Running Account Bills Can’t Be Rejected on Mere Technicalities: CESTAT Allows Rajasthan Housing Board CENVAT Credit

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi has set aside a service tax demand of more than ₹3.07 crore raised against Rajasthan Housing Board holding that CENVAT credit cannot be denied merely due to procedural objections where the receipt of services and payment of tax are not disputed. The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya, Member (Technical) observed that the extended limitation period could not be invoked in the absence of any suppression of facts or intent to evade tax. The dispute arose after the department conducted an audit of the Rajasthan Housing Board and alleged that the appellant had wrongly availed CENVAT credit amounting to ₹3,07,51,666 during the period from July 2012 to June 2017. According to the department, the credit had been taken based on running account bills and measurement books prepared by engineers, which allegedly did not qualify as prescribed documents under Rule 9(1) of the CENVAT Credit Rules, 2004. The department also pointed to discrepancies between figures disclosed in the CENVAT register and ST-3 returns. On this basis, a show cause notice was issued proposing recovery of credit along with interest and penalties. The adjudicating authority thereafter confirmed the entire demand, imposed interest, and levied an equivalent penalty under Section 78 of the Finance Act, 1994. The Rajasthan Housing Board challenged this order before CESTAT. Before the Tribunal, the appellant argued that most of the demand was barred by limitation because the show cause notice had been issued in June 2019 for a period beginning in July 2012. It was submitted that details of CENVAT credit had already been disclosed in ST-3 returns and therefore there was no suppression or wilful concealment of facts. The appellant further contended that the department had itself relied on figures declared in the returns and that the audit findings alone could not justify invocation of the extended period. The appellant also defended the substantive eligibility of the credit. It argued that part of the disputed amount related to service tax paid under the reverse charge mechanism through GAR-7 challans, which are recognized documents under the CENVAT Credit Rules. With respect to running account bills, it was submitted that these documents, read together with payment orders, contained all essential details including the service provider's name and address, details of the service recipient, description of services, service tax registration numbers and tax amounts. The department maintained that running account bills were not among the prescribed documents under Rule 9(1), and therefore credit could not be availed on such records. It also argued that the irregularity came to light only during audit and that the appellant had failed to correctly assess its liability under the self-assessment system. The Tribunal, however, disagreed with the department’s position. While considering the limitation issue, it observed that the appellant was a statutory body established under the Rajasthan Housing Board Act and had regularly filed ST-3 returns disclosing details of the credit availed. The Tribunal noted that there was no evidence of fraud, suppression, collusion or any intention to evade tax. It emphasized that merely because an issue was detected during audit could not justify invocation of the extended period. The Bench further held that the appellant had cooperated with the audit process and furnished all relevant documents. Since the Revenue could not establish any mala fide conduct, the extended limitation period was held to be wrongly invoked. On the merits of the CENVAT credit claim, the Tribunal accepted the appellant’s argument regarding service tax paid under reverse charge through GAR-7 challans, observing that such challans are specifically recognized under the Rules as valid documents for availing credit. Addressing the issue of running account bills, the Tribunal emphasized the underlying objective of the CENVAT scheme, namely the avoidance of cascading taxation. It observed that there was no dispute regarding receipt of input services or payment of service tax. Once these fundamental requirements were satisfied, credit could not be denied on hyper-technical grounds. The Tribunal referred to earlier judicial precedents and reiterated that nomenclature of documents cannot override substantive compliance. It observed that business practices may vary and law does not require trade practices to be altered merely to satisfy technical formality requirements. The Tribunal also noted that records maintained in the ordinary course of business are acceptable if they contain substantial particulars and establish the genuineness of transactions. Case Details Case Title: M/s. Resident Engineer Versus Citation: JURISHOUR-1378-CES-2026(DEL) Case No.: Service Tax Appeal No. 50823 Of 2020 Date: 25/05/2026 Counsel For Appellant: B.L. Narasimhan and Shri Ashutosh Choudhary Counsel For Respondent: B.L. Narasimhan and Shri Ashutosh Choudhary Click Here To Read Order Read More: Penalty on Undisclosed Gold, Cash and Investments

Running Account Bills Can’t Be Rejected on Mere Technicalities: CESTAT Allows Rajasthan Housing Board CENVAT Credit

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