CENVAT Credit Availed on Bogus Invoices Recoverable U/S 73A: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the Department’s appeal and restored the service tax demand of Rs. 20.07 crore, holding that CENVAT credit availed on invoices issued by non-existent entities was fraudulent and recoverable under Section 73A of the Finance Act, 1994, even for the period earlier held to be time-barred. The Bench of Justice Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) rejected the findings of the Commissioner (Appeals) and observed that the issuers of the input service invoices were conclusively established as fictitious entities, floated for generating bogus bills, a fact confirmed by Income Tax investigations. The case arose from a departmental investigation into M/s Svam Software Limited, an IT services company registered under service tax since 2006. The company had availed CENVAT credit amounting to ₹79.72 lakh during the period 2006-07 to 2008-09 on input service invoices issued by entities such as Macro Infotech, Campari Fiscal Service Pvt. Ltd., GEEFCEE Infosys, and Software Technology Group International Ltd. Investigations by the Income Tax Department revealed that these entities were among 124 shell companies floated by one Shri Tarun Goyal, created solely to issue bogus invoices without providing any actual services. It was found that these firms operated from common addresses, had fictitious employees and bank accounts, and had never deposited the service tax collected with the Government A show cause notice issued in April 2012 proposed recovery of wrongly availed CENVAT credit along with interest and penalties. The adjudicating authority confirmed the entire demand and imposed equal penalty under Section 78 of the Finance Act, 1994. However, the Commissioner (Appeals) partly allowed the assessee’s appeal and set aside the demand of ₹20.07 lakh for the period April–September 2006, holding it to be time-barred. This relief was challenged by the Department before the Tribunal. The tribunal held that the returned postal notices, unresponsive phone numbers, and identical addresses further corroborated that the firms never existed as genuine service providers. Under Rule 9(6) of the CENVAT Credit Rules, 2004, the burden of proving admissibility of credit lies entirely on the service recipient, which the assessee failed to discharge. The assessee could not produce any evidence of receipt of services or payment of service tax to the Government as required under Rule 4(7) of the CENVAT Credit Rules. The Tribunal also noted manipulation of accounting records, including booking of invoices prior to their issuance dates, indicating deliberate falsification. The Tribunal held that Section 73A of the Finance Act, 1994 squarely applied to the case. It observed that the assessee had collected service tax from its clients and adjusted it against inadmissible CENVAT credit without remitting the tax to the Government. The Bench ruled that amounts collected as service tax but not deposited are recoverable irrespective of limitation, and therefore, the demand of ₹20.07 lakh wrongly set aside by the Commissioner (Appeals) was legally sustainable Relying on settled jurisprudence, including the Rajasthan High Court’s ruling in Vodafone Digilink Ltd., the Tribunal reiterated that CENVAT credit is a conditional statutory concession and not a vested right, and that fraud vitiates everything. The Tribunal further held that the assessee had provided both exempt and taxable services without maintaining separate accounts, in violation of Rule 6 of the CENVAT Credit Rules, thereby further disentitling it from credit. Allowing the Department’s appeal, the Tribunal set aside the impugned appellate order and restored the entire demand along with applicable interest and penalties. Case Details Case Title: Commissioner, CGST, East Delhi Versus Svam Software Limited Case No.: Service Tax Appeal No. 50981 Of 2020 Date: 13.01.2026 Counsel For Appellant: Aejaz Ahmad Counsel For Respondent: None Click Here To Read Order Read More: DGGI Meerut | Court Sends Delhi-Based GST Accused to 14-Day Judicial Remand in Rs. 75 Crore Fake ITC Case

CENVAT Credit Availed on Bogus Invoices Recoverable U/S 73A: CESTAT

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