CENVAT Credit can’t be denied because invoices destroyed in fire

By | July 6, 2016

HELD

I am of the view that even though invoices have been destroyed in fire but if invoices have been recorded in the ledger and books of account of the respondent the Cenvat credit cannot be denied. Respondent could not have recorded the invoice in the ledger unless physical invoices were available. It is not only the invoice or ledger entry but the respondent might have paid invoice value to the service provider which can also be verified from the books of account

CESTAT, MUMBAI BENCH

Commissioner of Service Tax, Mumbai-I

v.

Kaycee Finance Services Ltd.

RAMESH NAIR, JUDICIAL MEMBER

ORDER NO. A/89650/2013-MUM.
APPEAL NO. ST/89650/2013

APRIL  20, 2016

R.K. Das, Jt. Commissioner (AR) for the Appellant.

ORDER

1. This appeal is directed against Order-in-Appeal No. 278 dated 16/7/2013 passed by the Commissioner of Central Excise & Service tax (Appeals), Mumbai IV, whereby Ld. Commissioner (Appeals) allowed the appeal of the Respondent by setting aside the Order-in-Original No. 66/STC-I/ADDL-SD/KAYCEE/13-14 dated 16/4/2013.

2. The brief fact of the case is that during the course of audit of the respondent’s record, audit officers observed that original invoices on which Cenvat credit have been availed are not available, the same were asked from the respondent to produce, on which respondent submitted that original invoices were shifted to store in the Cotton Corporation of India Kalamboli which subsequently lost/destroyed in an accident of fire occurred on 2/11/2011. Respondent in their letter dated 18/1/2012 informed that records were kept in the godown but there was no mention of any fire incidence which had occurred on 2/11/2011, therefore department contended that respondent were not having original input invoices to be produced for verification and the Cenvat credit was availed in respect of non-existing invoices. On this fact show cause notice was issued proposing disallowance of Cenvat credit availed during the Period October, 2006 to March, 2007 for an amount of Rs. 23,22,413/-. The Adjudicating authority while adjudicating show cause notice denied the Cenvat credit, demanded interest and imposed penalty of equal amount under Rule 15(3) of Cenvat Credit Rules, 2004, read with Section 78 of the Finance Act 1994. Aggrieved by the Adjudication order dated 15/4/2013 respondent filed appeal before the Commissioner (Appeals) which was allowed accepting the submission made by the respondent. Aggrieved by the impugned order, Revenue filed this appeal.

3-4. Shri R.K. Das, Jt. Commissioner (A.R.) appearing on behalf of the Revenue, reiterating the grounds of appeal, further submits that respondent could not produce the original invoices at any stage such as at the time of audit and subsequently. He submits that initially respondent has taken plea that invoices stored at their godown. Even if it is correct, nothing prevented the respondent to submit the invoices. Thereafter respondent claimed that the invoices were destroyed in an incidence of fire which took place in the godown. Even thereafter in the correspondence made by the respondent, they have not intimated regarding the fire incidence. Therefore conduct of the respondent clearly shows that original invoices were not existing and to hide this fact respondent has given excuses. In this given fact, the original authority has rightly denied Cenvat credit, Ld. Commissioner (Appeals) without appreciating the vital fact i.e. non-availability of the invoice, allowed the appeal of the respondent, which deserves to be set aside. He submits that for availing the Cenvat credit foremost requirement is the service tax paying invoices. There is no other document on which credit can be availed. For whatsoever reason if invoice is not available, Cenvat credit cannot be allowed. He placed reliance on following judgments:

(a) Protection Mfgrs. (P.) Ltd. v. CCE 2004 (177) ELT 612 (Tri. – Kol.)
(b) CCE v. Survoday Blending (P.) Ltd. [2013] 29 taxmann.com 350 (Ahd. – CESTAT)

He submits that Ld. Commissioner has also considering the limitation on the ground that show cause notice issued after gap of two years from the date of audit, Commissioner found that there is no evidence on record that the respondent had committed fraud or suppression of material fact from the department and the respondent initimated to the departmental authority about fire incidence. He submits that since service tax paying documents itself were not available, that itself is evidence of suppression of facts on the part of the respondent. As regard the intimation regarding the fire, when the invoices were not available, incidence of fire is irrelevant therefore the Commissioner (Appeals) has wrongly held that show cause notice is time bar. Ld. A.R. placed reliance on the judgment of Cema Electric Lighting Products India (P.) Ltd. v. CCE[2015] 51 GST 324 (Ahd. – CESTAT)

5. None appeared on behalf of the Respondent despite notice which was returned as undelivered.

6. From the record of the appeal, it is observed that this matter was listed on number of times earlier i.e. 5/3/2015, 18/6/2015, 14/8/2015, 9/10/2015, 29/12/2015 and 29/1/2016 and non of the said dates of hearing was attended by the respondent therefore it is clear that respondent is not serious to pursue their case, therefore I have no option except to proceed to dispose of the appeal on the basis of submission made by Ld. A.R. and the material available on record.

7. On careful consideration of the submissions made by Ld. A.R. and perusal of records, I find that respondent could not produce invoices either at the time of the audit and also subsequent to the audit. It is the stand of the respondent that they had in possession of invoices on the basis of which they had taken credit. Subsequently, these invoices were destroyed in fire. I find that Ld. Commissioner (Appeals) considering ground made by the respondent in the appeal before him, one of the ground was that all the invoices were recorded in the ledger, which is one of the evidence that respondent have received the invoice and credit taken on that basis. However it is not coming from the record of the Adjudicating authority, I am of the view that even though invoices have been destroyed in fire but if invoices have been recorded in the ledger and books of account of the respondent the Cenvat credit cannot be denied. Respondent could not have recorded the invoice in the ledger unless physical invoices were available. It is not only the invoice or ledger entry but the respondent might have paid invoice value to the service provider which can also be verified from the books of account. Since this verification have not been conducted by the lower authority matter needs to be remanded to the original authority. As regard the limitation, I do not agree with the findings of the Ld. Commissioner (Appeals) for the reason that respondent could not produce any invoice before audit as well as at subsequent stage and if it is established, invoices were not available, show cause notice cannot be held time bar. Even intimation of fire incidence is of no help to the respondent as from the intimation itself it cannot be said whether the invoices were existing or not therefore if it is proved that invoices were received by the respondent, longer period of demand is correctly invokable. As per my above discussion, I set aside the impugned order and remand the matter to the original adjudicating authority to pass a de novo adjudication order after verification of books of account, ledger and payment particulars towards such invoices. It is made clear that merely in absence of invoices Cenvat credit cannot be denied. Needless to say that the respondent shall be given opportunity of personal hearing and for submission of necessary documents, if any required. Appeal is disposed of by way of remand to the original adjudicating authority.

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