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CX – Making entries in RG.23A prior to receipt of goods is only a procedural one – substantive benefit of credit cannot be denied for such procedural lapse: CESTAT

2019-TIOL-2435-CESTAT-MAD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, CHENNAI
COURT NO. III

Service Tax Appeal No. 40557 of 2019

Arising out of Order-in-Appeal No.38/2019 (CTA-I), Dated: 23.01.2019
Passed by Commissioner of Central Excise (Appeals-I), Chennai

Date of Hearing: 26.06.2019
Date of Decision: 26.06.2019

M/s WIPRO ACER LTD
PLOT A-28, INDUSTRIAL ESTATE, THATTANCHAVADI
PUDUCHERRY-605009

Vs

COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE
PUDUCHERRY

Appellant Rep by: Ms P Kanthi Visalakshi, Adv.
Respondent Rep by: Shri B Balamurugan, AC (AR)

CORAM: Sulekha Beevi, C S, Member (J)

ST – The two issues that arise for consideration is with regard to disallowance of credit to the tune of Rs.4,73,349/- and Rs.27,446/- – As per SCN, the allegation with respect to Rs.4,73,349/- is that the credit entered in RG.23A Part II was made before receipt of goods into the factory – There is no case that such inputs were not used in manufacture of finished products – The availment of credit by making entries in RG.23A prior to receipt of goods into the factory is only a procedural one and the substantive beneficial right of credit cannot be denied for such procedural lapse – The second issue is with regard to denial of credit of Rs.27,446/- – Even after submission of material inward receipt the original authority has, after looking through such documents, denied credit to the tune of Rs.27,446/- – The said report has not been produced before Commissioner (A) – For this reason, assessee has failed to establish that inputs were actually received into the factory – Credit is therefore disallowed and the demand is sustained along with interest – However, penalty in this regard is set aside – Further, assessee has put forward explanation that these irregular availments occurred only because there was large number of documents to be entered and due to inadvertence the entries were omitted: CESTAT

Appeal partly allowed

Case laws cited:

Vimal Enterprise Vs UOI – 2005-TIOL-235-HC-GUJ-CX… Para 3.2

FINAL ORDER NO. 40868/2019

Per: Sulekha Beevi:

The brief facts of the case are that appellants were issued a show cause notice dt.03.02.1999 alleging irregular availment of cenvat credit on various Bills of Entry. The three counts on which the demands were raised was as follows :

(i) Firstly, that they had not produced Bills of Entry for defacement as required by law that prevailed during the relevant period.

(ii) Secondly, that they have availed credit of Rs.4,73,349/- 2/3 days prior to receipt of the inputs within the factory.

(iii) Thirdly, that they have availed irregular credit of Rs.27,446/- on goods which were not received in the factory at all.

2.1 On behalf of the appellants, Ld. Counsel Ms. P. Kanthi Visalakshi appeared and argued the matter. She submitted that the appellant had availed credit on the Bills of Entry issued in favour of them for the goods imported. They have entered the credit availed on the inputs in RG.23A Part I & Part II. The entries were made 2/3 days prior to the receipt of the goods within the factory, that was only due to inadvertence as there were lot of modvat credit documents to be entered. The department does not have a case that the appellants have not received the goods within the factory. Their mere allegation is that the entries were made prior to receipt of the goods. That was only due to inadvertent procedural error and may be condoned. In respect of the findings of the Commissioner (Appeals) that the appellants have not produced Material Receipt Report, she submitted that as seen from the Order-in-Original dated 24.08.1999, the appellants had produced Material Receipt Report for the relevant period in respect of the allegation of credit availed to the tune of Rs.27,446/-.

2.2 With regard to the demand in respect of Rs.27,446/-, she submitted that the goods were actually received in the factory as seen from the Material Receipt Report and there was an omission to enter into the RG.23A register.

3.1 Ld.A.R Shri B. Balamurugan supported the findings in the impugned order. He much emphasized on the findings of the Commissioner (Appeals) that appellant has not produced the Material Receipt Report. He explained that though RG.23A may show credit availed, unless the input is shown as received into the factory by the Material Receipt Report, it cannot be concluded that the inputs were received in the factory and the credits have been rightly denied.

3.2 Ld. A.R has also relied upon the decision in the case of Vimal Enterprise Vs UOI – 2006 (195) ELT 267 (Guj.)2005-TIOL-235-HC-GUJ-CX. The Hon’ble High Court in the said decision has held that if the transaction is genuine and the identity of supplier of inputs is established, and the duty paying documents is supported by facts, the credit ought not to have been denied on the basis of technical breaches, whereas in the present case the authorities below were not in a position to cross check such genuine transaction.

4. Heard both sides.

5. The two issues that arise for consideration is with regard to disallowance of credit to the tune of Rs.4,73,349/- and Rs.27,446/-. As per the SCN dt. 03.02.1999, the allegation is that with respect to Rs.4,73,349/- the credit entered in RG.23A Part II was made before receipt of the goods into the factory. Ld. A.R has pointed out that entries were made even much before presenting the Bills of Entry. In any case, the department does not allege that the inputs in regard to this amount were not received in the factory. Their mere allegation is that credit has been availed on the inputs before receipt of such goods into the factory. There is also no case that such inputs were not used in manufacture of finished products. Taking these facts into consideration, I am of the view that the availment of credit by making entries in RG.23A prior to receipt of the goods into the factory is only a procedural one and the substantive beneficial right of credit cannot be denied for such procedural lapse.

6. The second issue is with regard to denial of credit of Rs.27,446/-. Ld. Counsel has relied upon the OIO dated 24.8.99 to contend that they have produced the Material Receipt Report before the adjudicating authority; that the inputs were actually received by them and the credit cannot be denied. Even after submission of the material inward receipt the original authority has, after looking through such documents, denied credit to the tune of Rs.27,446/-. The said report has not been produced before the Commissioner (Appeals) . For this reason, I find that appellant has failed to establish that inputs were actually received into the factory. Credit in respect of Rs.27,446/- is therefore disallowed and the demand is sustained along with interest. However, penalty in this regard is set aside as the penalty imposed is only composite penalty for both the issues. Further, the appellant has put forward explanation that these irregular availments occurred only because there was large number of documents to be entered and due to inadvertence the entries were omitted.

7. From the above discussions, I hold that credit availed in respect of Rs.4,73,349/- is eligible and the demand in respect of the same requires to be set aside, which I hereby do so. The credit in respect of Rs.27,446/- is disallowed and the demand and interest thereon is upheld.

8. Appeal is partly allowed in the above terms with consequential benefits, if any, as per law.

(Dictated and pronounced in court)

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