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Cenvat Credit cannot be denied without the invocation of suppression, misstatement, or fraud.

LAW FINDER NEWS NETWORK | 10/15/2025, 10:47:00 AM
Cenvat Credit cannot be denied without the invocation of suppression, misstatement, or fraud.

Chennai CESTAT Rules in Favor of Pioneer Jellice India Pvt. Ltd. in Cenvat Credit Dispute. Tribunal Clarifies Non-Denial of Cenvat Credit When Service Tax Payment Under Settlement Provisions Without Suppression or Fraud


The Customs Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has delivered a significant judgment favoring M/s. Pioneer Jellice India Private Limited in a dispute concerning the denial of Cenvat Credit under Rule 9(1)(bb) of the Cenvat Credit Rules, 2004. The tribunal has clarified that Cenvat Credit cannot be denied when the payment of service tax was made under Section 73(4A) of the Finance Act, 1994, in the absence of allegations of suppression, fraud, or misstatement.


The case arose when the Directorate General of Central Excise Intelligence (DGCEI) initiated investigations against M/s. Pioneer Asia Industries Private Limited (PAIPL) for failure to pay service tax on rental charges received for providing an Effluent Treatment Plant to Pioneer Jellice. PAIPL subsequently paid the service tax along with interest and a 1% penalty, and issued supplementary invoices to Pioneer Jellice, who availed Cenvat Credit based on these invoices.


The Revenue's contention was that the Cenvat Credit was availed illegally, as the tax was paid following suppression of facts by PAIPL. However, the tribunal, comprising Member (Judicial) Mr. P. Dinesha and Member (Technical) Mr. Vasa Seshagiri Rao, found that the payment under Section 73(4A) did not equate to suppression or fraud, thus allowing Pioneer Jellice to avail the credit.


The tribunal emphasized that Section 73(4A) serves as a settlement provision, where allegations of fraud or suppression cannot be sustained if the service tax was paid without initiating proceedings under Section 73(1). It further noted that the penalty of 1% suggested a settlement rather than a punitive measure for fraudulent activity.


The judgment also addressed the Department's appeal regarding the non-imposition of interest, affirming that interest is applicable only upon actual utilization of wrong credit. As Pioneer Jellice maintained sufficient credit balance during the relevant period, the tribunal found no grounds for imposing interest.


This decision reinforces the interpretation of settlement provisions under the Finance Act, 1994, and clarifies the conditions under which Cenvat Credit can be availed, providing relief to manufacturers and service providers facing similar disputes.


Bottom Line:

Cenvat Credit cannot be denied under Rule 9(1)(bb) of the Cenvat Credit Rules, 2004, where the payment of service tax was made under Section 73(4A) of the Finance Act, 1994, without the invocation of suppression, misstatement, or fraud.


Statutory provision(s): Rule 9(1)(bb) of Cenvat Credit Rules, 2004, Section 73(4A) of Finance Act, 1994


M/s. Pioneer Jellice India Private Limited v. Commissioner of GST and Central Excise, (CESTAT)(Chennai)(Regional Bench) : Law Finder Doc Id # 2791387

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