Custom, Excise & Service Tax Tribunal
M/S. Rohan Motors Ltd vs Commissioner Of Service Tax, Noida on 27 July, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELALTE TRIBUNAL
R.K. PURAM, WEST BLOCK NO. 2, NEW DELHI-110066
Singh Member Bench
Date of hearing: 27.07.2015
Pronounced on: 7.09.2015
Appeal No. ST/50467/2015-ST[SM]
[Arising out of Order-in-Appeal No. NOI/EXCUS/000/APPL/192/2014-15 dated 31.10.2014 issued vide C. No. 121/ST/APPL/NOIDA/2014/964 dated 31.10.2014 passed by the Commissioner (Appeals), Central Excise, Customs & Service Tax Commissionerate, Meerut-II, Nodia (U.P)]
For Approval and Signature:
Honble Smt. Sulekha Beevi C.S., Member (Judicial)
1.
Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
M/s. Rohan Motors Ltd. Appellant
Vs.
Commissioner of Service Tax, Noida Respondent
Appearance: Shri Yogendra Aldak, Advocate for the appellant.
Shri R.K. Gupta, DR for the respondent.
Coram: Honble Smt. Sulekha Beevi C.S., Member (Judicial) Final Order No. 52797/2015 Per: Sulekha Beevi C.S. Brief facts are as under:
1. The appellants are authorized dealers of Maruti Suzuki India Ltd. They are engaged in sale as well as repair, maintenance and service of vehicles. During the course of audit for the period April, 2009 to March, 2010, it was found that appellant had availed full credit on advertisement services as input services. The department was of the view that appellant having various other branches and advertisement services being common to all units the credit has to be availed on proportionate basis. Appellant agreed to these objections and reversed the credit of Rs. 44,056/- on 22/5/2010. However, the interest of Rs. 6200/- was paid later after issuance of show cause notice. The audit report had also directed the Range Superintendent to examine past records. Accordingly, the Range Superintendent issued letters requesting the appellant to furnish information/documents. Summons were also issued. It is the case of the department that appellant failed to respond to the letters and summons. A show cause notice was issued alleging wrongful availment of CENVAT Credit and also failure to furnish information/documents and thereby violation of provision of Section 77 (1) ) of the Finance Act, 1994. The Order-in-Original confirmed the demand of service tax along with interest and ordered appropriation of the credit reversed. A penalty of double amount (Rs. 88,112/-) was imposed under Rule 15 of CENVAT Credit Rules read with Section 78 of the Finance Act, 1994. A penalty of Rs. 2,77,000/- was imposed under Section 77 (1) ) of the Finance Act (Rs. 200/- per day for the default of 1385 days). In appeal, the same was upheld except for reducing the penalty imposed under Rule 15 to equal amount of penalty. The appellant is thus before the Tribunal.
2. The first allegation is that appellant wrongly availed credit of Rs. 44,056/-. According to the department, the advertisement services on which the credit was availed, being input service for other branches also, the appellant was entitled to avail the credit on proportionate basis only. Appellants agreed to the objections and reversed the credit on 22.05.2010. The interest of Rs. 6200/- was deposited later, after issuance of show cause notice.
3. The learned counsel for the appellants referred to the provision of Rule 7 of the CENVAT Credit Rules, 2004 as it stood during the relevant period and contended that the credit availed has been rightly availed by appellant. Rule 7 provides that input service distributor may distribute the credit in respect of the service tax paid on input service to its manufacturing units or units providing output service. However, such distribution is subject to two condition only:
a. That the credit distributed should not exceed the amount of service tax paid;
b. That credit of service tax attributable to service used by units exclusively engaged in manufacture of exempted goods or providing of exempted goods services shall not be distributed.
4. Apart for the above two conditions, the Rule does not provide any other restrictions during the disputed period. The argument of he appellant is not without substance. The appellant has no case that he has obtained registration as input service distributor during the relevant period. However, Rule 7 as it stood then does not speak of distributing credit on proportionate basis. If the appellant failed to take ISD registration it would amount only to a procedural lapse for which the benefit of credit cannot be denied. It is clear that the credit was rightly availed by the appellant. The demand of Service tax along with interest and the imposition of penalty on this count is not sustainable .
5. The next issue to be addressed is the imposition of penalty under Section 77 (1) (c) of Finance Act, 1994. In addition to the audit objection regarding the credit availed as discussed above, the auditors had directed the jurisdictional range officer to collect figures related to GTA services for the years 2007-2008, 2008-2009, figures related to consultancy fees paid for different years and also details of rent paid by appellant to M/s. Jyotsna Suri for the years 2007-2008, 2008-2009. It is the case of the department that the Range Superintendent, Service Tax Range-I issued letters dated 30.07.2012, 6.08.2012, 17.09.2012 and 6.12.2012 asking the appellant to comply with audit objections. But that appellant did not furnish requisite information and documents, and did not respond to the letters. That though summons dated 10.01.2013 and 31.10.2013 were issued, the appellant did not appear. The learned DR supported the findings of the authorities below and argued that penalty has been rightly imposed.
6. On behalf of the appellant, the learned counsel submitted that vide letter dated 17.03.2011 the appellant had replied to the audit objections and also informed that the credit (Rs. 44,056) has been reversed. A further letter dated 15.06.2012 was issued by the Department raising very same queries, to which the appellant replied vide reply letter dated 10.07.2012. Appellant did not reply to the letter dated 30.07.2012and 6.08.2012 on the belief that appellant had sufficiently replied to the queries as per reply letter dated 17.3. 2011 and 10.07.2012. That to further letters, the appellant has replied vide reply letter dated 20.09.2012. Appellant did not receive any summons and came to know of its issuance only on receiving the show cause notice. That therefore the appellant has not responded to the summons, but has responded to the letters sufficiently.
7. On perusal of the correspondences between the parties it is seen that appellant vide reply letter dated 17.03.2011 has clarified appellants views/response to the audit objections raised. Regarding the credit availed, the appellant replied informing that the same is reversed. The appellant gave further information/explanation vide reply dated 10.07.2012. In all the subsequent letters, the queries regarding the very same audit objections are seen raised by the Department. The primary adjudicating authority observed that the appellant failed to respond to letters and submit desired information and imposed penalty broadly under Section 77 (1) (c). Whereas, the first appellate authority found that appellant though supplied information vide reply letters dated 17.03.2011 and 10.07.2012 failed to submit documents and the penalty is seen to be upheld specifically under section 77 (1) (c) (ii). This shows that the department itself is not sure whether the appellant is guilty of failure to furnish information or failure to produce documents. If penalty is imposed under section 77 (1) (c) (ii), the respondents have to state specifically which document was called from the appellant. The show cause notice does not specify the document that was called for. Imposition of penalty being in the nature of punishment, the same cannot be imposed on flimsy and shaky evidence. The respondents do not have a case that they were obstructed from conducting a search or that a specific document was withheld resulting in particular revenue implication. The relevant provision is noticed as under:
SECTION [77.?Penalty for contravention of rules and provisions of Act for which no penalty is specified elsewhere. (1) Any person,
(c) who fails to
(i) furnish information called by an officer in accordance with the provisions of this Chapter or rules made thereunder; or
(ii) produce documents called for by a Central Excise Officer in accordance with the provisions of this Chapter or rules made thereunder; or
(iii) appear before the Central Excise Officer, when issued with a summon for appearance to give evidence or to produce a document in an inquiry, shall be liable to a penalty which may extend to [ten thousand rupees] or two hundred rupees for everyday during which such failure continues, whichever is higher, starting with the first day after the due date, till the date of actual compliance;
8. This apart, it s submitted by the appellant that the appellant did not respond to some of the letters as the queries being same appellant was under bonafide belief that sufficient information has been furnished by the reply letters already issued. It is further submitted that details pertained to issues different from the allegation of irregular credit availed. Therefore separate show cause notice has to be issued. The correspondences reveal that the appellant vide letter dated 17.03.2011, i.e., in reply to the audit objections has given parawise response to the objections. This has been explained further vide letter dated 10.07.2012. Though the appellant failed to reply to few letters, the explanation for failure that the appellant was under bonafide belief that necessary information was given cannot be rejected in toto. Section 80 of the Finance Act, 1994 provides that no penalty shall be imposed for any failure referred to in section 76, 77, 78 of the Act if the assessee proves that there was reasonable cause for the said failure. As the appellants have been able to establish reasonable cause for not responding to few letters, I find that the imposition of penalty under section 77 (1) (c) (ii) is unjustified.
9. In the result, both the issues are found in favour of the assessee. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any.
(Pronounced in the open court on 7.09.2015) (Sulekha Beevi C.S.) Member (Judicial) Ritu