Madras High Court Directs SVLDRS Relief To SB Aditya Power Projects In CENVAT Credit Dispute

The Madras High Court on 25 June held that authorities cannot reject a CENVAT credit claim on a ground that was not raised in the original show cause notice, and set aside the order denying credit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS).

Justice Senthilkumar Ramamoorthy allowed the petition filed by SB Aditya Power Projects and directed the Designated Committee to reconsider the declaration and issue the discharge certificate after taking into account the Court's findings. He observed:

“There is nothing in the above Rule which makes it a pre-requisite for the availment of CENVAT credit that the goods should be delivered in the registered place of business of the petitioner.”

The dispute arose after SB Aditya Power Projects sought settlement under the SVLDRS for a service tax demand. In the original show cause notice, the Department proposed to deny CENVAT credit only on the ground that the credit had been availed beyond the prescribed time limit. However, after the matter was remanded, the Designated Committee rejected a substantial portion of the credit claim on the ground that the goods had been received at premises other than the registered place of business.

The company challenged the order, arguing that the authorities could not introduce a new ground for rejecting the credit when the original allegation regarding limitation had already been found to be unsustainable. It submitted that its business model required goods to be delivered directly to customers' sites and that the CENVAT Credit Rules did not mandate receipt of goods only at the registered premises.

Accepting the submission, the Court held that Rule 9 of the CENVAT Credit Rules, which prescribes the documents required for availing credit, does not make delivery of goods at the registered place of business a pre-condition for claiming CENVAT credit. It also rejected the Department's contention that the Designated Committee under the SVLDRS only processed declarations and did not adjudicate disputes. The Bench held:

“This contention is untenable for at least two reasons. First, Section 127 empowers the committee to examine the amounts estimated by the declarant and thereafter either accept such amounts or provide its estimate. In cases where the estimate of the Designated Committee deviates from the estimates provided by the declarant, Sub-section 3 of Section 127 provides for the declarant to be heard before a decision is reached. Therefore, the SVLDRS envisages determination by the Designated Committee although the same may not qualify as a full fledged adjudication.”

It further noted that the Scheme empowers the Designated Committee to determine the amounts payable and mandates a hearing where its estimate differs from the amount declared by the taxpayer. It said:

“The second reason for rejecting the contention is that the Designated Committee has undertaken determination of CENVAT credit and allowed the claim only to the extent of Rs.4,30,328/-. In addition, the ground of rejection in the impugned order is different from that raised in the show cause notice.”

Accordingly, the High Court quashed the impugned order and directed the Designated Committee to reconsider SB Aditya Power Projects' declaration under the SVLDRS and issue the discharge certificate within two months.

For Petitioner: T. Mohan, Senior Advocate for M.N. Bharathi, Advocate

For Respondent: Sai Srujan Tayi, Senior Standing Counsel