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Maini Precision Products Ltd. Vs. Commissioner of Central Tax - (Customs, Excise and Service Tax Appellate Tribunal) (12 Jul 2021)

Substantive right cannot be denied merely on procedural irregularity



The present appeal is directed against the impugned order passed by the Commissioner of Central Tax (Appeals) whereby the Commissioner has rejected the appeal of the Appellant and confirmed the demand of Rs. 16,40,610 under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A(4) of Central Excise Act, 1944 and also imposed penalty under Rule 15(3) of CCR, 2004 read with Section 11AC(1)(a) of Central Excise Act, 1944.

The issue of revenue neutrality has been considered by the various Courts and it has been held that, non-distribution of credit is condonable as procedural lapse, especially in situation which is revenue neutral. Further, in the case of Doshion Ltd. v. CCE, Ahmedabad wherein it has been held that, procedural irregularity in the case of ISD distribution is a revenue neutral situation and there is no loss to the Revenue.

Once the Department has not disputed the eligibility or entitlement of credit then, the failure of the Appellant to distribute the same and transition to GST after coming into force of GST is only a procedural lapse and it will not affect the substantive right of the Appellant because the failure to comply with the provisions of ISD are at best may be termed as procedural irregularity and it has been consistently held by various Courts that substantive right cannot be denied merely on procedural irregularity.

Similarly, the extended period of limitation invoked by the Department is not sustainable in the present case because the Appellant has not concealed any information from the Department and all the documents were provided by the appellant to the Audit Party and on the basis of Audit Report, the SCN was issued. Further, the entire demand in the present case resulted into revenue neutral.

Further, pre-requisite of revenue neutrality is that, there is no extra benefit to the assessee and no loss is caused to the Revenue and these two pre-requisites are fulfilled in the present case because even if the disputed credit was distributed to the units at a pro-rata basis, net effect of such transaction would have been NIL and in the present case, the SCN was issued to the Appellant after the introduction of GST that at which point the issue has become revenue neutral because the Appellant has taken one registration. The impugned order is not sustainable in law because in the present case, the entire situation is revenue neutral and therefore the demand is not sustainable and is set aside. Appeal allowed.


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