The Bangalore Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that CENVAT credit cannot be denied merely because it was availed on the basis of a proforma invoice when the service tax had been duly paid by the service provider and all statutory particulars were available on record.
The bench of R. Muralidhar (Judicial Member) and R. Bhagya Devi (Technical Member) ruled that the Department could not invoke the extended limitation period in the absence of any suppression of facts, setting aside the entire demand of ₹82.40 lakh.
The appellant/assessee is a manufacturer of sponge iron, having engaged M/s. Industrial Technical Consultant (ITC), Raipur, for setting up its manufacturing plant. ITC issued a proforma invoice dated January 25, 2011, raising execution charges of ₹8 crore and charging service tax of ₹82.40 lakh, taking the total invoice value to ₹8.824 crore.
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The appellant availed CENVAT credit of the service tax in March 2011 after the service provider had discharged the entire tax liability. The credit was duly reflected in the ER-1 return for the relevant month.
However, during a departmental audit conducted in July 2012, an objection was raised that the credit had been taken on the strength of a proforma invoice, which was allegedly not one of the prescribed documents under Rule 9 of the CENVAT Credit Rules, 2004. Based on this objection, the Department issued a show cause notice on October 16, 2015, proposing recovery of the credit along with invocation of the extended period of limitation.
The appellant argued that the service provider had already discharged the service tax liability through government challans before the credit was availed. It also pointed out that the proforma invoice contained all material particulars, including the service tax registration number, PAN, assessable value and service tax amount, thereby satisfying the substantive requirements of Rule 9.
Further, four regular invoices were subsequently issued between March 2011 and March 2012 corresponding to the same transaction. According to the appellant, these subsequent invoices, when read together with the proforma invoice, clearly established the genuineness of the transaction and the payment of service tax.
The appellant also challenged the demand on limitation, emphasizing that the credit had been disclosed in the ER-1 return, the audit objection had been raised in December 2012, yet the show cause notice was issued only in October 2015 without any evidence of suppression or fraud.
The department maintained that a proforma invoice was not among the specified documents recognized under Rule 9 of the CENVAT Credit Rules for availing credit. It further argued that the particulars of the invoice were not reflected in the ER-1 return and came to light only during departmental audit, thereby justifying the demand and invocation of the extended limitation period.
The Bench noted that there was no dispute regarding the actual rendering of services by ITC or the payment of service tax amounting to ₹82.40 lakh. The Tribunal observed that the audit report itself acknowledged that the service provider had paid the service tax and had subsequently issued regular invoices covering the transaction.
The Tribunal held that when all documents are read together, the transaction stood fully established and the substantive conditions for availing CENVAT credit had been satisfied.
Relying on its earlier decision in Hindustan Zinc Ltd. v. CCE, Rajasthan (Final Order No. 50367/2022), the Tribunal reiterated that Rule 9 of the CENVAT Credit Rules does not restrict admissibility solely to a particular format of invoice. Any document containing all prescribed statutory particulars and evidencing payment of service tax can serve as a valid document for availing CENVAT credit.
Accordingly, the Tribunal concluded that denial of credit solely because the document was styled as a proforma invoice was unsustainable.
The Tribunal also accepted the appellant’s plea on limitation.
It observed that the CENVAT credit had been taken in March 2011 and properly disclosed in the ER-1 return. The audit report dated December 18, 2012 had already quantified the alleged irregularity. Despite this, the Department waited more than three years to issue the show cause notice without demonstrating any further investigation or evidence of suppression by the assessee.
The Bench held that mere detection during audit could not justify invocation of the extended limitation period when all material facts were already available to the Department through statutory returns and audit records.
Allowing the appeal, the CESTAT set aside the impugned order on both merits and limitation, holding that CENVAT credit cannot be denied merely because it was availed on the basis of a proforma invoice when service tax has actually been paid and all statutory particulars are available. The Department failed to establish suppression or any other ground necessary to invoke the extended period of limitation. The appellant is entitled to consequential relief in accordance with law.
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