No CENVAT Credit on Note Sheets and Sanction Orders: CESTAT Clarifies Rule 9 Requirements

No CENVAT Credit on Note Sheets and Sanction Orders: CESTAT Clarifies Rule 9 Requirements

Introduction

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that CENVAT credit cannot be claimed on the basis of note sheets or sanction orders and can only be availed on valid documents containing all mandatory details as prescribed under the CENVAT Credit Rules (CCR).

Factual Background

The assessee/appellant, M/s Environment Planning & Coordination Organization, was engaged in providing taxable services such as Architectural and Consulting Engineering Services and was registered with the service tax department. They were paying service tax and availing CENVAT credit on inputs and input services.

The assessee produced sanction orders and note sheets to substantiate payments made to contractors. However, the documents failed to meet the requirements of Rule 9(1) of the CCR, which specifies the types of documents eligible for claiming credit.

Procedural Background

The documents submitted lacked essential details required under Rule 9(2) — including the Service Tax Registration number of the service provider, the amount of service tax charged, and the name of the assessee. Consequently, a show cause notice (SCN) was issued, leading to the disputed order.

Contentions of the Parties

Assessee’s Contentions:

• CENVAT credit was denied merely because the documents did not contain certain mandatory particulars.
• Claimed that the substance of the transactions was genuine and that minor omissions should not result in denial of credit.

Revenue’s Contentions:

• Argued that Rule 9 requirements are substantive and not procedural.
• Stated that only those documents specifically listed in Rule 9(1) qualify as valid duty-paying documents, and the assessee’s note sheets and sanction orders were outside the permissible list.

Tribunal’s Analysis

The Tribunal stressed that Rule 9(1) lists the only permissible documents for availing CENVAT credit — note sheets and sanction orders are not included. Even invoices must contain all details mentioned in the proviso to Rule 9(2) to be considered valid.

The bench, comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member), observed that the assessee cannot expect the department to piece together different documents like agreements, covering letters, and incomplete challans to validate credit claims.

Reasoning & Analysis

The Tribunal held that strict compliance with Rule 9 is mandatory. Without proper documentation, credit claims are invalid regardless of the genuineness of the transaction. This ensures transparency and prevents misuse of the CENVAT credit mechanism.

Implications

This ruling underscores that only valid, complete, and compliant documents can be used to claim CENVAT credit. Businesses must ensure that all invoices and supporting documents contain mandatory particulars to avoid disputes.

Outcome

The Tribunal partly allowed the appeal, setting aside the demand for the extended period of limitation and entire penalty under Section 78, but upheld the denial of CENVAT credit based on invalid documentation.

Appearance:

• Appellant represented by Mr. Sandeep Mukherjee, Advocate.
• Respondent represented by Mr. Rajeev Kapoor, Advocate.