Hindustan Construction Company Ltd Reversed Credit Shield

The appellant, Hindustan Construction Company Ltd., was engaged in providing taxable services including works contract, construction, manpower supply, renting of immovable property, and business support services. 

During EA-2000 audit proceedings covering the period 2013-14 to June 2017, the Department objected to availment of CENVAT credit on services such as rent-a-cab, car repair, health insurance, outdoor catering, and insurance relating to operations in high-risk areas at Jammu.

Upon audit objection, the assessee voluntarily reversed the disputed credit amounting to approximately Rs. 11.05 lakhs through the GST portal before issuance of the show cause notice. 

The assessee also maintained a CENVAT balance exceeding Rs. 2 crores throughout the relevant period, thereby demonstrating that the disputed credit had never actually been utilized. Despite such reversal, the Department issued show cause notice invoking extended limitation and imposed equal penalty under Rule 15(3) of the CENVAT Credit Rules read with Section 78 of the Finance Act, 1994.

The Tribunal held that Section 73(3) squarely applied because the assessee had discharged the liability upon being pointed out during audit and informed the Department accordingly. Since Rule 14 and Rule 15 of the CENVAT Credit Rules incorporated Section 73 mutatis mutandis, the Department could not legally issue recovery notice once voluntary reversal had occurred. 

The Tribunal further observed that continued availability of substantial CENVAT balance established non-utilization of the disputed credit. Consequently, the entire proceedings including penalty and extended limitation were quashed.