Dealers of SIM Cards /Recharge vouchers cannot be regarded as recipients of telecom services provided by telecom companies; hence, said dealers cannot take input service credit of service tax paid by telecom companies
CESTAT, NEW DELHI BENCH
Omar Agencies (Hutch)
Commissioner of Central Excise, Allahabad
AND R.K. SINGH, TECHNICAL MEMBER
FINAL ORDER NOS. 52725-52726 OF 2015
APPEAL NOS. ST/543 OF 2009 & 804 OF 2010
CROSS OBJECTION NO. 270 OF 2009
AUGUST 14, 2015
S.S. Dabas, Adv. for the Appellant. Smt. Suchitra Sharma , AR (Jt. CDR) for the Respondent.
R.K. Singh, Technical Member :- The assessee has filed appeal against Order-in-Revision dated 16/10/2009 in terms of which the following order was passed by Commissioner :—
“I, in exercise of powers conferred on me under Section 84 of the Finance Act, 1994, revise the Order-in-Original No. MP (ST)-05/07) 14 of 2007 dated 31/10/2007 to the extent as under :-
|(i)||I order for recovery of inadmissible Cenvat credit amounting to Rs. 1,10,105/- wrongly availed and utilized during the period from 04/02/2005 to September 2005 under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act 6, 1994 alongwith interest under Section 75 of Finance Act, 1994.|
|(ii)||I order for recovery of wrongly availed inadmissible Cenvat credit of Rs. 5,86,904/- (including the service tax credit of Rs. 61,794/- wrongly utilized) during the period from October, 2005 to March, 2006 under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of Finance Act, 1994 alongwith interest under Section 75 of Finance Act, 1994.|
|(iii)||I impose a separate penalty of Rs. 10,000/- under Rule 15 (3) of Cenvat Credit Rules, 2004.|
Rest part of the order in original will remain unchanged.
Adjudged/revised amount of demand/penalty should be paid forthwith.”
2. Revenue is also in appeal against order-in-appeal dated 31/03/2009 which held that the activity of providing/selling SIM cards/recharge coupons in lieu of commission was not Business Auxiliary Service.
3. The facts of the case are as under. The assessee was allegedly providing Business Auxiliary Service to M/s Aircel Digilink India Ltd. Co. in the form of providing/selling SIM Cards/recharge coupons and was receiving commission for the same, but did not pay service tax under Business Auxiliary Service. It also took Cenvat credit amounting to Rs. 1,10,105/- during the period 10/02/2005 to September 2005 and Rs. 5,75,496/- during the period October 2005, to March, 2006. This credit was taken in respect of service tax paid by M/s Aircel Digilink India Ltd. Co. The primary Adjudicating Authority held that the assessee was not receiving any service from M/s Aircel Digilink India Ltd. Co., and therefore, the service tax paid by the latter was not admissible to the assessee. Amount of Rs. 61,974/- were ordered to be recovered by the primary Adjudicating Authority on the ground that this amount of Cenvat credit was utilized for paying service tax when the credit was not even admissible. The primary Adjudicating Authority passed the following order.
|“1.||I order recovery of wrongly availed inadmissible Cenvat credit amounting to Rs. 1,10,105/- for the period from 10th February, 2005 to September, 2005 and Rs. 5,75,496/- wrongly availed during the period October, 2005 to March, 2006 from M/s Omar Agencies (Hutch), Banda under Section 73 of the Finance Act, 1994 read with Rule 14 of the Cenvat Credit Rules, 2004 and Section 11A of the Central Excise Act, 1944 alongwith interest on the above amounts under Section 75 of the Finance Act, 1994 read with Section 11AB of the Central Excise Act, 1944.|
|2.||I order recovery of Cenvat credit amounting to Rs. 61,974/- wrongly utilized for the period October, 2005 to March, 2006 alongwith interest under Section 73 of the Finance Act and Section 75 of the Act respectively from M/s Omar Agencies (Hutch), Banda.|
|3.||I also impose penalty of Rs. 1,71,899/- (Rs. 1,10,105/- + Rs. 61,794/-) on M/s Omar Agencies (Hutch), Banda under Section 76 of the Finance Act, 1994 read with Rule 15 of the Cenvat Credit Rules, 2004.”|
The appellant filed an appeal and the Commissioner (Appeals) vide order dated 28/03/2008 rejected the assessees appeal holding that the impugned credit taken by the assessee was not admissible on the ground that this credit was taken in respect of services which were not input services for the assessee. The assessee filed an appeal before CESTAT against the said order and CESTAT vide order dated 19/08/2008 passed the following order :-
“As we find that the original authority has decided the issue of taxability also and since the issue is at the root of the dispute, we direct that this issue should also be decided by the Commissioner (Appeals) and to enable this, we set aside the order of the Commissioner (Appeals) and remand the matter for fresh consideration after affording a reasonable opportunity of hearing to the appellant.
The appeal is allowed by way of remand. Stay petition is also disposed of.”
4. In pursuance of the said order of CESTAT, the Commissioner (Appeals) vide order dated 31/03/2009 held that the activity of providing selling SIM cards/recharge vouchers in lieu of certain commission was not taxable under Business Auxiliary Service and, hence, service tax is not leviable on the assessee.
5. Revenue is in appeal against the said order-in-appeal.
6. We have considered the submissions of both sides.
7. As regards the leviability of service tax under Business Auxiliary Service on the commission received by the assessee from M/s Aircel Digilink India Ltd. Co. for providing/selling the SIM card/recharge vouchers, the issue stand covered in favour of assessee by CESTAT in a series of judgments including in the case of Anand Sales Corpn. v. CCE [final order No. ST/A/50337-50344/2014 dated 29/01/2014] which clearly held that such commission is not liable to service tax under the Business Auxiliary Service. The said order of the CESTAT relied upon the judgment in the case of CCE v. Martand Food & Dehydrates (P.) Ltd. [Central Excise Appeal Defective No. 87 of 2013, dated 23-7-2013] which was reiterated in Daya Shankar Kailash Chand v. CCE & ST [Final Order No. ST/A/55023/2013 (PB), dated 18-12-2012]. The appeal filed against the judgment of Daya Shankar Kailash Chand (supra) was dismissed by Hon’ble Allahabad High Court 2014 (34) S.T.R. J99 (All.). Therefore, the Revenues appeal is not sustainable as regards the leviability of service tax on the assessee under Business Auxiliary Service is concerned.
8. As regards the appeal of the assessee against the Order-in-Revision, it is evident that the commission was received by the appellant/assessee from M/s Aircel Digilink India Ltd. Co. M/s Aircel Digilink India Ltd. Co. did not provide any service to the appellant/ assessee nor did the appellant/assessee make any payment to M/s Aircel Digilink India Ltd. Co. Service tax was paid by M/s Aircel Digilink India Ltd. Co. on its output services (telephone services) which were not provided to the appellant/assessee. Thus, the service tax paid by M/s Aircel Digilink India Ltd. Co. was on services which were clearly neither provided to the appellant/assessee nor were eligible to be called input service in its (appellant/assessees) respect. Thus it is clear that the service tax credit of Rs. 1,10,105/- and Rs. 5,86,904/- taken by the assessee was clearly in violation of the Cenvat Credit Rules, 2004. However, other than merit it is seen that the Order-in-Revision under Section 84 of Finance Act, 1994 (as it stood during the relevant time) was passed on 16/10/2009 while the Order-in-Appeal against the same Order-in-Original was first passed on 28/03/2008. Section 84 (4) ibid at the relevant time clearly stipulated that No order under this section shall be passed by Commissioner of Central Excise in respect of any issue if an appeal against such issue is pending before Commissioner of Central Excise (Appeals). The Commissioner while passing the Order-in-Original took the view that admissibility of impugned Cenvat credit was not the issue before the Commissioner (Appeals). We find that the Commissioner (Appeals) in the Order-in-Appeal dated 28/03/2008 has clearly noted that he was confining himself to determine the issue involved in the show cause notice viz. availability of service tax credit to the appellants in facts and circumstances of the case. The Commissioner (Appeals) then decided the issue holding that the impugned credit was not admissible to the appellant. Evidently in view of the aforesaid factual matrix and by virtue of Section 84 (4) ibid as it stood then, the Commissioner was not competent to issue the impugned Order-in-Original. Therefore, the Order-in-Revision cannot be sustained.
9. Thus the net essence of the outcome of this legal trajectory is that the impugned Cenvat credit is inadmissible not only because the services on which it was taken were not input services for the assessee but also because the output service of the appellant assessee was not taxable including under Business Auxiliary Service. However, the penalty sought to be imposed in the show cause notice was under Section 76 ibid and Rule 15 (3) of Cenvat Credit Rules. But penalty under Section 76 ibid is leviable only if a person fails to pay service tax it is liable to pay in accordance with the provisions of Section 68 or the rules made in that regard and therefore penalty under Section 76 in this case cannot be sustained as no service tax is held to be payable by the assessee in accordance with Section 68 ibid or the rules made in that regard. The maximum penalty under Section 15 (3) of Cenvat Credit Rules at the relevant time was Rs. 2,000/-. Therefore penalty in excess of Rs. 2,000/- cannot survive.
10. In the wake of the foregoing analysis, disposing of both the appeals, we pass the following order:
|(i)||The Cenvat credit of Rs. 1,10,105/- and Rs. 5,75,496/- is inadmissible and recoverable alongwith applicable interest.|
|(ii)||The assessee is liable to pay penalty of Rs. 2,000/- under Rule 15 (3) ibid.|