Custom, Excise & Service Tax Tribunal
M/S. India Gate Way Terminal (P) Ltd vs Cce, Cochin on 9 June, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 18/05/2010
Date of decision:..
Appeal No.ST/237/07
(Arising out of Order-in-original No.04/2007/ST dt. 6/3/2007
passed by CCE&C, Cochin)
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. India Gate Way Terminal (P) Ltd.
..Appellant(s)
Vs.
CCE, Cochin
..Respondent(s)
Appearance Mr. Jayashankar, A.K., Advocate for the appellant.
Mr. U. Raja Ram, JDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per M.V.Ravindran This appeal is directed against the Order-in-original No.04/2007/ST dt. 6/3/2007.
2. The relevant facts that arise for consideration are that the appellants herein are holders of service tax registration for the services rendered by them under the category of Port services to various persons. They are discharging the service tax on the taxable value as received from various persons, under the provisions of Finance Act, 1994. During the course of audit of the records of the appellant, it was noticed by the Internal Audit Party that the appellant had availed and utilized the credit of service tax paid on certain services on the strength of ineligible documents such as 1) invoices devoid of essential details, 2) invoices not in the name of the assessee, 3) photocopies of invoices and 4) debit notes etc. Coming to a conclusion that these documents are not documents prescribed for availment of cenvat credit as per Rule 9 of Cenvat Credit Rules, 2004, the appellants were issued show cause notice for the reversal of the said credit availed by them. The appellants vide their reply dt. 11/12/2006 gave detailed explanation as regards the credit availed by them and submitted that the said credits are eligible credits and they have to be allowed to them. Adjudicating authority after considering the submissions made by them, came to the conclusion that the credit availed by the appellant is incorrect and coming to such conclusion, he confirmed few of the demands raised and dropped few of the demands. Against the demands confirmed by the adjudicating authority, the appellant/assessee is before us. As against the dropping of the demands as initiated by the show cause notice , Revenue has not filed any appeal.
3. Ld. Counsel appearing on behalf of the appellant would submit as under:-
I. As regards the disallowance of cenvat credit on improper documents, he would submit that the documents were not the documents mentioned in the rule, but the documents did contain all the details for verification of fact of payment of the services provided and the receipt of the same by the appellant. He would draw our attention to the specific proviso made in Rule 9(2) to deal with such situation. He would submit that the amount involved in this dispute is Rs.35,39,026/- and draws our attention to the various documents on which they have availed credit. He would submit that the documents are the letters written by the Banks for debit their account for the service tax element against the Bank Guarantee issued, letter of credit given etc. He would draw our attention to the specific mentioning of the details of all the letters. He fairly submitted that these documents were not produced before the lower authorities and hence the issue of credit of Rs.35,39,026/- may be remanded to the adjudicating authority, to come to a conclusion.
II. As regards the disallowance of credit taken in respect of insurance charges, he would submit that amount involved is Rs.3,04,450/- + Edu. Cess and Rs.1048/- for hotel bills. He would submit that as regards cenvat credit on the service tax paid on the hotel bills, they are not pressing the appeal. As regards the insurance charges, he would submit that the insurance charges are the charges which have been paid by them for the insurance of their goods and the employees in the port area. Hence the credit cannot be denied. He would rely upon the decision of the Division Bench of the Tribunal in the case of Stanzen Toyotetsu India Pvt. Ltd. Vs. CCE, Bangalore [2009(14) STR 316 (Tri. Bang.)] III. It is the submission of the ld. Counsel that an amount of Rs.3,93,893/- which is sought to be reversed by the adjudicating authority, is regarding the demand which is pertaining to the credit availed on the capital goods & spares to the extent of 100% in the year of receipt. He would draw our attention to page 44 of the Order-in-Original for the findings. He would submit that it can be seen from the above that all the capital goods were received in the year 2005 and credit was taken in 2005. He would submit that 50% of the credit can be taken by them in 2006, and the show cause notice was issued on 16/6/2006 which itself would be infructuous as they are eligible for balance 50% of the credit in the year 2006.
IV. As regards the demand of service tax of Rs.20,72,665/- +Edu. Cess Rs.41,453/- and demand of Rs.27,61,934/- + Edu. Cess Rs.55,239/-, it is his submission that these are the amounts which have been paid by them they are not seriously challenging the same.
V. As regards the amount of Rs.5,86,185/- + Edu. Cess Rs.11,950/-, he would submit that these demands have arisen on the ground that the appellant had conducted auction of cargo not cleared by the importer and the Revenue wants to tax the same under the category of port services. He would submit that this is not a service provided by the importer and auction proceeds cannot be subjected to service tax.
VI. As regards demand of service tax of Rs.5,86,185/- + Edu. Cess Rs.11,724/-, it is his submission that the charges which are sought to be taxed by the authorities are collected in nature of the fees for making available infrastructure for facilitating customs examination. It is his submission that these facilities have nothing to do with the actual services of port services in respect of vessels or goods. He would rely upon the decision of this Bench in the case of Cochin International Airport to submit that license fees are not liable to be taxed as there are no services rendered for license fee during the relevant period.
VII. As regards the service tax demand of Rs.3,72,185/- + Edu. Cess Rs.7,444/-, he would submit that the service tax short on the amount which represents a portion of the total amount received by Container Corporation of India (CONCOR) from their clients shared with the appellants. The said CONCOR has already discharged entire service tax on the amount received by them from their clients and has shared the amount with appellant as per agreement, hence the amount in the hands of the appellant cannot be subjected to tax. He would rely upon the decision of this Bench in the case of Popular Automobiles. It is his submission that the impugned order may be disposed off.
4. Ld. DR would submit that the evidences which have been produced today by them in respect of the disallowance of cenvat credit availed on improper documents needs to be verified by the lower authorities . It is his submission that the credit taken on the service tax paid on the insurance charges is not eligible as these insurance were taken in the name of the individual employees of the appellant. It is his submission that the 100% amount of cenvat credit taken on the capital goods is totally ineligible in the first year and hence credit amount availed by them during the first year is correctly sought to be reversed. It is his submission that though the assessee is eligible for the benefit of the balance 50% of the amount in the next year, he should have followed the proper procedure. It is the submission that the appellant is liable to pay interest for the amount which has been utilized by them by taking the additional credit of 50% in the first year itself. As regards the credit of service tax taken on the sale procedes auctioned by the appellant, charges collected for pre-stage yard checking and amount received from CONCOR in respect of various storing containers, he leaves the issue to the Bench for coming to a conclusion.
5. We have considered the submissions made at length by both sides and perused the records.
6. We will take up the issue of the amounts not challenged by the appellant in their appeal. It is seen from the records that the service tax amount of Rs.20,72,665/- + Edu. Cess of Rs.41,453/- on the services which were procured by the appellant from the foreign consultant is not challenged by them. It is also seen from the records that the appellant has not challenged the service tax liability of Rs.27,61,934/- + Edu. Ces Rs.55,239/- on the amount of re-imbursement of the expenses and the royalty payments made by them. It is also seen that the appellant is not challenging the amount of service tax credit of Rs.1048/- taken by them on the hotel bills. Since the appellant is not challenging the above said three amounts, the impugned order to the extent they confirm the demand of service tax and seek reversal of the cenvat credit as indicated herein above is upheld. Since the appellant has not challenged the amounts as indicated herein above, the appellant is also liable to pay interest on the said amounts. On perusal of the Order-in-Original, we find that the adjudicating authority has imposed penalties under Section 76, & Section 78 of the Finance Act, 1994 in a consolidated manner and hence the penalty on the above three items will be restricted as per the provisions of Section 76 & 77 of the Finance Act, 1994. As regards the penalty under Section 78 on the above issues, we find that provisions of Section 78 need not be invoked as the appellant would have got the relief of the judgment of the Honble High Court of Bombay in the case of National Shipowners Association Vs. UOI & others [2009(13) STR235 (Bom.)] had he challenged the issues. Since the royalty payments for services rendered by the foreign consultant to the appellants would be liable for service tax from 18/4/2006 only, in our view, penalty under Section 78 of the Finance Act, 1994 is unwarranted. Invoking the provisions of Section 80 of the Finance Act, 1994, we set aside the penalty that is imposed on the appellant under Section 78 of the Finance Act, 1994.
7. As regards the disallowance of the cenvat credit taken in respect of the service tax paid on insurance charges, we find that the said insurance charges have been paid by the appellant for the insurance taken for the individual employees who are working within the port area. We find that our decision in the case of Stanzen Toyotetsu India Pvt. Ltd. (supra) squarely covers the issue in favour of the appellant. Respectfully following the same, we set aside that portion of the impugned order wherein the adjudicating authority has confirmed the demand and imposed penalties and sought interest on the credit availed on the service tax paid on insurance charges.
8. As regards the reversal of alleged ineligible credit availed on the capital goods, we find that it is not in dispute that the appellant is eligible for cenvat credit on the capital goods and spares. The only dispute on this point is that the appellant had availed 100% credit of the central excise duty paid on such capital goods and spares in the year of receipt of capital goods. We find that the show cause notice was issued in October, 2006 and the adjudication order has been passed on 6/3/2007. Even if we consider that appellant has wrongly availed 100% credit of the central excise duty paid on such capital goods and spares in the year 2005-2006, it cannot be disputed that they were eligible to avail 50% of the credit in succeeding year, as the credit of 50% of the central excise duty is allowed in the year of receipt of capital goods. It is undisputed that the goods are in the possession of the appellant. That being the case, the reversal of the balance 50% of the amount as sought by the adjudicating authority, would be only an academic exercise as the appellant would have got the credit in the next year. In view of this, we hold that the amount of Rs.3,93,893/- which is confirmed by the adjudicating authority is incorrect and confirmation is liable to be set aside and we do so. At the same time, we find that the appellant has utilized the said credit for discharging his service tax liabilities on the services rendered by him. Having utilized the said amount, the appellant is liable to pay the interest for the period he utilized the said credit for the discharge of service tax liability. Lower authorities may work out the amount of interest liable to be paid by the appellant on this issue. Since we set aside the demand, the question of imposition of penalties on the appellant on this count does not arise.
9. As regards the service tax liability on the terminal charges / port charges retained by the appellant from out of the sale proceed of auction of goods that were not cleared by the importers, we find that conducting of an auction of the cargo not cleared by the importers is not a service rendered to importers. The said auction proceeds are adjusted by the port authorities towards the port charges and cannot be considered as any services rendered by the appellant towards the goods or any persons. It is to be noted that the appellant has taken a plea that no amount was adjusted towards the professional charges / port charges. To our mind the auctioning of the goods not cleared by the importer is not a port service rendered by the importer and hence cannot be subjected to any service tax. The demand raised and confirmed on this count fails and hence the impugned order to the extent it confirmed the demand on the count is liable to be set aside and we do so. Consequently he interest and penalty on this count are also liable to be set aside and we do so.
10. As regards the charges collected by the appellant at the pre-stage operations, we find from the records that the appellant had created infrastructure facility for examination of the cargo by the customs authorities, before it enters into port area. It is on record that the charges which are collected are in the nature of fees for making available the infrastructure to the exporters. These fees have nothing to do with the actual provisions of port services in respect of vessels or goods. This is created by the appellant for smooth flow of the customs examined goods into port area. To our mind, these charges collected at the pre-stage yard for the examination of the goods by the customs authorities would not get covered under the category of port services. The demand raised and confirmed under this head is not sustainable and we set aside the same. The impugned order to the extent it confirms the demand and imposed the penalty and demands the interest is set aside.
11. As regards the amounts received from CONCOR and service tax liability thereof, we find from the records that CONCOR vide letter dt. 22/8/2007 addressed to the appellants Chief Financial Officer has informed as under:-
This is to certify that Container Corporation of India Limited (CONCOR) has collected and remitted service tax on all bills raised in relation to the Imported cashew containers shifter from IGT Yard to CONCOR Yard for which revenue earned by CONCOR has been shared with IGT. It can be seen from the about reproduced letter written by CONCOR that they have discharged the entire service tax liability on the bills raised in respect of imported cashew containers shifted from the appellants yard to CONCOR yard and the revenue has been shared with the appellant. We find strong force in the contentions raised by the ld. Counsel that the issue is now covered in their favour by the decision in the case of Popular Automobiles (supra) and Cochin International Airport Ltd.(supra). Since the amount which has been received by the appellant is an amount on which service tax liability has already been discharged by M/s. CONCOR, the said amount cannot be held to be taxable under the category of port services in the appellants hand. In view of this, service tax liability confirmed by the adjudicating authority on this point and consequent penalties and demand of interest are not sustainable and are set aside.
12. As regards disallowance of availment of cenvat credit on improper documents to the tune of Rs.35,39,026/-, we find that these documents indicate some kind of transactions on which the service tax liability was debited by the bankers. Since these documents were not produced and not explained before the adjudicating authority, we are not recording any findings and remit the matter to the adjudicating authority to reconsider this issue afresh after following the principles of natural justice and come to a conclusion. Consequent penalties and interest liability, if any, subject to such conclusion may be decided by the adjudicating authority.
13. The appeal is disposed off as indicated herein above.
(Pronounced in court on ..) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr ??
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