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2021 (7) TMI 457 - AT - Central ExciseCENVAT Credit - failure to distribute credit on certain common input services and transition to GST - violation of Rule 7 of CENVAT Credit Rules, 2004 - denial of substantive right on the ground of procedural irregularity - extended period of limitation - revenue neutrality - HELD THAT:- In the present case, the learned Commissioner has confirmed the demand of CENVAT credit on the grounds that the appellant has failed to distribute the credit to its various units regarding common input service. The defence of the appellant that after the implementation of GST with effect from 01.07.2017, the appellants have taken single registration for all the 9 units working in the State of Karnataka in terms of Section 25 of the CGST Act, 2017. Further, it is found that the unutilized credit from ER-1 Returns and ST-3 Returns were transferred to Form GST TRAN-1 in terms of Section 140 of the CGST Act 2017 read with Rule 117 of CGST Rules 2017 and the same was further taken to Electronic Credit Ledger. Once the Department has not disputed the eligibility or entitlement of credit then the failure of the appellant to distribute the same and transition to GST after coming into force of GST is only a procedural lapse and it will not affect the substantive right of the appellant because the failure to comply with the provisions of ISD are at best may be termed as procedural irregularity and it has been consistently held by various Courts that substantive right cannot be denied merely on procedural irregularity. Extended period of limitation - revenue neutrality - HELD THAT:- The extended period of limitation invoked by the Department is not sustainable in the present case because the appellant has not concealed any information from the Department and all the documents were provided by the appellant to the Audit Party and on the basis of Audit Report, the SCN was issued - Further the entire demand in the present case results into revenue neutral because even if the appellant had distributed the credit, it would have been available for utilization by appellant post GST regime in terms of Section 25 of the CGST Act, 2017. It is found that pre-requisite of revenue neutrality is that there is no extra benefit to the assessee and no loss is caused to the Revenue and these two pre-requisites are fulfilled in the present case because even if the disputed credit was distributed to the units at a pro-rata basis, net effect of such transaction would have been NIL and in the present case, the SCN was issued to the appellant after the introduction of GST that at which point the issue has become revenue neutral because the appellant has taken one registration. The entire situation is revenue neutral - Appeal allowed - decided in favor of appellant.
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