The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has held that CENVAT credit on tippers cannot be denied merely because the vehicles were purchased before they were specifically included in the definition of “capital goods” under the CENVAT Credit Rules.
The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that while the tippers were received in February and March 2010, they were registered and put to use only after June 22, 2010, when the notification specifically recognized them as eligible capital goods. The vehicles cannot be put into operational use without registration and noted that the disputed credit had not been utilized before the effective date of the notification.
The appeal arose from an order of the Commissioner (Appeals) affirming the disallowance of CENVAT credit of ₹1,03,88,050 availed by Libra Business Private Limited on 25 Volvo tippers purchased during February and March 2010. The Department had also sought recovery of interest and imposed a penalty under Section 78 of the Finance Act, 1994.
The assessee was engaged in providing mining and goods transport agency services. During February and March 2010, it purchased 25 Volvo tippers and availed CENVAT credit of the excise duty paid on those vehicles. The credit was intended to be utilized against service tax liabilities arising from mining services rendered by the company.
The Department objected to the availment of credit on two grounds. First, it argued that the assessee had availed credit before obtaining service tax registration. Secondly, it contended that tippers were specifically included within the definition of “capital goods” only through Notification No. 25/2010-CE (NT) dated June 22, 2010. Since the vehicles were received before that date, the Department maintained that the credit was inadmissible.
Based on these allegations, a show cause notice was issued proposing denial of credit and recovery of dues. The adjudicating authority confirmed the demand, which was subsequently upheld by the Commissioner (Appeals).
The assessee argued that although the tippers were purchased before June 22, 2010, they could not legally be used until registered under the Motor Vehicles Act. Most of the vehicles were registered only after June 22, 2010, and were put into service thereafter. Therefore, the eligibility for CENVAT credit should be examined with reference to the date on which the vehicles were actually deployed for providing taxable output services.
The company further submitted that the disputed credit was disclosed in statutory ST-3 returns and was utilized only from May 2011 onwards. It also pointed out that it had followed Rule 4(2) of the CENVAT Credit Rules by utilizing only 50% of the available credit during the relevant financial year.
Additionally, the assessee challenged the invocation of the extended limitation period, arguing that all relevant facts had been disclosed in returns and examined during departmental audit proceedings conducted in 2012.
The Tribunal emphasized that CENVAT credit is a substantive benefit and should not be denied on mere technical or procedural grounds when the taxpayer is otherwise entitled to the benefit. Since duty had been paid on the tippers and they were ultimately used for providing taxable output services, denial of credit was held to be unjustified.
The Bench relied heavily on earlier decisions, particularly the Hyderabad Bench ruling in Vijay Mining & Infra Corp Pvt. Ltd. and the decision in IBC Ltd., where it had been held that the inclusion of tippers and dumpers as eligible capital goods through Notification No. 25/2010 was clarificatory in nature. Those decisions recognized such vehicles as primary requirements for rendering mining and supply-of-tangible-goods services and therefore eligible for CENVAT credit.
Following these precedents, the Tribunal concluded that credit on tippers purchased before June 22, 2010, could not be denied merely because the vehicles were received prior to the notification date.
On the issue of limitation, the Tribunal found that the credit had been duly disclosed in statutory returns and that the Department had already examined the matter during audit proceedings. The show cause notice itself was based on information available in the assessee’s records.
The Bench held that there was no evidence of fraud, suppression of facts, collusion, or wilful misstatement with intent to evade tax. Consequently, the extended period under the proviso to Section 73(1) of the Finance Act, 1994, could not be invoked. Since the entire demand was raised using the extended limitation period, the demand was also liable to be set aside on that ground alone.
Allowing the appeal, the Tribunal set aside the disallowance and recovery of CENVAT credit amounting to ₹1,03,88,050, quashed the demand for interest, dropped the penalty imposed under Section 78 of the Finance Act, 1994, and granted consequential relief to the assessee in accordance with law.
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