CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL BANGALORE REGIONAL BENCH - COURT NO. 2 Central Excise Appeal No. 20202 of 2018 (Arising out of Order-in-Appeal No. 253/2017 CT dated 20.09.2017 passed by the Commissioner of Central Tax (Appeals – II), Bangalore.)

M/s. Vahini Irrigation Pvt. Ltd.

No. 17, behind KPTCL Sub Station, Gulur Hobli, Honnudike Post, Tumkur, Karnataka – 572 122. ……….Appellant(s)

Versus Commissioner of Central Excise Bangalore North West Commissionerate, Bangalore. ……..Respondent(s)

APPEARANCE:

Mr. Rajesh Kumar, Chartered Accountant (CA) for the Appellant.

Mr. Rajashekar. B. N. N, Superintendent (AR) for the Respondent.

CORAM:

HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL)

HON'BLE MR. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL)

Final Order No. 20004 /2026 Date of Hearing: 09.09.2025 Date of Decision: 09.01.2026 PER: P.A. AUGUSTIAN This appeal is filed against Order-in-Appeal No. 253/2017 CT dated 20.09.2017 passed by the Commissioner of Central Tax (Appeals – II), Bangalore.

2. The issue in the present appeal is whether availment of CENVAT credit of service tax paid on licence for providing courier service is tenable.

3. The brief facts are the Appellant is manufacturing PVC pipes and holding Central tax registration. During course of audit, it is observed that Appellant had availed service tax credit on the service not connected with the manufacturing activity undertaken by them and on further verification it was found that the Appellant entered into an agreement with M/s. KSRTC for transporting of parcels/goods, operation of courier services through the buses belonging to M/s. KSRTC and paid an amount of Rs.1,51,11,739/- as license fee including service tax of Rs. 25,80,768/- to the agency and availed the same as CENVAT credit which appears to be ineligible. Accordingly, show cause notice dated 07.08.2014 was issued and Adjudication authority as per order dated 29.05.2015 confirmed the demand against irregular CENVAT credit and appropriated the amount paid by the Appellant. The Adjudication authority imposed equal amount of penalty under Rule 15(5) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Aggrieved by said order, an appeal was filed before the Commissioner (Appeals) and Commissioner (Appeals) as per the impugned order dated 20.09.2017 upheld the order passed by the original authority. Aggrieved by said order, present appeal is filed.

4. When the appeal came up for hearing, Learned Chartered Accountant (CA) for the Appellant submits that the impugned order at Para 11 held that the credit is ineligible, therefore it is recoverable under Rule 14 of Cenvat Credit Rules, 2004. Rule 14 during the relevant period read as follows:

"Where the CENVAT credit has been taken and utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries".

5. In this regard, Learned Chartered Accountant (CA) for the Appellant submits that it is relevant to note that the provision provided for recovery only when the credit availed is wrongly utilized as well. If the credit availed is not utilized, the provision of Rule 14 is not at all applicable. In the instant case, the order-in-original itself at Para 12 gives a categorical finding that the credit availed was not utilized. That being the case, the question of demand for reversal of credit is not legal and proper.

6. Learned Chartered Accountant (CA) further submits that assuming but not admitting that the credit was ineligible, it is an undisputed fact that credit was reversed before utilization of the credit. It is settled law that reversal of the credit tantamount to non-taking of the CENVAT Credit. In this regard reliance is placed on Commissioner of C. Ex., Mumbai-1 Vs. Bombay Dyeing & Mfg.