Suppression of facts has to be "Wilful" for recovery of CENVAT Credit

The CESTAT Delhi ruled that for CENVAT credit to be recovered due to suppression of facts, the suppression must be 'wilful'. In this case, M/s. Emaar MGF Land Ltd. successfully appealed against an order demanding recovery of CENVAT credit, interest, and penalty. The tribunal found no evidence that the appellant had wilfully suppressed information from the department regarding service tax payments.

In M/s. Emaar MGF Land Ltd. v. Commissioner of Central Excise and CGST, Delhi-South [Service Tax Appeal No. 51379 OF 2017 dated August 11, 2021], M/s. Emaar MGF Land Ltd. ("the Appellant") has filed the current appeal for quashing Order-In-Original No. DLI-SVTAX-001-COM-054-16-17 dated March 31, 2017("OIO") which confirmed recovery of Central Value Added Tax Credit ("CENVAT Credit") along with interest and penalty under Section 73(1) of the Finance Act, 1994 ("the Finance Act").

A Show Cause Notice dated April 17, 2014 ("SCN") was issued by the Department to deny the CENVAT Credit availed by the Appellant on works contract service alleging that the activity of construction of residential complexes by a builder became taxable only after the insertion of an Explanation in the definition of taxable service of 'construction of complex service' under Section 65(105)(zzzh) of the Finance Act. The Credit availed by the Appellant was before the insertion of the provision thereby making the same recoverable with interest and imposition of penalty.

The Commissioner Central Excise and CGST, ("the Respondent") confirmed the demand as mentioned in the SCN under Section 73(1) which is challenged by the Appellant in the current case.

The Hon'ble CESTAT, Delhi observed from the submissions provided by the Appellant that Appellant in the current case did not suppress facts from the Department. The Respondent fell in error that the Appellant had suppressed information regarding payment of service tax.

Further noted, there is no reason or discussion given by the Respondent for stating in the order "in any case, the notice, in this case, has willfully contravened the provisions of the Finance Act". The said contentions cannot be sustained. Also noted that when the demand under Section 73(1) of the Finance Act cannot be confirmed, it is not necessary to examine the other contentions raised by the Respondent to quash the impugned order. Therefore, the same is being set aside.