Eligible CENVAT credit cannot be denied merely for delayed availment or non-reflection in ST-3 returns.

M/s Panchatatva Infrabuild Pvt. Ltd. was registered with the Service Tax Department. On the basis of third-party information received from the Income Tax Department for FY 2014–15, the Department issued a show-cause notice dated 30 December 2020 alleging that the appellant had received service-related receipts of ₹49,50,000 but had disclosed no corresponding taxable service value in its ST-3 returns. The Department consequently proposed service tax of ₹6,11,820, along with interest and penalties.

The appellant had outsourced the work to M/s Aakriti Buildtech, which raised an invoice for ₹44,45,043 and paid service tax of ₹5,49,407. The adjudicating authority allowed credit/set-off of this amount, confirmed the balance service tax demand of ₹62,413, and appropriated the tax, interest and penalty amounts deposited by the appellant.

The Revenue appealed, contending that the appellant had outsourced the entire work and that the tax paid by the subcontractor could not be treated as CENVAT credit used for providing the appellant’s output service. The Commissioner (Appeals) allowed the Revenue’s appeal. The appellant thereafter approached the Tribunal.

1. Whether the appellant was entitled to claim CENVAT credit of ₹5,49,407 on the service tax paid to its registered subcontractor, despite the credit not being reflected in the ST-3 returns?

2. Whether the credit could be denied on the ground that it was availed beyond the prescribed period of six months or one year?

3. Whether the extended period of limitation could be invoked on the basis of information received from the Income Tax Department, in the absence of fraud, collusion, wilful misstatement or suppression of facts with intent to evade tax?

The Tribunal applied the CENVAT credit scheme under the CENVAT Credit Rules, 2004, holding that substantive eligibility for credit cannot ordinarily be defeated by a procedural lapse where the taxable input service was received, service tax was paid, and valid documents existed.

It also considered Sections 73(1), 75 and 78 of the Finance Act, 1994, read with Section 174 of the Central Goods and Services Tax Act, 2017, concerning service-tax recovery, interest and penalty.

The Tribunal relied on M/s Antares Services Pvt. Ltd. v. Commissioner of Central Excise, Chandigarh, Final Order No. 60023/2024, for the proposition that non-reflection of eligible credit in the ST-3 returns does not, by itself, extinguish the substantive entitlement to credit.

It further relied on Kush Constructions v. CGST NACIN, ZTI, Kanpur, 2019 (24) G.S.T.L. 606 (Tri.-All.), which held that a demand based on data obtained from the Income Tax Department, without independent evidence of suppression or intent to evade, does not justify invocation of the extended limitation period.

The Tribunal found that the appellant had received the subcontractor’s services, paid the applicable service tax, and possessed documentary evidence, including the relevant invoices. The fact that the credit was not reflected in the ST-3 returns, or was claimed/utilised after the prescribed period, was treated as a procedural lapse that could not override the appellant’s substantive entitlement to credit.

The Tribunal also rejected the extended-period demand because the proceedings originated from third-party Income Tax Department data and the record did not establish suppression, fraud, collusion, wilful misstatement or any intent to evade service tax. Accordingly, the extended limitation period and the associated penal consequences were held unsustainable.

The Tribunal held that eligible CENVAT credit could not be denied merely because it was not reported in the ST-3 returns or was availed late, and that the extended limitation period was unavailable in the absence of proof of suppression or intent to evade tax.