Custom, Excise & Service Tax Tribunal
M/S. Sachdeva Roadlines vs Cst, New Delhi on 13 June, 2014
IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:02.05.2014
Date of Decision: 13.06.2014
1
Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 26 of 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 Departmental authorities?
Appeal No.ST/97/2012-CU(DB)
(Arising out of Order-in-Original No.38/GB/2011 dated 31.10.2011 passed by the Commissioner of Service Tax, New Delhi)
M/s. Sachdeva Roadlines Appellants
Vs.
CST, New Delhi Respondent
Appearance:
Rep. by Shri A.K. Batra, Chartered Accountant for the appellant. Rep. by Shri Amresh Jain, DR for the respondent. Coram: Honble Mr. Justice G. Raghuram, President Honble Mr. Rakesh Kumar, Technical Member Final Order No. 52466 /13.06.2014 Per Rakesh Kumar: The facts leading to filing of this appeal are, in brief, as under:-
1.1 The appellant are a Goods Transport Agency (GTA) and they have Service Tax Registration for payment of service tax in respect of this service. The period of dispute in this case is from 1.4.2008 to 31.3.2009. During this period, they were availing of exemption under notification no.1/06-ST dated 1.3.2006 (S.No.6) which provides for 75% abatement on the gross amount charged subject to condition that cenvat credit of central excise duty paid on inputs or capital goods or of service tax paid on input service used for providing the taxable service of GTA has not been availed by the assessee or the assessee has not availed the exemption under notification no.12/03-ST dated 20.06.2003. Accordingly, during the period of dispute, the appellant were paying service tax on the value equal to the gross amount charged minus 75% abatement i.e. on 25% of the gross amount charged. During the period prior to 1.3.2006, same exemption was available under notification no.32/04-ST and in respect of that exemption, the condition was that no cenvat credit of excise duty paid on inputs or capital goods must be taken or the exemption under notification no.12/03-ST is not availed and as such, there was no condition of non-availment of cenvat credit in respect of input services. The appellant during the period of dispute while did not take any cenvat credit of excise duty paid on inputs or capital goods, they availed cenvat credit amounting to Rs.1,09,975/- in respect of certain input services and this was duly disclosed in the ST-3 Returns as the service tax Return filed by them mentioned the amount of service tax paid through the cenvat credit account. When the ST-3 Return was scrutinized and the concerned assessing officer came to know that the appellant during the period of dispute while availing of the exemption notification no.1/06-ST(S.No.6) had simultaneously also availed cenvat credit in respect of input services, a show cause notice was issued for denying this exemption and recovery of differential amount of service tax amounting to Rs.1,39,76,300/- along with interest and also for imposition of penalty. The show cause notice was adjudicated by the Commissioner vide order-in-original dated 30.10.2011 by which the Commissioner disallowed the benefit of exemption notification no.1/06-ST (Sl.No.6) and confirmed the above mentioned service tax demand in terms of the proviso to Section 73(1) of the Finance Act, 1994 along with interest thereon under Section 75 ibid and besides this, also imposed penalty of equal amount on the appellant under Section 78. Against this order of the Commissioner, this appeal has been filed.
2. Heard both the sides.
3. Shri A.K. Batra, Chartered Accountant , ld. Counsel for the appellant pleaded that the appellant, a Goods Transport Agency, during the period of dispute, were availing the exemption under notification no.1/06-ST (Sl.No.6) and accordingly, were paying service tax after availing 75% abatement i.e. on 25% of the gross amount charged, that during the period prior to 1.3.2006, the same exemption was available under notification no.32/04-ST, which was being availed during that period, that the only conditions for availing exemption notification no.32/04-ST were that no credit of central excise duty paid on inputs or capital goods used in or in relation to providing output service has been availed by the assessee or the assesee has not availed the exemption under notification no.12/03-ST dated 20.06.2003, that w.e.f. 1.3.2006 notification no.32/04-ST was replaced by notification no.1/06-ST, the Sl.No.6 of the Table annexed to which provided the same exemption, that however, in the new exemption notification effective from 1.3.2006, an additional condition of non-availment of cenvat credit in respect of input services were also imposed, that the appellant not being aware of the additional condition having been imposed for availment of this exemption continued to avail cenvat credit in respect of the input services, that as soon as the departmental officers brought this discrepancy to their notice, they immediately reversed the credit of Rs.1,09,975/- along with interest, that just because during the period of dispute the appellant due to bonafide mistake availed of the cenvat credit amounting to Rs.1,09,975/- in respect of the input services, the benefit of exemption cannot be denied when they immediately reversed this credit along with interest, as soon as this was pointed out to them, that reversal of cenvat credit would amount to non-availment of cenvat credit and hence, the condition of exemption notification stands satisfied, that in this regard, he relies upon the judgement of the Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. Vs. CCE, Nagpur reported in 1996 (81) ELT 3 (SC) , wherein it was held that when exemption under a particular notification was available subject to non-availment of cenvat credit and when cenvat credit initially taken was subsequently reversed prior to clearance of the exempted goods, it would amount to not availing of the cenvat credit and the condition of exemption notification regarding non-availment of cenvat credit stands satisfied, that the Tribunal in the case of Khyati Tours & Tavels Vs. CCE, Ahmedabad reported in 2011 (24) STR 456 (Ahmd.) has held that when exemption under notification no.1/06-ST was available subject to non-availment of cenvat credit and cenvat credit initially taken had been subsequently reversed, the reversal of wrongly availed cenvat credit with interest would have the effect as if no credit has been availed and accordingly, the benefit under the notification would not be deniable, that the same view has been taken by the Honble Allahabad High Court in the case of Hello Minerals Water (P) Ltd. Vs. Union of India reported in 2004 (174) ELT 422 (All.), wherein the Honble High Court with regard to extending the benefit of exemption notification no.15/94-CE, which was available subject to non-availment of input cenvat credit, held that subsequent reversal of cenvat credit which had earlier been taken, would amount to not taking the credit on the inputs and the benefit of exemption has to be granted, that the same view has been taken by this Tribunal in the case of Sri Lakshmi Saraswathi Textiles (ARNI) Ltd. VS. CCE, Pondicherry reported in 2008 (222) ELT 390 (Tribunal-Chennai), that in view of the above judgements of the Tribunal and the High Court the order of the Commissioner denying the benefit of exemption under notification no.1/06-ST and confirming the duty demand on this basis is totally incorrect, that the fact that availment of cenvat credit amounting to Rs.1,09, 975/- in respect of input services during the period of dispute was due to bonafide mistake and ignorance of the appellant is clear from the fact that no sensible assessee would forgo duty exemption of more than rupees one crore just to avail cenvat credit of Rs.1,09,975/-, that, in any case, in these circumstances of the case, penalty of equal amount under Section 78 of the Finance Act, 1994 was not justified as there was neither any wilful mis-statement nor suppression of facts or any deliberate defiance of law or dishonest conduct on the part of the appellant and that in view of the above, the impugned order passed by the Commissioner is not correct.
4. Shri Amresh Jain, ld. Departmental Representative, defended the impugned order by reiterating the findings of the Commissioner in the order and pleaded that 75% abatement in terms of sl.no.6 of the Table annexed to the exemption notification no.1/06-ST was subject to condition that neither any cenvat credit of excise duty paid on inputs or capital goods is availed nor any cenvat credit of service tax paid on any input service is availed nor the benefit of exemption under notification no.12/03-ST is availed, that when the exemption is subject to these conditions and any of these conditions is violated, the exemption would not be available, that it is settled law that exemptions have to be construed strictly and when the exemption is subject to any condition and that condition is not fulfilled, the exemption would not be available, that subsequent reversal of the cenvat credit would not amount to non-availment of cenvat credit, that in this regard, he relies upon the judgement of the Apex Court in the case of Amrit Paper Vs.CCE, Ludhiana reported in 2008 (12) STR 536 (SC), that the judgement of the Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. (supra) is not applicable to the facts of this case as in the case of Chandrapur Magnet Wires (P) Ltd. (supra), the exemption under notification no.69/86-CE was available subject to condition of non-availment of input duty credit and the assessee was manufacturing the goods, which were eligible for exemption under this notification as well as the dutiable goods not eligible for exemption under this notification and was initially availing the cenvat credit on the entire quantity of inputs, but prior to clearance of the exempted goods was reversing the prorata credit and it is in these circumstances only that the Apex Court held that reversal of the cenvat credit earlier taken would amount to not availing the cenvat credit and accordingly, the fulfillment of the conditions of the exemption notification, that in this case, the input service credit taken earlier in violation of the condition of the exemption notification was reversed only when this irregularity was pointed out to the assessee and during the entire period of dispute, the appellant while availing the exemption under notification no.1/06-ST had also availed cenvat credit in respect of input services in clear violation of the conditions of the notification and that in view of these circumstances, the Commissioner has rightly denied the benefit of the exemption notification. With regard to penalty under Section 78, Shri Jain pleaded that the assessee, during the period of dispute, has knowingly availed cenvat credit in respect of input services while he was availing exemption under notification no.1/06-ST also and this shows that they deliberately contravened the provisions of law with intent to wrongly avail the exemption notification and hence, the penalty under Section 78 has been correctly imposed. He, accordingly, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records.
6. The period of dispute in this case is from 1.4.2006 to 31.03.2007 and during this period, the appellant were availing the exemption under notification no.1/06-ST dated 1.3.2006 (Sl.No.6). In terms of this exemption, the taxable service of Goods Transport Agency service under Section 65 (105) (zzp) provided by the appellant is exempt from service tax leviable under Section 66 which is in excess of the service tax calculated on 25% of the gross amount charged for providing the service. This exemption, however, is subject to the following conditions:-
(I) the cenvat credit of duty on inputs and capital goods or cenvat credit of service tax on inputs services, used for providing such taxable service, has not been taken under provisions of the Cenvat Credit Rules, 2004; or (II) the service provider has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), no.12/2003-ST, dated the 20th June, 2003.
Prior to 1.3.2006, the same exemption was available under notification no.32/04-ST dated 3.12.2004 and this exemption was subject to the following conditions:-
(i) the Credit of duty paid on inputs and capital goods used in providing such taxable service tax has not been taken under the provisions of Cenvat Credit Rules, 2004; or
(ii) the Goods Transport Agency has not availed the benefit of exemption under the notification of the Government of India in the Ministry of Finance (Deptt. of Revenue) No. 12/2003-ST, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003].
Thus, for availment of 75% abatement in the notification no.1/06-ST which came into force w.e.f. 1.2.2006 the conditions of non-availment of cenvat credit in respect of input service has been added. The appellants contention is that prior to 1.3.2006, they were availing of the exemption no.32/04-ST and were not availing cenvat credit in respect of inputs or capital goods and that they continued to avail of this exemption even when the notification no.32/04-ST was substituted by the new notification no.1/06-ST as they were not aware of the additional condition of non-availment of cenvat credit in respect of input service. They while availing of the exemption, also availed cenvat credit of Rs.1,09,975/- in respect of input services and that as soon as this irregularity was pointed out to them, they reversed the same along with interest. The point of dispute is that as to whether the subsequent reversal of the cenvat credit would amount to non availment of credit and thus, satisfying the condition of the new exemption notification no.1/06-ST. The appellant do not dispute that w.e.f. 1.3.2006, for availing the exemption in question, they could not avail any cenvat credit whether of excise duty in respect of input or capital goods or of service tax in respect of input services. The Revenues contention is that it is well settled law that when an exemption notification is subject to certain conditions and those conditions have not been specified, the benefit of exemption cannot be extended, as an exemption has to be strictly construed. The condition for exemption under notification no.1/06-ST is that cenvat credit in respect of inputs, capital goods and input services has not been availed. The question arises as to whether when initially cenvat credit has been taken in respect of certain input services and subsequently, it is reversed along with interest, whether it would amount to non-availment of cenvat credit in respect of input services. On this point, the Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. (supra) in the context of eligibility of the assessee for exemption under notification no.69/86-CE as amended by notification no.106/88-CE, which was available to copper winding wires subject to the conditions of not availing of input duty cenvat credit has held that when cenvat credit was initially taken, but subsequently reversed, it would amount to not availing the cenvat credit and in such a situation, the benefit of the exemption cannot be denied. Subsequently, Honble Allahabad High Court in the case of Hello Minerals Water (P) Ltd. (supra) held that when an exemption notification is subject to non-availment of modvat credit of inputs and initially modvat credit in respect of inputs had been taken, the benefit of exemption is to be granted when reversal of credit on inputs was done at the stage of filing of the appeal before the Tribunal and that even when the cenvat credit initially taken was reversed subsequent to the clearance of the final products, the benefit of exemption notification which was subject to non-availment of cevnat credit cannot be denied. Same view has been taken by Honble Gujarat High Court in case of Ashima Dyecot Ltd. reported in 2008(12) STR 701 (Gujarat) and SLP filed by the Government against this judgement was dismissed by the Apex Court vide order reported in 2009 (240) ELT A-41 (SC). Same view has been taken by the Tribunal in the cases of Khyati Tours & Travels Vs. CCE, Ahmedabad reported in 2011 (24) STR 456 (T-Ahmd.) and also in the case of Sri Lakshmi Saraswathi Textiles (ARNI) Ltd. Vs. CCE, Pondicherry reported in 2008 (222) ELT 390 (Tribunal-Chennai) and in the case of B.G. Shirke Technology Pvt. Ltd. CCE, Pune-II reported in 2012 (27) STR 366 (T-M). Thus, it is now a settled law that when the benefit of an exemption is subject to the condition of non-availment of cenvat credit and initially, the assessee has taken the cenvat credit but subsequently, whether before the clearance of the exempted goods or after the clearance of the exemption goods the credit taken was reversed, it would amount to not taking the cenvat credit and the benefit of exempted notification cannot be denied. The Revenue has cited judgement of the Apex Court in the case of Amrit Papers - 2008 (12) STR 536 (SC). We have gone through this judgement. In this case, the assessee was manufacturing paper, which was exempted from duty under notification no.6/2000-CE dated 1.3.2000 subject to the condition of not availing the input duty cenvat credit. The assessee initially availed cenvat credit amounting to Rs.1,92,365/- during the month of March, 2000 and cleared the goods without payment of duty and subsequently, he, however, reversed the cenvat credit so as to comply with the condition of the exemption notification. He, however, later on decided not to avail of the exemption notification and on 30.08.2000 deposited the duty for the month of March, 2000 and applied to the department for refund of the cenvat credit of Rs.1,92,365/- earlier reversed by him. The refund was allowed by the Asstt.Commissioner on 13.12.2001. Thereafter, the assessee again decided to avail of the exemption and accordingly, he reversed the cenvat credit and on 12.07.2001 filed refund claim for the refund of the duty which he had deposited on 30.08.2000 for the month of March. It is this refund of the duty, which was rejected by the Asstt. Commissioner and this rejection was upheld by the Commissioner (Appeals) and also by the Tribunal and ultimately by the Apex Court. Thus, the issue involved in the case of Amrit Papers (supra) is totally different and in this judgement, the point as to whether the cenvat credit initially taken but subsequently reversed would amount to not availing the cenvat credit was nowhere discussed. Thus, this judgement of the Apex Court is not applicable to the facts of this case. In our view, it is the judgement of the Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. (supra) and the judgement of the Honble Allahabad High Court is in the case of Hello Mineral Water Pvt. Ltd. (supra) , which would be applicable to the facts of this case.
7. In view of the above discussion, the impugned order is not sustainable. The same is set aside. The appeal is allowed.
[order pronounced on 13.06.2014] (Justice G. Raghuram) President (Rakesh Kumar) Member (Technical) Ckp.
1