Custom, Excise & Service Tax Tribunal
Sri Sai Communications vs Commissioner Of Central Tax Goods & ... on 8 April, 2024
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ST/30538/2022
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Service Tax Appeal No. 30538 of 2022
(Arising out of Order-in-Original No. HYD-EXCUS-001-COM-003-22-23 dt.12.10.2022
passed by Commissioner of Central Tax, Central Excise & Service Tax, Medchal)
Sri Sai Communications
No. 18-81/1, Sai Nilayam, Flat No.401, ......Appellant
Housing Board Colony, Siddipet, TS - 502 103
VERSUS
Commissioner of Central Tax
Medchal - GST
11-4-649/B, Above SBI Bazarghat Branch,
......Respondent
Lakdikapool, Medchal Malkajgiri, TS - 500 004 Appearance Shri T. Ankamma Rao, Advocate for the Appellant.
Shri B. Sangameshwar Rao, AR for the Respondent.
Coram:
HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) FINAL ORDER No. A/30255/2024 Date of Hearing: 07.03.2024 Date of Decision: 08.04.2024 [Order per: ANIL CHOUDHARY] The issue in this appeal is whether the appellant has rightly taken credit of input service tax.
2. The appellant - Sri Sai Communications is a partnership firm mainly engaged in the business of providing Cable TV service as Multi System Operator (MSO). The appellant receives cable TV signals from various broadcasters providing TV channels like Star TV, Zee TV, ETV, etc., and relays the signals to Local Cable Operators (LCO). In this process, the appellant buys set top boxes and cables from various suppliers and sells the same to LCOs. The set top boxes and cables are required for transmission of TV signals. The appellant had taken registration under Service Tax on 09.07.2013 as Cable Operators service.
(2)ST/30538/2022 Although the appellants had taken registration, they were not making compliances like filing of returns, etc., as the All India Cable Operator associations had agitated against levy of service tax on cable TV service and the collective representation was pending with the Government for some years.
3. In the course of enquiry/investigation during 2017-18 in the affairs of the appellant, Revenue found that appellant did not manufacture any set top boxes but were trading in such boxes. It further appeared that the appellant was not filing regular returns (ST3) and/or making compliance. Accordingly, summons was issued dt.05.01.2018 to furnish Financial Statements, Profit & Loss Statements, Invoices issued, Purchase Invoices, Sales details, etc., for the period 2012-13 to 2017-18. The appellant filed requisite documents vide letter dt.20.01.2018 along with copies of sample Invoices, monthly extract of revenue, copy of the Bank Statements for the period 2013-14 to 2016-17. On scrutiny of the documents, it appeared that appellant was liable to service tax under section 66B in respect of receipts from cable TV subscription charges, advertisement charges, cable TV service and sale of space or time. The appellant during the course of enquiry, on being so advised, filed their ST3 returns from 2012-13 to 2017-18 (up to June 2017) on 27.03.2018 & 31.03.2018. The appellant was maintaining regular books of accounts and vouchers on tally software in the ordinary course of business. Due to late filing of returns, the appellant had suo moto deposited late fee @Rs.20,000/- each return from 2013-14 to 2017-18. Revenue verified the value of service on which service tax was paid with the taxable revenues shown in the P & L account and found that appellants have adopted amounts realized in full as taxable values, for payment of service tax. Appellant had also paid the cesses wherever applicable. It further appeared as per the returns filed that appellants have paid service tax by utilizing Cenvat credit availed on the input service tax.
4. It further appeared to Revenue that the date of filing ST3 return is the date of taking Cenvat credit and accordingly, as required under Rule 4(1) read with Rule 9(1) of CCR, the appellant had to take Cenvat credit within one year from the date of invoice but it appeared that Cenvat credit has been taken later on, as there is no mention of service tax payable account and service tax receivable account in the liabilities or assets side of the balance sheets for the relevant period. It further appeared that for the period from October 2012 to June 2017 appellants have taken total Cenvat credit of Rs.4,16,32,186/- and have utilized credit of Rs.3,39,34,468/- for payment of output tax. Thus, it appeared to Revenue that appellants have not taken Cenvat credit in the (3) ST/30538/2022 regular course within the prescribed time as permissible under Rule 4 and Rule 9 of CCR and thus, Cenvat credit taken is irregular and also the discharge of service tax liability through Cenvat credit is also irregular. Accordingly, pre-SCN consultation was given to the appellant, wherein the Managing Director - P. Srinivas, appeared with their Chartered Accountant and stated that they have got copies of all Cenvat invoices on basis of which they have taken Cenvat credit and utilized the same towards payment of service tax liability. The appellant on further date in pre-SCN consultation meeting filed tabulation/list of entire invoices on which they have taken input tax credit. He further stated that input tax credit taken has been reflected as an asset in their balance sheet for each of the disputed period. Further SCN dt.10.06.2021 was issued invoking extended period of limitation, proposing to disallow Rs.4,16,32,186/- of Cenvat credit taken and further to demand output service tax of Rs.3,52,94,314/- along with interest. Further, penalty was proposed of Rs.20,000/- for delayed filing of ST3 return for second half of 2012-13 and also penalty under section 77 and 78 of the Act.
5. The appellant contested the SCN and filed detailed submissions. It was also mentioned that appellant maintains regular books of accounts which are subjected to audit by the CA and proper audit reports are issued by the Auditor along with report in prescribed Audit Form (Form No. 3CD under Income Tax Act/Rules), which have been filed with the Income Tax department. It was also emphasized that appellant regularly receives invoices for input services on which service providers charge service tax and appellants have been regularly paying service tax for such services through banking channel and such tax paid has been duly accounted for in their books of accounts under the respective ledger accounts. At the end of each accounting year, the total debit balance of service tax, education cess and secondary higher education cess is shown under the head 'duties and taxes' in the trial balance and is further reflected in the balance sheet. It was further urged that computerized records are permitted under Circular No.137/26/2007-CX.4 dt.01.01.2008. Further Rule 5 of Service Tax Rules prescribed, inter alia, that records (including computerized records) maintained by the tax payer in accordance with various laws are acceptable. Thus, taking of Cenvat credit and maintenance of proper records by way of ledger accounts, etc., is in accordance with the Rules duly permitted by the Board as aforementioned. Thus, Cenvat credit taken in such electronic records regularly in the ordinary course of business is legal and proper and no adverse inference is called for. It was further urged that once Cenvat credit has been (4) ST/30538/2022 taken legally in the regular course of business on proper input tax invoices, the same can be utilized and have correctly been so utilized towards payment of output service tax. It is further pointed out that Revenue have accepted their books of accounts and have demanded service tax in the aforementioned SCN on the turnover as disclosed by said books of accounts, as reflected in the balance sheet and P & L accounts.
6. The SCN was adjudicated by the Commissioner of Central Tax and GST, who was pleased to confirm the demand of disallowance of Cenvat credit as proposed, holding the same to be irregularly availed and utilized in violation of Rule 4 & Rule 9 of CCR. Further, demanded an amount of service tax of Rs.3,52,94,314/- payable on the output services for the period from 2012-13 to 2017-18 along with interest. Further appropriated an amount of Rs.9,70,476/- already paid towards Swachh Bharat Cess vide different challans all dt.31.03.2018. Further, penalty under section 78 was imposed of Rs.4,16,32,186/- (+) Rs.3,52,94,314/-. Late fee of Rs.20,000/- was also imposed for late filing of return for the financial year 2012-13 (October to March) under section 70 of the Act. Proposed penalty under section 77 was dropped. Being aggrieved, the appellant is before this Tribunal.
7. Assailing the impugned order, learned Counsel for the appellant, inter alia, urges that the only adverse finding against the appellant is that it appears that they have not taken Cenvat credit on the input service invoices regularly in the ordinary course of business, i.e., within one year from the date of invoice as permissible under Rule 4 read with Rule 9 of CCR.
8. Learned Counsel takes us through the copies of Profit & Loss accounts and balance sheets already filed in the appeal paper book. He also takes us through the schedule of invoices financial year-wise, wherein each input tax invoice with invoice number, date, name of service provider, gross amount and breakup value as to service tax and cess. The appellant has further demonstrated that in their books of accounts maintained on tally software, they have regularly entered the transactions. For example, for the financial year 2013-14, from ledger account of Sun Distribution Services Pvt Ltd (service provider) it is evident that whenever they have received the invoice, they have credited the amount to Sun Distribution Services and have paid for the invoice through banking channel and debited the amount to their account. Further, they have also reflected the breakup of the bill amount. For example, Bill No.566234 dt.05.11.2013 for amount of Rs.3,48,010/- (break up - Channel (5) ST/30538/2022 subscription Rs.3,09,728/- (+) Service Tax Rs.37,167/- (+) Education Cess Rs.743/- (+) SHEC Rs.372/-). Similarly, the appellant has maintained ledger account of each of the service providers. Further, appellant has also maintained proper journal and ledger account of service tax (input service tax, education cess and SHEC) and such totals at the end of the year have been shown as debit balance in the trial balance under the head 'duties and taxes'. In the course of hearing, the appellant also demonstrated some of the entries from the ledger accounts of the service providers with the invoice wise annexures, year wise, already annexed to the appeal file.
9. Such details have been demonstrated for each of the accounts for the years under dispute. The appellant has also demonstrated the extract of their purchase ledgers, copy of which is available in the appeal paper book, wherein they have reflected each and every input service invoice along with the breakup of amount towards service and towards service tax. In almost all the cases, the payments have been made through banking channel. Accordingly, learned Counsel prays for allowing the appeal with consequential benefits.
10. Learned AR for Revenue relies on the findings in the impugned order.
11. Having considered the rival contentions, we find that the appellant has maintained proper books of accounts in the ordinary course of business in electronic form (tally software), which is permissible under the Service Tax Rules read with Board Circular aforementioned. We further find that appellants have regularly got their books of accounts audited by a Chartered Accountant and they have regularly filed Audit Reports along with Balance Sheet and Profit & Loss Account before Income Tax department. We further find that the appellant has regularly taken Cenvat credit of input service tax in their books of accounts after making payment to the service providers. Such aggregate input service tax, including cess, reflected in the trial balance, being debit balance as on 31st March under the re-grouped account head 'duties and taxes'. Thus, it appeared that due to reflection of input tax credit under the head 'duties and taxes', has created confusion to the Revenue. Accordingly, we hold that appellant has taken service tax credit regularly within the prescribed period from the date of invoice as prescribed under Rule 4 read with Rule 9 of CCR, 2004. We further find that there is no dispute raised by the appellant with respect to output tax.
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12. In view of our aforementioned findings and observations, we allow the appeal and set aside the impugned order. The appellant shall be entitled to consequential benefits, in accordance with law.
(Pronounced in the Open Court on 08.04.2024) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (A.K. JYOTISHI) MEMBER (TECHNICAL) Veda