As per Rule 1(2) of CCR the Cenvat Credit Rules do not apply to taking of Cenvat Credit of Service Tax. Therefore, Cenvat Credit taken with respect to services availed in the state of Jammu & Kashmir, has been correctly denied to the appellant.
CESTAT, KOLKATA BENCH
Vodafone Essar Spacetel Ltd.
Commissioner of Central Excise, Customs & Service Tax, BBSR-I
DR. D.M. MISRA, JUDICIAL MEMBER
AND H.K. THAKUR, TECHNICAL MEMBER
ORDER NOS. FO/A/75805/2015 & SO/76496/2015
STAY PETITION NO. SP-76269/2014
APPEAL NO. ST-76124/2014
DECEMBER 23, 2015
Ravi Raghavan and Miss. S. Chatterjee, Advs. for the Petitioner. S. Sharma, Commr. (AR) for the Respondent.
H.K. Thakur, Technical Member – This appeal has been filed by the appellant against Order-in-Original No. COMMR/B-l/ST-01/2014 dated 05.05.2014 passed by the Commissioner of Central Excise, Customs & Service Tax, BBSR-I as Adjudicating authority. Under this Order-in-Original dated 05.05.2014 Adjudicating Authority has disallowed a credit of Rs. 42,92,90,582/- under Section 73(2) of the Finance Act, 1994, read with Rule 14 of the CENVAT Credit Rules, 2004 and confirmed the same along with interest. An equivalent amount of penalty has also been imposed upon the appellant by Adjudicating Authority under Section 78 of the Finance Act, read with Rule 15(3) of the Cenvat Credit Rules, 2004 (CCR).
2. Shri Ravi Raghavan (Advocate), along with Miss S. Chatterjee (Advocate), appeared for personal hearing on behalf of the appellant and submitted that the period of demand is April 2007 to September, 2011. That out of the total demand Rs. 30,69,98,748/- pertain to Cenvat Credit taken by the appellant on the capital goods installed in the state of Jammu & Kashmir, which is proposed to be denied in view of Rule 6(4) of CCR. That Rs. 11,52,24,984/- pertain to credit taken on the input services availed in the state of Jammu & Kashmir which is proposed to be denied under Rule 6(1) of the CCR. That a credit of Rs. 16,00,139/- is proposed to be denied, with respect to the credit taken on the basis of documents issued by the Banks, under Rule 9 of the CCR. That remaining credit of Rs. 56,66,711/- is with respect to Service Tax paid on managerial services availed on the basis of duty paying documents which according to Revenue are improper documents under Rule 9 of the CCR.
2.1 It is the case of the learned Advocate —
|(i)||That demand for the period 01.04.2007 to 31.03.2011 (amounting to Rs. 36,38,996/-) is time barred as the show cause notice is issued on 19.01.2012 and there is no wilful suppression or misstatement on the part of the appellant.|
|(ii)||That the capital goods installed in J & K state are used for providing taxable as well as exempted services when a subscriber of Bhubaneswar circle of the Appellant goes to the state of J & K and avails roaming services. That Bhubaneswar circle of the Appellant collects roaming charges from such subscriber and discharges service tax on the same. Therefore, the capital goods installed in the state of Jammu & Kashmir have not been used by the Appellant for exclusively providing exempted services, hence, Rule 6(4) is not violated.|
|(iii)||That since the input services were used for providing taxable services as well as exempted services provided in J & K, therefore, upto 31.03.2011 (for credit availed Rs. 3,14,55,065/-) the credit taken will fall under Rule 6(5) and hence not hit by the bar of Rule 6(1) of the CCR.|
|(iv)||That other credits are denied on the basis of improper documents which is not correct as all the requisite particulars as per Rule 4A of the Service Tax Rules, 1994 are contained in the documents on the basis of which Cenvat Credit was taken by the appellant and accordingly Rule 9 of CCR is not violated.|
|(v)||That procedural lapses like taking of Cenvat Credit on the invoices prior to taking centralized registration on bank guarantee commission of states other than Orissa, cannot be made the basis for denying Cenvat Credit if otherwise admissible.|
2.2 Learned Advocate relied upon CBEC Circular No. 22/2/97, dt. 03.09.1997 & Delhi Commissionerate Circular, dt. 26.11.2007 to argue that capital goods installed and services availed in Jammu & Kashmir are also used for taxable roaming services provided by the Appellant in Jammu & Kashmir. That as per CBEC Circular 91/2/2007-ST, dt. 12.03.2007 after Finance Bill, 2007 appellant has to pay Service Tax on Interconnect Usage Charges (IUC) which could also be in the state of Jammu & Kashmir. That as the service provider and service recipients are out of the state of Jammu & Kashmir capital goods and services availed in Jammu & Kashmir will also be deemed to have been used for providing taxable service during roaming.
2.3 For taking Cenvat Credit on documents which contain all the relevant details learned Advocate relied upon the following case laws:—
|(a)||CCE v. Gwaliar Chemical Industries Ltd. 2011 (274) ELT 97 (Tri – Delhi)|
|(b)||CCE v. Grasim Industries Ltd. [Order No. 493/2011 SM (BR) (PB), dated 21-7-2011]|
|(c)||Essar Oil Ltd. v. CCE [2011 (303) ELT 255 (Tri – Ahd.)|
|(d)||JSW Steel Ltd. v. CCE [2012 (277) ELT 189 (Tri – Chennai)]|
|(e)||Pharmalab Process Equipment (P.) Ltd. v. CCE 2009 (242) ELT 467 (Tri. – Ahd.)|
|(f)||CCE & C v. Jalaram Plastic Pack  35 STT 94 (Ahd. – CESTAT)|
|(g)||Manipal Advertising Services (P.) Ltd. v. CCE  25 STT 30 (Bag. – Trib.)|
3. Shri S. Sharma, ld. Commissioner (AR) appearing on behalf of the Revenue argued that as per Section 64(1) of the Finance Act, 1994 Service Tax provisions are not applicable to the state of Jammu & Kashmir. That no extra service tax specifically has been paid by the appellant for providing roaming services in the state of Jammu & Kashmir and roaming charges collected from the customers are same everywhere in India. That no such Service Tax paid on roaming charges in the state of Jammu & Kashmir has been separately indicated either in the ST-3 returns filed by the appellant or in the invoices charged to the customers. That centralized registration for seven branch offices/premises, from where services are provided, are only for making accounting and service tax payment easy and does not make all the seven premises as one service provider. It was his case that appellant has mis-represented by including the name of their Bahu Plaza Complex, Jammu, as no taxable service is provided by the appellant from this premises. That once no taxable service provided in the state of Jammu & Kashmir then no Cenvat Credit to capital goods installed in the state of Jammu & Kashmir is admissible as per CCR. Learned AR made the Bench go through Section 64(1) of the Finance Act, 1994, Rule 4(2) of Service Tax Rule, 1994 and Rule 1(2), Rule 2(e), 6(1) and 6(4) of the CCR to argue that Cenvat Credit with respect to capital goods and inputs services was not admissible and has been correctly denied to the appellant by the Adjudicating Authority. Regarding invocation of extended period it was his case that nowhere in the returns filed with the department by the appellant it was specified that credit of capital goods and input services utilised in Jammu & Kashmir has been taken.
3.1 Regarding taking of Cenvat Credit on improper documents learned AR made the Bench go through paras – 4.10 to 4.13 of the Adjudication order to argue that Cenvat Credit of Rs. 72,66,850/- (Rs. 16,00,139/- + Rs. 56,66,711/-) has been correctly denied to the appellant.
4. Heard both sides and perused the case records. Issues involved in these proceedings are –
|(i)||Whether appellant has correctly availed Cenvat Credit with respect to capital goods installed in the state of Jammu & Kashmir where service tax provisions are not applicable as per Section 64(1) of the Finance Act, 1994?|
|(ii)||Whether Cenvat Credit is admissible with respect to the services availed in the state of Jammu & Kashmir?|
|(iii)||Whether appellant is eligible to Cenvat Credit of Rs. 72,66,850/- availed by the appellant on documents which according to Revenue are not proper documents as per Rule 9 of the CCR?|
|(iv)||Whether extended period of five years can be invoked against the appellant for demanding duty and imposing penalty?|
5. So far issue involved at para 4(i) above, regarding Cenvat Credit on capital goods used in the state of Jammu & Kashmir, is concerned appellant has argued that capital goods installed in the state of Jammu & Kashmir are also used for providing taxable on roaming facilities, provided by the appellant from Bhubaneswar, on which service tax is paid. It is thus the case of the appellant that provisions of Rule 6(4) of the Cenvat Credit Rules, 2004 (CCR) are not applicable and Cenvat Credit was correctly taken. On the other hand Revenue is of the opinion that no taxable service was provided by the appellant in the state of Jammu & Kashmir and roaming charges, recovered by the appellant will be considered to be services provided at Bhubaneswar as per the CBEC Circulars relied upon by the appellant. It is also the case of the Revenue that centralized registration obtained by the appellant is only a procedure to ease accounting and payment of service tax when service provider in the state of Jammu & Kashmir remains at their Jammu Branch office who is providing service in non-taxable area/service tax exempted area.
5.1 It is observed that Section 69(1) of the Finance Act, 1994 every person liable to pay service tax has to seek registration. Further as per Rule 4(2) of the Service Tax Rules, 1994, where a person has centralized billing/accounting system then centralized registration can be obtained. Obtaining centralized registration of Bhubaneswar does not mean that service provider (branch office) in Jammu & Kashmir state starts providing services from Bhubaneswar. Further branch office in Jammu & Kashmir was not required to be included by the appellant in the centralized registration from where no taxable service is provided by virtue of Section 64(1) of the Finance Act, 1994. We are not convinced by the argument of the appellant that the capital goods/towers installed in Jammu & Kashmir are also used for providing taxable roaming services, because such facility/service has to be deemed to have been provided at Bhubaneswar as per the CBEC clarification relied upon by the appellant. There is nothing on record that any special charge recovered by the appellant from the customers towards the roaming facilities provided in the state of Jammu & Kashmir. Roaming charges are the same whether roaming facilities are provided in Jammu & Kashmir or elsewhere in India as nothing contrary to that aspect has been brought on record by the appellant. In view of the above all the branch offices of the appellant remain separate service providers even if a centralized registration for discharging service tax liability is obtained by the appellant. Accordingly it is held that when branch office (service provider) in Jammu & Kashmir was not required to discharge service tax then all the capital goods installed in the state of Jammu & Kashmir have to be considered ineligible for taking credit. The observations made by Adjudicating authority in paras 4.5 & 4.6 of the Order-in-Original dated 05.05.2014 are logical and are upheld.
6. So far as point at para 4(ii) above, regarding admissibility of Cenvat Credit available on services the state of Jammu & Kashmir, is concerned it is observed that Rule 1 of the Cenvat Credit Rules, 2004 read as follows:—
“Short title, extent and commencement.
|1.||(1) These rules may be called the CENVAT Credit Rules, 2004.|
|(2) They extent to the whole of India:|
Provided that nothing contained in these rules relating to availment and utilization of credit of service tax shall apply to the state of Jammu and Kashmir”
6.1 As per the above proviso to Rule 6(2) [to be read as Rule 1(2) – ed.] of CCR the Cenvat Credit Rules do not apply to taking of Cenvat Credit of Service Tax. Therefore, Cenvat Credit taken with respect to services availed in the state of Jammu & Kashmir, has been correctly denied to the appellant.
7. So far as Cenvat Credit of Rs. 72,66,850/-, mentioned at above para 4(iii) is concerned, appellant has argued that Cenvat Credit has been properly taken as all the details presented in Rule 4(A) of Service Tax Rules, 1944 are satisfied. Learned Advocate for the appellant during the course of hearing has also relied upon several case laws on this issue. Rule 4A(1) of the Service Tax Rules, 1994 is relevant and is reproduced below along with its provisos:—
“[Taxable service to be provided or credit to be distributed on invoice, bill or challan.
4A.(1) Every person providing taxable service, [not later than fourteen days from the date of [completion] of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier,] shall issue an invoice, a bill or as the case may be, a challan signed by such person or a person authorized by him in respect of [such] taxable service provided or to be provided and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely:—
|(i)||the name, address and the registration number of such person;|
|(ii)||the name and address of the person receiving taxable service;|
|(iii)||description, classification and value of taxable service provided or to be provided and|
|(iv)||the service tax payable thereon:”|
7.1 The words “invoice”, “bill” and “challan” have not been defined in the Service Tax Rules, 1994 but the details contained in such documents have been prescribed in Rule 4A(1) of these rules. Further provisos under Rule 4A(1) any document, whether or not serially numbered with respect to banking services, GTA Services, and Aircraft Operator Services; has been prescribed. From a collective reading of these provisions we are of the opinion that if details prescribed in Rule 4A(1) of the Service Tax Rules, 1994 are available in a document then the same can be considered as an invoice, bill or challan and will be a proper document for availing Cenvat credit under CCR. Our view is fortified by the case law of CESTAT, Ahmedabad in Jalaram Plastic Pack (supra) where debit notes issued by the service provider were considered proper document for taking Cenvat Credit under Rule 9(2) of CCR. Similar view has been expressed by CESTAT, Delhi in the case of Gwaliar Chemicals Industries Ltd. (supra). Minor procedural irregularities, if any, cannot be made the basis of denying Cenvat Credit if utilization of taxable services have been established to be used in the output services provided by an assessee. Accordingly we hold that Cenvat Credit of Rs. 72,66,850/- (Rs. 16,00,139/- + Rs. 56,66,711/-) has been correctly availed by the appellant and appeal to that extent is required to be allowed.
8. Regarding issue at para 4(iv) above, regarding invocation of extended period and imposition of penalty, Adjudicating authority has given following findings:—
“4.14 The noticee applied and obtained local Service Tax registration during June, 2007 and centralized registration during July, 2009. Till detection of the case in 2012 it has not intimated the department that it has availed the impugned credit of Rs. 42,94,90,582/- on the items that have been consumed in a territory which has been excluded from the provisions of the Act. They availed the above credit when the provisions of the CCR, 04 does not have any applicability to its case. Also, a majority of the cenvated items have been received long before the registration of the notice for providing taxable service at Bhubaneswar in 2007. The notice is a corporate entity and is supposed to be well aware of the provisions of Service Tax statute. Despite this fact, it continuously availed the above impugned credit in violation of the provisions of Rule 1(2), 3, 6 & 9 of the CCR, 04 which indicates its wilful intention for unjust financial benefits. These facts would have gone unnoticed had the departmental officers unearthed the same. Therefore, I find that the above conduct of the notice contains ingredients of suppression of facts and wilful contravention of the above provisions of law with an intention to evade payment of Service Tax. Accordingly, I hold that the extended period of limitation under proviso to Section 73(1) of the Act is rightly invokable in this case for effecting recovery of the irregularity availed Cenvat Credit of Rs. 42,94,90,582/-. I also hold that apart from recovery of the above credit under Rule 14 of the CCR, 04 along with interest, the noticee is liable for penalty under Rule 15 of the CCR, 04 read with Section 78 of the Act.”
8.1 On the other hand appellant has argued that extended period of 5 years, under proviso to Section 73(1) of the Finance Act, 1994, will be applicable only if there is wilful act or mis-statement or deliberate withholding of information as per the case laws of Padmini Products Ltd. v. Collector of Central Excise 1989 taxmann.com 629 (SC), Anand Nishikawa Co. Ltd.v. CCE 2005 2 STT 226 (SC) decided by Apex Court. It is appellants case that they have correctly taken Cenvat Credit as per CCR and has not misstated or suppressed any information from the department with an intention to take wrong credit. It is also their case that in view of the explanation given by the appellant there was a bona fide belief on the part of the appellant that the credit was admissible and the penalty can be imposed as per the following case laws:
|(i)||Flyingman Air Courier (P.) Ltd. v. CCE 2004 (170) ELT 417 (Trib. – Delhi)|
|(ii)||CCE v. Gamma Consultancy (P.) Ltd.  14 STT 20 (Mum)|
|(iii)||Hindustan Steel Ltd. v. State of Orissa 1970 taxmann.com 111 (SC)|
Appellant also pleaded that as per the provisions contained in Section 80 of the Finance Act, 1994 issue involved is of interpretation of statutory provisions and there was a bona fide belief on the part of appellant, therefore, penalty is required to be waived.
8.2 As per the provisions contained in Rule 9(6) of the Cenvat Credit Rules, 2004 the burden of proof regarding admissibility of Cenvat Credit lies on the provider of output service taking such credit. In the existing realm of self-assessment of taxes more trust is cast upon the tax-payer. It is an admitted fact that before centralized registration appellant was having separate registration for the premises where taxable services were provided. Office premises in Jammu & Kashmir, from where services were provided in Jammu & Kashmir, were not registered for providing taxable services. It was a mis-statement on the part of the appellant to include the premises of Jammu & Kashmir in the centralized Registration when no taxable services were provided in the state of Jammu & Kashmir. No service tax credit could be taken by virtue of Section 64(1) of the Finance Act, 1994. We agree with the Adjudicating authority on the reasoning that an assessee of the stature of the present appellant, having the best legal advise at their command, can not be considered to be ignorant of law. No where in the statutory returns/intimations, submitted to the department and brought on record, that Cenvat Credit of capital goods and services installed/availed in the state of Jammu & Kashmir has been depicted. Appellant never approached the department at any stage that any ambiguity or confusion exists in taking of credit with respect to capital goods/services installed availed in the state of Jammu & Kashmir. Further it is observed from the relied upon case law ofPadmini Products Ltd. v. CCE (supra) that each case has to be examined on facts to determine whether extended period can be made applicable. On the basis of records and the facts of the present case we agree with the findings of the Adjudicating authority that extended period is applicable and penalty, equivalent to the inadmissible credit, imposed upon the appellant is justified. Further we also hold that appellant has no reasonable cause for considering that Cenvat Credit on capital goods/services installed/availed in the non-taxable state of Jammu & Kashmir, is admissible. Accordingly, it is not a case for allowing the benefit of Section 80 of the Finance Act, 1994 to the appellant.
9. In view of the above observations appeal filed by the appellant, with respect to admissibility of Cenvat Credit on capital goods and service tax, availed in the state of Jammu & Kashmir by the appellant is accordingly dismissed.
10. In view of the above observations appeal filed by the appellant is allowed only to the extent indicated in para 7.1 above