Custom, Excise & Service Tax Tribunal
M/S. Patel Air Freight vs Cce,C&St, Hyderabad-Ii on 5 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Bench Division Bench
Court I
Appeal No.ST/263/2011; ST/27587/2013
(Arising out of Order-in-Original No.01/2010-ST dt. 29/01/2010 and No.23/2013-Adjn.ST(Commr.) dt. 31/5/2013 passed by CST, Hyderabad-II)
For approval and signature:
Honble Ms. Sulekha Beevi, Member(Judicial)
Honble Mr. Madhu Mohan Damodhar, 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?
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?
4.
Whether Order is to be circulated to the Departmental authorities?
M/s. Patel Air Freight
..Appellant(s)
Vs.
CCE,C&ST, Hyderabad-II
..Respondent(s)
Appearance
Shri S.S. Gupta and Shri Archit Aggarwal, Chartered Accountants for the appellant.
Shri M.K. Mall, Asst. Commissioner(AR) for the respondent.
Coram:
Honble Ms. Sulekha Beevi, Member(Judicial)
Honble Mr. Madhu Mohan Damodhar, Member(Technical)
Date of Hearing:13/05/2016
Date of decision:.
FINAL ORDER No._______________________
[Order per: Madhu Mohan Damodhar]
The common facts of these two appeals are that the appellants were rendering taxable services under the categories of Courier Services and Business Auxilliary Services. During the course of verification of records, it appeared to the Department that the appellant has wrongly availed and utilized CENVAT credit by following a practice of making payment on receipt of Cargo Sales Report to various airlines after calculating the service tax liability and by availing CENVAT credit based on the said Cargo Sales Report. Accordingly, notices dated 12-07-2009 for period Sept 2004 to March 2009, inter alia proposing demand of alleged irregularly availed credit amount of Rs 2,34,06,813/- and non-paid service tax of Rs 2,22,34,462/- was issued to the appellants , which proposals were confirmed vide OIO dated 29-01-2010. Hence appeal no ST/263/2011.
2. Two other notices, one dated 22-10-2010 for period April 2009 to March 2010, inter alia, proposing demand of alleged irregularly availed credit amount of Rs 77,79,610/- and non-paid service tax of Rs 50,20,514/- and another notice dated 14-10-2011, for period April 2010 to March 2011, inter alia, proposing demand of alleged irregularly credit amount of Rs 98,26,915/- and non paid service tax of Rs 99,87,498/- were also issued to the appellants , which proposals were confirmed vide common OIO dated 31-05-2013. Hence appeal no. ST/27587/2013
3. During the hearing, Shri S S Gupta. Ld Counsel for the appellants, made the following main arguments:
All the airlines have given pre-printed air-way bill (AWB) to the appellant for the purpose of issuing the same against the booking of cargo for the said airlines. The AWB contains all the details as required under Rule 4A of Service Tax Rules. On confirmation of terms and conditions of the carriage and the freight charges being levied by the airlines, the appellant issues the air way bill (AWB) as an agent of the carrier i.e .airlines towards booking of cargo. The airway bill contains various details such as value of freight, AWB issue charges, fuel, surcharges and handling charges. The service tax is levied on the freight amount, AWB charges plus fuel surcharges and handling charges and reflected on the said airway bill. All the AWBs contain the service tax registration number of the respective airlines. This is followed by all the airlines in the industry. The appellant thereafter raises the invoice to customer containing details like amount charged towards freight amount, service charges, fuel charges, AWB charges etc. The freight charged in the invoice is the same amount as charged in the airway bill (AWB) issued on behalf of the airlines. On the basis of various bookings done, the appellant prepares fortnightly Cargo Sales Report (CSR) in respect of each airline. CSR is a summary of AWBs i.e. invoices raised by the airlines. The said cargo sales report shows the total amount of freight charges plus other charges which are due to the carrier. The cargo sales report also reflects the commission payable to the appellant for booking of the cargo. The commission payable to the appellant is deducted from the gross amount payable to the airlines. It is evident from the cargo sales report that the service tax has been paid to the various airlines on the gross freight remitted by the appellant. Along with the CSR, the appellant also raises the invoice towards its commission of 5% on the freight charges plus applicable service tax on the same. It will thus be evident from the above that the service provided by the appellant is of booking cargo and the commission of 5% of freight amount is charged to the airlines for the said services. As per Section 67 of the Act, value of taxable service is the gross amount charged for the taxable services rendered. The appellant has rendered the services of booking of cargo and the value corresponding to that service only is commission amount received by the appellant. Thus, tax is required to be paid by the appellant only on the commission amount received by it. Undisputedly, the appellant has paid service tax on freight amount plus 5% commission received from the airlines. The appellant has already reversed the amount of CENVAT credit availed by it on the service tax remitted to the airlines. It is submitted that payment made towards taxes amount to reversal of credit taken. In the stay order no. 1263/2012 dated 24.07.2012, the Tribunal has given specific finding that the appellant has paid higher service tax than the credit taken. Their records for the period 2011-2012 were verified in audit conducted by the Department and found that they were eligible for the credit. They made an RTI application dated 15.12.2014 requesting for file noting with respect to verification done at their premises in the year 2012. Copy of RTI order received conveyed following noting made by department after verification:
verification was ordered and the scrutiny group superintendent has verified the invoices on 14.12.2014 and has brought out that credit availed for the subsequent period i.e. April, 2011 to March, 2012 is regular. In view of this no periodical SCN for the period April, 2011 to March, 2012 is warranted.
This shows that the department has also found that credit taken by them is regular and accordingly no periodical show cause notices were issued thereafter. The appellant took centralised registration in Mumbai in Jan 2012, after which they received two show cause notices on identical issue denying the credit for the period 2009-2013 and 2013-14. Both the show cause notices were adjudicated vide common Order-in-Original No.21 and22/STC-IV/MRRR.15-16 dated 16.07.2015 wherein the Commissioner has allowed the CENVAT credit taken on airway bills & concluded it to be the proper document as per Rule 4A of Service Tax Rules, 1994 read with Rule 9(1) of the CENVAT Credit Rules, 2004. Copy of the order was handed over during hearing. The department did not accept the same and went into appeal, however, mainly on the ground that the appellant is not eligible to take CENVAT credit on service tax paid by airlines and that the recipient of the service is the shippers of the goods/documents and not the appellant. Even if the demand is upheld, it cannot be both on credit availed and utilized.
4. On behalf of the department, Learned AR Shri S K Mall, opposed the appeal, reiterated the findings of the impugned orders and submitted that the CSR is not a specified document for availing input tax credit.
5. Heard both sides and have also gone through the facts and records of the case.
6. The crux of the issue hinges on the question as to whether availment of credit on the document called Cargo Sales Report is in order or otherwise.
7. Admittedly, the said document called Cargo Sales Report is not specifically included in the list of documents on which cenvat credit can be taken, inter alia, by provider of output service envisaged in Rule 9 of the CENVAT Credit Rules, 2004. It is not in dispute that the said Cargo Sales Report is only a summarization of Air Way Bills (AWB) issued by the appellants as agents of airlines towards booking of cargo. It is also not in dispute that the said AWBs indicate, inter alia, details like AWB no ( Invoice no), Service Tax Registration no of the concerned airline, name of service provider airline, name of service recipient, value, nature of service and service tax amount. In our view, therefore, these AWBs can surely be considered as an eligible invoice or bill for the purposes of the said Rule 9 supra, or for that matter, Rule 4A of the Service Tax Rules, 1994. The legal imbroglio in this case has arisen only because appellants allegedly chose to avail credit on the Cargo Sales Report, which is a fortnightly summary of the Air Way Bills (AWB). It is not the case of the department that the said Cargo Sales Report shows a higher or lower credit amount different from the total of the AWBs referred to therein. It is also not the case of the department that the appellants are availing CENVAT credit of service tax not suffered by them. The only ground for denial of such credit is the appellants availment thereof based on the Cargo Sales Report. Nevertheless, when the relevant AWB s have also been made available to the department, the appellants taking credit on their consolidation and summarization in a fortnightly Cargo Sales Report is therefore to be considered as their having taken credit on the AWBs themselves. It has to be also kept in mind that the appellants conduct their business in a unique niche of the airline industry, that of booking cargo space on behalf of airlines, and as such the universal practices in such areas should be properly understood and appreciated before issuing demands of this nature. So long as the primary and essential requirements of the procedural Rule have been satisfied, benefit should not be denied on insubstantial grounds. In fact , even the said Rule 9, so vigorously relied by lower authority, lays down that minor inadequacies in the document on which credit is availed should be overlooked, in the Proviso to sub rule (2) thereof, as reproduced below:
PROVIDED that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, Central excise or Service tax registration number of the person issuing the invoice, as the case may be, name and address provider of output service and the Deputy commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit.
8. In arriving at this conclusion, we also draw sustenance from judicial decisions on similar issue, which are pari materia applicable to the facts of this case.
9. In TEMPLE PACKAGING PVT. LTD. V COMMR. C. EX., CUS. & S.T [2015 (323) E.L.T. 597 (Tri. - Ahmd.)], Tribunal held as follows:
11.?The Commissioner (Appeals) observed that the Challan is not a document for the purpose of availment of the Cenvat credit. It is also observed that the appellant could have taken the credit in the Cenvat account on the basis of Bill of Entry. It is revealed from the record that the appellant paid the duty by challan on the basis of the Bill of Entry generated through EDI on 13-3-2006. It is observed that the appellant has shown the reference of the Challan in their Cenvat account. In my considered view, the appellant could have mentioned the reference of Bill of Entry number in their Cenvat account. The appellant is also eligible to avail credit on the basis of Challan under Rule 9 of the Cenvat Credit Rules, 2004 as held by the Tribunal in the case of Essar Oil Ltd. (supra). It is held that word Challan and any other similar document mentioned in the explanation to Rule 9(i)(b) of the said Rules evidencing payment of additional CVD on sale of cenvatable goods would be eligible for availing Cenvat credit. It is settled by series of decisions that when there is substantial compliance of law the benefit of Cenvat credit cannot be denied on procedural lapse.
13?The Honble Supreme Court in the case of Narmada Chematur Pharmaceuticals Ltd. (supra) held that optional exemption not availed in order to take Cenvat/Modvat credit and such credit subsequently held to be wrongly availed and when the amount of Cenvat/Modvat credit wrongly availed is exactly equivalent to the amount of excise duty paid by not availing the exemption, the consequences is revenue neutral and the demand of such wrong availment of credit rightly quashed by the Tribunal. In the present case, the appellant had not availed the EPCG scheme and the exact amount utilized in the cenvat account and there is no dispute the appellants are eligible to avail Cenvat credit as per Notification No. 97/2004. Thus, the decision of the Honble Supreme Court in the case of Narmada Chematur Pharmaceuticals Ltd. (supra) would be applicable in the present case
.
10. In HIM TEKNOFORGE LTD. V CCE., CHANDIGARH [2014 (312) E.L.T. 721 (Tri. - Del.)], Tribunal held as follows:
The appellant is engaged in the manufacture of rough forging under Chapter 73 of the Schedule to the Central Excise Tariff Act, 1985. It is seen that the said goods were cleared by them to ordnance factory under the cover of Central Excise invoices. The said goods were not found to be as per technical specifications of the ordnance factory, the same were returned to the appellant on the basis of Nominal Issue Vouchers. As per the appellants, the said vouchers raised by the ordnance factories contained the requisite information including the details of the Central Excise invoices under which the goods were earlier removed by the appellants. The Excise invoices were also returned by the ordnance factory along with vouchers.
2.?On return of the said goods, the same were entered by the appellant in their statutory records of inputs and credit was availed. Revenue raised an objection that availing of credit on the basis of Nominal Issue Voucher was not in accordance with law inasmuch as the said vouchers cannot be treated to be modvatable documents. Accordingly, proceedings were initiated against the appellants by way of Show Cause Notice dated 26-6-2007 for the credit availed by the assessee during April 2004 to February 2006. The said Show Cause Notice culminated into an order passed by the Assistant Commissioner confirming demand of Rs. 1,12,562/- by rejecting the Modvat credit so availed by them and imposing penalty of identical amount under Rule 15 of the Cenvat Credit Rules. On appeal against the above order, the same was confirmed by Commissioner (Appeals). Hence the present appeal.
3.?After hearing both the sides represented by Shri Vikrant Kakaria, ld. Advocate and Shri K.P. Singh, ld. DR, I find that the sole objection of the Revenue is that the goods stand returned by the ordnance factory under the cover of Nominal Issue Vouchers, which is an invalid document for availment of credit. Lower authorities have also considered the assessees plea that along with the said vouchers on their own invoices under the cover of which the goods were originally cleared have also been returned but have not accepted the same on the ground that the goods stand returned after a lapse of three to four years. The appellants plea on limitation stands also rejected by the lower authorities on the ground that the fact of availing credit on the basis of Nominal Issue Voucher has not been disclosed to their Range Central Excise authorities.
4.?Ld. Advocate appearing for the appellant relied upon the Tribunals decision in the case of Hitesh Plastic Pvt. Ltd. v. CCE, Vapi reported in 2009 (243) 419 as also on the Tribunals decision in the case of Jindal Photo Pvt. Ltd. v. CCE Order No. A/1496/2009/WZB/AHD [2009 (247) 730 (Tribunal)] and Tribunals decision in the case of BAPL Industries Ltd. v. CCE, Coimbatore reported in 2006 (198) 587. The ratio of all above decisions is to the effect that as the provisions of Rule 16 allows the assessee to avail the credit of duty paid on the goods cleared by them, by treating the same as inputs the provisions of Rule 7, which specify the documents for the purpose of availment of credit in respect of inputs, would not apply to the provisions of Rule 16. The said rule being a special provision enacted for receiving back the rejected final product, the availment of credit on the basis of Central Excise invoices issued by the manufacturer would be sufficient. Even in the present case, I find that there is no dispute about the receipt of the duty paid rejected final product. The technical objection that the credit stands availed on the basis of vouchers issued by ordnance factory (though the appellant also claimed the production of Central Excise invoices, which is not disputed by the Revenue) cannot be upheld inasmuch as the legislative intent as reflected in the said rule allows an assessee to avail Modvat credit of duty paid on the final product but subsequently received back as rejected goods. Such legislative intent cannot be defeated on the technical ground.
11. It is further noticed that on the same issue, for subsequent period April 2011 to March 2012, credit availed by the appellants has been found as regular and no periodical SCN for that period was issued by Hyderabad service tax authorities, as evidenced by the RTI reply given by department and relied upon by the appellant.
12. Further, after the appellant took centralised registration in Mumbai in Jan 2012, they were issued with two SCNs on the same issue for the periods 2009-2013 and 2013-14. Both these notices were adjudicated vide a common order dated 16-07-2015, wherein the adjudicating authority has gone into the issue in depth and has decided in favour of the appellant; the relevant portions of the order are reproduced below:
The crux of the issue raised in the show cause notice is that the assessee is taking credit based on the Cargo Sales Report, which as per the notice is not the valid document as per Rule 9(1) of the CENVAT Credit Rules, 2004. I have gone through various Cargo Sales Reports and connected Air way Bills. I find that, in fact, they are taking credit based on the AWBs, as the CSR is only a fortnightly summary of AWBs. They are making a consolidated entry for each of the CSR in the CENVAT ledger and not individual entries AWB wise. However, I opine, it does not mean that they are taking credit based on CSR, because only a single entry is passed in the Cenvat ledger (for one CSR) instead of multiple entries AWB wise.
In view of the above background, is it correct on the part of the assessee to take credit of service tax charged on the AWBs (whose summary is given in the CSR) and utilise the same for payment of service tax liability? The department has alleged in the show cause bodices that the CSR, or for that matter the AWB, is not proper document under Rule 9(1) of the CCR, 2004. There was no other allegation in the notices. Where as the assessee contended that the said AWB on which the credit has been taken, is a valid document under Rule 9(1) of the CCR, as it contains all the necessary details which are required to be present in an invoice.
Now, let me see whether the Air Way Bill (AWB) can be treated as invoice/bill/or challan issued by the input service provider. Rule 4A of the Service Tax Rules,1994 regulates issuance of invoice/bill or challan by the service provider. The said rule reads as:
Rule 4A. Taxable service to be provided or credit to be distributed on invoice, bill or challan-
1) Every person providing taxable service shall not later than thirty days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier issue an invoice, a bill or as the case may be, a challan signed by such person or a person authorized by him in respect of taxable service provided or agreed to be provided and such invoice, bill or as the case may be, challan shall be serially numbered and shall contain the following namely:-
i) The name, address and the registration number of such person:
ii) The name and address of the person receiving taxable service:
iii) Description and value of taxable service provided or agreed to be provide; and
iv) The service tax payable thereon:
I have seen copies of the Air Way Bills and find that they contain all the ingredients of the invoice/bill or Challan as they contain the following:
Invoice no {a Unique Air Way Bill} Service Tax Registration no (of the air line) Name of the service provider (i.e airline) Name of the service receiver (the assessee) Value of service Nature of service Service Tax amount Thus, the Air Way Bill can be considered as a invoice/bill or Challan as per Rule 4A of the Service Tax Rules, 1994, and accordingly, I rule that the assessee has rightly taken the Cenvat Credit, as per provisions of Rule 9(1) of the Cenvat Credit Rules, 2004.
Though on review of the aforesaid OIO, the Committee of Chief Commissioners have directed for its appeal to CESTAT, we find merit in the contention of the ld. Counsel that the order for appeal is mainly on the ground that the appellant is not eligible to take CENVAT credit on service tax paid by airlines at all and that the recipient of the service is the shippers of the goods/documents and not the appellant.
13. In the event, we unequivocally hold that the availment of CENVAT credit based on the Cargo Sales Report prepared from the AWBs, cannot be denied to the appellant. By implication, utilization of such availed credit to discharge their service tax liability cannot also be held as irregular. The impugned orders will therefore require to be set aside, which we hereby do. Appeals allowed with consequential reliefs, if any, as per law.
(Pronounced in open court on .) (MADHU MOHAN DAMODHAR) MEMBER(TECHNICAL) ( SULEKHA BEEVI, C.S.) MEMBER(JUDICIAL) Raja..
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