 14 of CENVAT Credit Rules read with proviso to section 11A(1) of the Central Excise Act, 1944 and confirmed by adjudication. Commissioner (Appeals) decided the matter in favour of assessee, relying upon verification report of the department where the credits taken were verified and found in order. Aggrieved by the same, the department filed appeal before the Tribunal.

Held
The Tribunal observed that assessee was required to enter the credit of said amount in relevant ST-3 return and put a remark of transfer of the said credit in the ER-1 return utilised for payment of excise duty. Instead, input service tax credit was debited from the CENVAT account register and utilised in ER-1 return and it was not reflected in ST-3 return. However, it was noted that amount taken and utilised in ER-1 return of the respective month was deducted from total credit balance and only the balance amount was shown in respective column of ST-3 return and therefore the department’s appeal was dismissed.

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