26 Apr Procedural Lapse in Taxation: Significant Benefits Cannot Be Denied
The legal concept states that insignificant procedural mistakes shouldn’t result in denying significant benefits to a taxpayer.
- Case 1
Introduction
The case of M/S. S.L. Polypack Private Limited versus Commissioner of CGST & CX, Howrah Commissionerate, as adjudicated by CESTAT, Kolkata, presents a significant legal precedent regarding the denial of CENVAT Credit to the assessee based on procedural lapses. In this article, we delve into the facts of the case, the issues raised, and the pivotal judgment rendered by the tribunal.
Facts of the Case
M/s. S.L. Polypack Private Limited, engaged in the manufacturing of plastic cups and plates, received input goods covered by invoices issued by M/s. L.G. Polymers India Ltd. During the period of 2007-08 and 2008-09, the Appellant utilized these inputs in the manufacture of finished products, duly clearing them after payment of appropriate duty and claiming credit for the same.
However, a Show Cause Notice (SCN) dated August 1, 2013, was issued to the Appellant, alleging procedural lapses and proposing to recover CENVAT Credit amounting to INR 1,50,194/-. The Respondent contended that the input invoices lacked essential details and were therefore ineligible documents for claiming credit.
Issue
The central question revolves around the sustainability of the SCN and the subsequent Impugned Order. Whether procedural lapses can serve as a valid ground for denying substantive benefits to the assessee is a matter of contention.
Held
In its judgment, CESTAT, Kolkata, observed that there was no dispute regarding the delivery of goods, which were duly received at the factory. The tribunal highlighted the guidelines outlined in an Impugned Circular, emphasizing that SCNs should not be issued for procedural lapses without thorough inquiry, aiming to reduce litigations.
Furthermore, CESTAT noted that the Impugned SCN was issued well beyond the normal period, rendering it barred by limitation. The tribunal unequivocally held that substantive benefits cannot be withheld on procedural grounds alone. Consequently, the Impugned Order was set aside.
- Case 2
Introduction
Filing returns on the Goods and Services Tax Network (GSTN) platform has become an integral part of compliance for businesses. However, assessees often encounter technical challenges while navigating the system, leading to concerns about the lapsing of Input Tax Credit (ITC). In light of recent legal precedents, the question arises: can substantial benefits like ITC be forfeited due to technical glitches on the government’s end?
Facts of the case
The case of Formica India Division v. Collector of Central Excise, as adjudicated by the Supreme Court, provides crucial insights into the treatment of procedural lapses concerning benefits or exemptions. Despite the assessee’s failure to adhere to prescribed procedures, the Supreme Court ruled that substantive benefits cannot be denied solely on the grounds of procedural errors.
Issue
The core issue at hand is whether the substantial right to Input Tax Credit (ITC) can lapse due to technical faults occurring on the GSTN platform. Assessees grapple with the fear that inadvertent errors or system glitches could lead to the forfeiture of valuable credits, impacting their financial obligations and compliance status.
Held
Drawing parallels with the Formica India Division case, it becomes evident that substantive benefits cannot be withheld due to technical lapses, even if arising from the assessee’s own oversight. The Supreme Court’s stance underscores the principle of fairness and equity in tax administration, prioritizing the underlying eligibility for benefits over procedural perfection.
- Case 3
Introduction
The case of CCE, Chennai v. M/S. MRF Limited revolves around the eligibility for Cenvat credit based on supplementary invoices issued for the payment of differential duty. This article explores the intricacies of the case, highlighting the arguments presented by both parties and the Tribunal’s decision.
Facts of the Case
The appeal centers on the recognition of supplementary invoices as valid duty-paying documents for availing Cenvat credit. The Revenue contends that only certain types of supplementary invoices were recognized before March 2001, while broader recognition came into effect after that date. However, the respondents took credit on February 28, 2001, just before the notification expanding the provisions.
Issue
The primary issue at hand is whether the respondents are entitled to avail Cenvat credit based on supplementary invoices issued for the payment of differential duty, despite the timing of the credit being one day prior to the notification broadening the validity of such invoices.
Held
The Tribunal held that the taking of credit on supplementary invoices for payment of additional duty, whether due to finalization of provisional assessment or price escalation, constituted only a procedural irregularity. The issuance of supplementary invoices aimed to rectify the incorrect adoption of the rate of duty at the time of clearance from the factory. Therefore, the Tribunal upheld the impugned order, extending credit, and dismissed the appeal of the Revenue.
- Case 4
Introduction
The case of M/S. Sanathan Textiles Pvt. Ltd. v. CCE, Vapi, heard by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad, highlights a dispute concerning the availment of CENVAT credit on common input services used for manufacturing both dutiable and exempted products. This article provides an overview of the case, delving into the facts, issues, and the tribunal’s decision.
Facts of the Case
The appellant, M/S. Sanathan Textiles Pvt. Ltd., was charged with availing Service Tax credit on common input services utilized in manufacturing activities. The appellant manufactured dutiable product POY and exempted cotton yarn, paying Nil rate of duty under Notification No.30/2004-CE. As the appellant did not maintain separate accounts for services consumed in dutiable and exempted products, a show cause notice was issued. The adjudicating authority confirmed the demand, leading to the appeal.
Issue
The main issue revolves around whether the appellant’s reversal of CENVAT Credit on common input services, for the period specified, constitutes compliance with Rule 6 of the CENVAT Credit Rules, 2004. Additionally, the tribunal considers the necessity of reversing a specific amount of credit not previously reversed by the appellant.
Held
The tribunal held that the appellant’s reversal of the entire CENVAT Credit availed on common input services during the specified period met the compliance requirements of Rule 6. The tribunal relied on precedents, including decisions by the Supreme Court and High Courts, to support this conclusion. However, regarding the unverified amount of credit not reversed, the tribunal directed the appellant to reverse it within a specified timeframe. Furthermore, the tribunal ordered the appellant to pay interest on the reversed amounts as per legal provisions.
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