CESTAT Allows CENVAT Credit on Proforma Invoice Where Service Tax Payment and Service Receipt Are Undisputed

The CESTAT has ruled that CENVAT credit can be allowed even when a proforma invoice is used, provided the service tax has been paid and the service receipt is not in dispute. The Tribunal found that the proforma invoice contained all necessary details and that the subsequent regular invoices and ER-1 returns confirmed the transaction. Crucially, the demand for credit was also deemed time-barred as the issue was known to the department for years without further action.

The appellant had engaged a service provider for setting up its manufacturing plant. The service provider issued a proforma invoice for execution charges of Rs. 8 crore along with Service Tax of Rs. 82.40 lakh. The appellant availed CENVAT credit after the service provider discharged the applicable Service Tax liability.

The Department denied the credit on the ground that a proforma invoice was not among the prescribed documents under Rule 9 of the CENVAT Credit Rules, 2004. A demand was subsequently raised by invoking the extended period of limitation.

The Tribunal observed that there was no dispute regarding the actual provision of services or payment of Service Tax. The proforma invoice contained the relevant particulars, including the service provider's registration details, taxable value and Service Tax amount. Further, regular invoices were issued subsequently, and the CENVAT credit had been duly reflected in the appellant's ER-1 return.

Relying on the decision in Hindustan Zinc Ltd. v. CCE, Rajasthan, the Tribunal held that CENVAT credit cannot be denied merely because the document is titled as a “proforma invoice” when the required statutory particulars are available and the underlying transaction is genuine.

The Tribunal also held that the demand was time-barred. The credit was disclosed in the ER-1 return, and the audit had already identified and quantified the issue in 2012. However, the show cause notice was issued more than three years later without any evidence of suppression or further investigation.

Accordingly, the Tribunal set aside the impugned order, allowed the appeal and granted consequential relief as per law.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED

Key Takeaway: The substance and completeness of the supporting document may prevail over its nomenclature when the receipt of services, payment of tax and statutory particulars are established. Further, the extended period cannot be invoked merely because the Department identified the issue during an audit, particularly when the relevant facts were already disclosed.