Custom, Excise & Service Tax Tribunal
Dish Tv India Ltd vs Dgcei Adjudication Cell on 11 July, 2019
CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH, COURT NO. II
Service Tax Appeal No. 51760 of 2016
[Arising out of the Order-in-Original No. 07/ST/2015-16 dated 01/03/2016
passed by The Additional Directorate General (Adjudication), Directorate
General of Central Excise Intelligence (Adjudication Cell), New Delhi.]
M/s Dish TV India Limited Appellant
B-10, Lawrence Road Industrial Area,
Delhi - 110 035.
VERSUS
The Directorate General of Respondent
Central Excise Intelligence, Adjudication Cell, West Block - 8, Wing No. 6, 2nd Floor, R.K. Puram, New Delhi - 110 066.
APPEARANCE Shri A.R. Madhav Rao, Advocate - for the appellant.
Shri G.R. Singh, Authorized Representative (DR) - for the Respondent.
CORAM:HON'BLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE SHRI C.L. MAHAR, MEMBER (TECHNICAL) FINAL ORDER NO. 50878/2019 DATE OF HEARING : 20/03/2019.
DATE OF DECISION:11/07/2019.
C.L. MAHAR :-
The brief facts of the matter are that the Department had issued a show cause notice dated 14/10/2014 to the appellant, whereunder the service tax under the following four issues have been demanded from the appellant under Section 73 (1) of the Finance Act, 1994. The penal provisions of Section 76, 77 and 78 of the Finance Act, 1994 read with Rule 15 (3) of the Cenvat
2 ST/51760 of 2016 Credit Rules, 2004 have also been invoked. Under the above- mentioned show cause notice the demand of Cenvat credit has been made on following grounds : (i) a demand of Rs. 4,18,94,327/- has been made on the ground that the appellant have availed Cenvat credit on the CPEs (Consumer Premises Equipment) which were installed in the State of Jammu and Kashmir and as the provision of the Finance Act, 1994 are not applicable to the State of Jammu and Kashmir, it has been alleged that the appellant have wrongly availed Cenvat credit and accordingly reversal of the Cenvat credit has been demanded as per the provision of Rule 14 of the Cenvat Credit Rules, 2004 readwith the proviso to the Section 73 (1) of the Finance Act, 1994; (ii) the second issue on which the demand has been raised in the above-mentioned show cause notice pertains to the matter that the appellant need to reverse back the Cenvat credit on the CPEs (Consumer Premises Equipment) installed on complementary basis at the premises of certain customers/subscribers. A demand of Rs. 8,71,650/- has been raised on this issue as per the provision of Section 73 (1) of the Finance Act, 1994, (iii) a demand of Rs. 62,66,437/- has also been demanded for wrong availment of the Cenvat credit on the CPEs lost in transit or lost at the distributors premises before same being put for the final utilization; (iv) and a demand of Rs. 9,84,62,871/- has also been made under Rule 14 of the Cenvat Credit Rules, 2004 readwith Section 73 (1) of the Finance Act, 1994 for not reversal of the Cenvat credit on CPEs such as set- top box, cables, antenna etc. which were installed at the consumer/subscribers premises and such CPEs, which were not in use for providing the output service because of the fact that the subscription of the cable connection have been cancelled/de- activated by the subscriber and such CPEs have also been written off fully in the financial account of the appellant for a period between 1 July 2012 to 31 March 2014.
3 ST/51760 of 2016
2. The matter got adjudicated vide order-in-original No. 7/ST/2015-16 dated 29 February 2016 whereunder the learned Adjudicating Authority has confirmed the demand pertaining to issue No. (i), (iii) and (iv), a penalty of Rs. 4,18,94,327/- has also been imposed under Section 78 readwith Rule 15 (3) of the Cenvat Credit Rules, 2004 pertaining to the demand as mentioned at Sl. No. (i) above. Penalty of Rs. 62,66,437/- has also been imposed under Section 78 of the Finance Act, 1994 pertaining to the demand on the issue as mentioned at Sl. No.
(iii) in the preceding para. A general penalty of Rs. 98,00,000/- has already been imposed under Rule 15 (1) of the Cenvat Credit Rules, 2004. The appellant are before us against the above- mentioned impugned order-in-original.
3. It has been submitted by the appellant that so far as demand pertaining to issue at Sl. No. (i) is concerned, though it is a matter of fact that the provisions of the Finance Act, 1994 are not applicable in the State of Jammu and Kashmir and thereby the service provided by them in the State of Jammu and Kashmir became exempted services as defined under Rule 2 (e) of the Cenvat Credit Rules, 2002. However, it has been the contention of the appellant that though the broadcasting service was not under taxable category of services in the State of Jammu and Kashmir, the appellant had paid service tax for the period 2009-2010 to 2013 and, therefore, once the service tax has been paid on the output service, it amounts to reversal of the Cenvat credit taken by them since the service tax has been paid to Government exchequer utilizing the Cenvat credits. The appellant has submitted that they have paid service tax on the services provided in the state of Jammu & Kashmir upto January 2013 and the service tax was paid by utilizing the Cenvat credits as well as by paying in cash. The details are given here below :-
Period Total Service Tax Cenvat credit Service Tax Date of filing of payment (Rs.) utilized for paid in cash relevant ST-3 payment of (Rs.) return service tax (Rs.) 2009-2010 1,216,050,209/- 1,141,968,929/- 74,081,280/- April - September
4 ST/51760 of 2016 2009 - 23/10/2009 October - March 2010 - 23/07/2010 2010-2011 1,589,642,450/- 1,548,505,832/- 41,136,618/- April - September 2010 - 26/10/2010 October - March 2011 - 25/04/2011 2011-2012 1,94,57,90,608/- 1,87,55,28,002/- 7,02,62,606/- April - September 2011 - 25/12/2011 October - March 2012 - 25/04/2012 01/4/2012 2,26,47,56,192/- 1,58,43,18,011/- 68,04,38,181/- April - June 2012 -
to 22/11/2012
31/01/2013
July - September
2012 - 22/04/2013
October - March
2013 - 31/08/2013
Total 701,62,39,459/- 615,03,20,774/- 86,59,18,685/-
4. It can be seen from above chart that the appellant made payment of service tax by utilization of Cenvat credits as well as by making cash payments. It has further been submitted by the learned Advocate that they have discharged service tax on the output services of broadcasting on the considerations charged by them from the subscribers in Jammu and Kashmir for rendering such services from 1 April 2009 to 31 January 2013, however, it has been admitted by learned Advocate that service tax has not been paid by them on output services rendered by them in Jammu and Kashmir between the period 1 February 2013 to 31 March 2014. It has further been impressed that so far as the period between 1 April 2009 to 31 January 2013 is concerned, since they have paid service tax on the output service there cannot be a denial of the Cenvat credit on the credit availed by them on the capital goods and other inputs amounting to Rs.3,31,58,649/-. It has further been mentioned that Cenvat credit amounting to Rs. 87,35,678/- for the period between 1 February 2013 to 31 March 2014 had been paid back by them on being pointed out by the Department vide challan No. 173 dated 30 July 2014 and challan No. 391 dated 1 August 2014, Challan No. 176 dated 11 August 2014 under these challans a total amount of Rs. 5 crore have been deposited by the appellant with the Department. It has further been mentioned that it was only 5 ST/51760 of 2016 because of over sight that the Cenvat credits for period between 1 February 2013 to 31 March 2014 could not be reversed in their books of accounts, however, the appellant never had any intention to evade or wrongly avail the Cenvat credits. It has further been added that since the entire amount alongwith interest has been paid by them even before issue of the show cause notice and, therefore, as per the provisions of Section 73 (3) of the Finance Act, 1994, the Department should not have issued a show cause notice to them in this regard. The learned Advocate has cited the following judgments in favour of his arguments :-
"(i) Commissioner of Central Excise & Customs, Surat - III vs. Creative Enterprises - 2009 (235) E.L.T. 785 (Guj.) In the present case, the assessee was under the impression that the activity undertaken by it amounted to manufacture and accordingly paid excise duty and also availed Cenvat credit of the inputs utilized. The department contended that as the activity of the assessee did not amount to manufacture, the assessee is liable to reverse the CENVAT credit availed. The Gujarat High Court held that Cenvat credit cannot be denied when the assessee has paid the tax, as payment of tax amounts to reversal of credit. The court in paragraph 7 of the decision held as follows :
"The Tribunal is justified in holding that if the activity of the respondent - assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture."
This decision was upheld by the Supreme Court by dismissing the SLP filed by the revenue. The order of dismissal is reported at 2009 (243) E.L.T. A 121.
(ii) Commissioner of Central Excise, Pune - III vs. Ajinkya Enterprises - 2013 (294) E.L.T. 203 (Bom.) On similar facts, the High Court in this case dismissed the appeal of the Revenue on the ground that if duty is paid where it is not required under law to be discharged, Cenvat credit availed need not be reversed.
(iii) The Mumbai Tribunal in the case of PSL Holdings Ltd. vs. Commissioner of Central Excise - 2003 (156) E.L.T. 602 (Tri.
- Mum.) held : "By utilization of credit for payment of duty which was not required to be paid, credit was effectively reversed and Revenue cannot once again ask for reversal of credit".
(iv) Similar view was taken by the Delhi Tribunal in the case of Asian Colour Coated Ispat Ltd. vs. Commissioner of Central Excise - 2015 (317) E.L.T. 538 (Tri. - Del.).
6 ST/51760 of 2016 Thus it is a settled principle that where an assessee who has discharged tax when it was not required to be paid, credit availed cannot be denied to the assessee. In the instant case, the amount of credit availed has been reversed by paying service tax which was not required to be paid. In the light of the above mentioned judicial precedents, the impugned order is liable to be set aside."
The appellant further places reliance inter alia upon the following decisions which categorically hold that payment of tax is considered is reversal of Cenvat credit :
a) Nagammai Cotton Mills P. Ltd. vs. Commissioner -
2008 (10) S.T.R. 77 (T)
b) Aksh Technologies Ltd. vs. Commissioner - 2013 (31) S.T.R. 700 (T)
c) Radico Khaitan Ltd. vs. Commissioner - 2014 (35) S.T.R. 566 (T)
d) Sterlite Opticals Technologies Ltd. vs. Commissioner -
2012 (282) E.L.T. 392 (T)"
5. With regard to the issue at Sl. No. (III), wherein a reversal of Cenvat credit of Rs. 62,66,437/- has been demanded from the appellant on the capital goods namely set-top boxes etc. which are lost in transit or lost in the distributors premises before being put to use by the subscribers. The learned Advocate appearing for the appellant has pleaded that they accept the liability of this amount and prayed that it has already been mentioned to the Original Adjudicating Authority that this amount may be appropriated from the amount of Rs. 5 crore deposited voluntarily by the appellant during the course of investigation and since the amount has been paid prior to the issue of the show cause notice and, therefore, as per the provisions of Section 73 (3) of the Finance Act, 1994, the Department should have compounded the non-payment or reversal of the Cenvat credit and there was no need of issuing show cause notice to the appellant. It has further been added that it was wrong on the part of the Adjudicating Authority to have imposed a penalty of the equal amount on this count considering the fact that there was no contumacious conduct on the part of the appellant in evasion or misuse of any Cenvat credit and the Cenvat credit were taken because of the over-sight as the procurement of the capital goods namely CPEs are received on continuous basis on
7 ST/51760 of 2016 the purchase invoices indicating payment of excise duty. As per the standard accounting principle the credits are taken as soon as payment for purchases are made and invoices have been received. The fact that certain CPEs have not been received on or have been lost comes to light on later date. It has been also contended that the Commissioner has been provided with the details of set-top boxes which have been lost during 2010-2011 to 2011-2012 and for 2013-2014, on which Cenvat credit have already been reversed. It has further been mentioned that only for a short period of 2012-2013 by oversight the Cenvat credits have not been reversed. It has further been argued that even without any prejudice the maximum penalty could have been 50% of the credit Cenvat credit wrongly availed by them as per the provisions of 1st proviso to Section 78 of the Finance Act, 1994 and further since entire amount of wrongly availed Cenvat credit alongwith the interest and penalty have already been deposited in the form of voluntarily payment of Rs. 5 crores with the Department, the benefit of reduced penalty of 25% should have been given to them.
6. With regard to issue No. IV, which pertains to the Cenvat credit on deactivated CPEs for which Cenvat credit have not been reversed by the appellant though they have officially written off such deactivated CPEs in their books of account and therefore as per the provision of the Rule 3 (5A) of Cenvat Credit Rules, 2004, the appellant have been asked to reverse the Cenvat credit of Rs.9,84,62,871/-. It has been submitted by the learned Advocate for the appellant that the CPEs/set-top boxes etc. are procured by the appellant for providing output services at the premises of the subscribers and once the subscription of the service has been subscribed by the subscribers, the CPE/set-top box, cable, antenna etc. are transferred to the premises of the subscriber as per the provision of the Rule 3 (5) of the Cenvat Credit Rules, 2004 which provides that in case such capital goods 8 ST/51760 of 2016 are transferred/removed to the subscribers premises, the appellant are not required to reverse back the Cenvat credit.
7. It has further been submitted by virtue of Rule 3 (5) of Cenvat Credit Rules, 2004 the appellant were entitled to the Cenvat credit of duty paid on capital goods namely CPEs and this credit cannot be recovered except in a manner as provided under the provisions of Cenvat Credit Rules. The learned Advocate has relied upon the Apex court judgment in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. reported in 2004 (178) E.L.T. 13 (S.C.). Further it has been added by the learned Advocate that the Adjudicating Authority has invoked the provision of the Rule 3 (5A) of the Cenvat Credit Rules which are actually not applicable in the given facts of the present case. It has been pointed out that the provision of Rule 3 (5A) are applicable to a situation, where the capital goods on which the Cenvat credit has been availed are removed from the service providers premises after being used by the provider of output service. It has been the case of the appellant that since the goods have been supplied to the subscriber as per the provision of Rule 3 (5B) of the Cenvat Credit Rules, and, therefore, the provision of the Rule 3 (5A) are not relevant in this case. It has further been submitted that the Department had earlier issued a show cause notice on the same issue for the period immediately preceding the present proceedings namely for October 2007- 2008 to 2010-2011 contending that such credit was to be reversed under Rule 3 (5B) of the Cenvat Credit Rules, as according to the Department the set-top boxes value had been written off fully in the books of accounts before being put to use. Such a demand was dropped by the Commissioner, CGST, Noida by order dated 12/01/2018 holding that the capital goods had been put to use as also the capital goods have not been fully written off. The Commissioner in that order has also noted the fact that the local Range office had objected to the denial of credit 9 ST/51760 of 2016 by letter dated 31/01/2013. A copy of the order passed by the Commissioner CGST, Noida dated 12/01/2018 has been filed along with the compilation of judgments to this Bench. It is further been submitted that no appeal has been preferred by the Department before CESTAT against the above-mentioned order- in-original. Thus, the Department was fully aware, prior to issuance of the present show cause notice of the appellant's practice, and when the appellants are following the same practice all throughout, without prejudice to the merits of the case, invoking the extended period of limitation and imposition of penalty contending there was mala fide intent, cannot be sustained.
8. We have also heard learned Departmental Representative who has supported the findings of the order-in-original.
9. After hearing both the sides and on perusal of the appeal record, we find that the following issues need to be addressed by us in this matter : (i) whether Cenvat credit availed by the appellant on the services provided by them in the State of Jammu and Kashmir need to be reversed back or not ; (ii) whether the assessee is liable to reverse back the Cenvat credits availed on the Consumer Places Equipments (CPEs), loss in transit at the distributor's premises before same is being put to use for providing the output service ; (iii) whether assessee is liable to pay an amount equal to the Cenvat credit availed by them on the CPEs which are not being used for providing output services on account of the (deactivation) of DTC service and also the value of the CPEs have been written off in their books of accounts after 5 years of their capitalization.
10. We take up all the three issues sequentially for the decision here under :-
So far as issue at Sl. No. (i) is concerned, the basic premise on which the department has demanded reversal of the Cenvat credit is that since the provisions of Finance Act, 1994 for levy of 10 ST/51760 of 2016 service tax are not applicable in the state of Jammu and Kashmir and therefore the services provided by the appellant in the state of Jammu and Kashmir by virtue of the definition given under Rule 2 (e) of the Cenvat Credit Rules fall under the category of exemption services and therefore the appellant were not entitled to Cenvat credit on input services as well as on the capital goods for the output services provided by them in the Jammu and Kashmir region. It has been contended by the appellant that though it is a matter of fact that they have availed the Cenvat credit of capital goods which was used for providing output service in the state of Jammu and Kashmir where the provisions of Finance Act, 1994 are not applicable. However, they have regularly paid service tax to the Central Government since April 2009 to January 2013. The service tax during this period i.e. from 2009-2010 to 2012-2013 (upto January 2013) the service tax has been paid by them not only by utilizing the Cenvat credit but also by making the cash payment to the Central Government.
The chart below as provided by the appellants indicates the amount of the Cenvat credit utilization as well as payment of service tax in cash during a period from 2009-2010 to 31 January 2013 :-
Period Total Service Tax Cenvat credit Service Tax Date of filing of payment (Rs.) utilized for paid in cash relevant ST-3 payment of (Rs.) return service tax (Rs.) 2009-2010 1,216,050,209/- 1,141,968,929/- 74,081,280/- April - September 2009 - 23/10/2009 October - March 2010 - 23/07/2010 2010-2011 1,589,642,450/- 1,548,505,832/- 41,136,618/- April - September 2010 - 26/10/2010 October - March 2011 - 25/04/2011 2011-2012 1,94,57,90,608/- 1,87,55,28,002/- 7,02,62,606/- April - September 2011 - 25/12/2011 October - March 2012 - 25/04/2012 01/4/2012 2,26,47,56,192/- 1,58,43,18,011/- 68,04,38,181/- April - June 2012 -
to 22/11/2012
31/01/2013
July - September
2012 - 22/04/2013
October - March
2013 - 31/08/2013
Total 701,62,39,459/- 615,03,20,774/- 86,59,18,685/-
11 ST/51760 of 2016
11. Thus, it has been claimed by the appellant that though they have availed the Cenvat credit in respect of CPEs installed in the state of Jammu and Kashmir and the credit so availed had been utilized for payment of service tax in respect of service tax paid by them to the Central Government on the output service arising in the state of Jammu and Kashmir. The appellant this way try to explain that the credit which have been availed by them has actually been reversed by making payment of the service tax on the output service performed by them in Jammu and Kashmir to the Central Government which was otherwise not due as the provision of the Finance Act, 1994 are not applicable in the state of Jammu and Kashmir. The learned Advocate has taken the shelter to strengthen his argument in this regard by saying that the law is well settled in this regard that if any assessee under a mistake, mis-conception pays duty on the output service which was otherwise exempted or not taxable and if the Cenvat credit has been taken on the input services or capital goods, same will tantamount to reversal of the credit initially availed because of the fact that service tax has been paid on otherwise exempted service.
We find that it is a matter of record that though the appellant are not required to pay any service tax on the output service provided by them in the state of Jammu and Kashmir, however, under a mistaken belief that the provision of the Finance Act, 1994 are also applicable in the state of Jammu and Kashmir, the appellant paid service tax on the output services provided by them in the state of Jammu and Kashmir. There is also no denial of the fact, as can be seen from the table in the preceding paras, that the appellant discharged service tax liability on the output service, not only by utilizing Cenvat credit, which they have availed, but also paid the service tax from the cash over and above the Cenvat credits availed by them. This fact prove the bonafide of the appellant that firstly by the fact that 12 ST/51760 of 2016 they had been under the wrong impression that service tax liability is applicable in the state of Jammu and Kashmir; secondly that service tax which have been paid on the output service is much more than the input and capital input Cenvat credit availed by them. We do not agree with the finding of the Original Adjudicating Authority that "if the credit is taken for an activity which does not constitute service, payment of service tax will not amount to reversal of the credit".
12. We find that this Tribunal as well as High Court of Gujarat as well as Mumbai in their decisions, which are being mentioned here below, have held that by utilization of the Cenvat credit for payment of duty, which was not required to be paid, the credit effectively stands reversed and revenue cannot once again ask for reversal of the credits. The relevant extract of certain relevant decisions are reproduced here below :-
"(a) Commissioner of Central Excise & Customs, Surat - III vs. Creative Enterprises - 2009 (235) E.L.T. 785 (Guj.) In the present case, the assessee was under the impression that the activity undertaken by it amounted to manufacture and accordingly paid excise duty and also availed Cenvat credit of the inputs utilized. The department contended that as the activity of the assessee did not amount to manufacture, the assessee is liable to reverse the CENVAT credit availed. The Gujarat High Court held that Cenvat credit cannot be denied when the assessee has paid the tax, as payment of tax amounts to reversal of credit. The court in paragraph 7 of the decision held as follows :
"The Tribunal is justified in holding that if the activity of the respondent - assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture."
This decision was upheld by the Supreme Court by dismissing the SLP filed by the revenue. The order of dismissal is reported at 2009 (243) E.L.T. A 121.
(b) Commissioner of Central Excise, Pune - III vs. Ajinkya Enterprises - 2013 (294) E.L.T. 203 (Bom.) On similar facts, the High Court in this case dismissed the appeal of the Revenue on the ground that if duty is paid where it is not required under law to be discharged, Cenvat credit availed need not be reversed.
(c) The Mumbai Tribunal in the case of PSL Holdings Ltd. vs. Commissioner of Central Excise - 2003 (156) E.L.T. 602 (Tri.
13 ST/51760 of 2016
- Mum.) held : "By utilization of credit for payment of duty which was not required to be paid, credit was effectively reversed and Revenue cannot once again ask for reversal of credit".
(d) Similar view was taken by the Delhi Tribunal in the case of Asian Colour Coated Ispat Ltd. vs. Commissioner of Central Excise - 2015 (317) E.L.T. 538 (Tri. - Del.).
Thus it is a settled principle that where an assessee who has discharge tax when it was not required to be paid, credit availed cannot be denied to the assessee. In the instant case, the amount of credit availed has been reversed by paying service tax which was not required to be paid. In the light of the above mentioned judicial precedents, the impugned order is liable to be set aside."
13. Thus, we hold that for the period of availment of the Cenvat credit for which the service tax has been paid on the output service by the assessee, the appellant need not reverse back the Cenvat credits, however, we confirm that Cenvat credit taken between period 1st February 2013 to 31 March 2014 amounting to Rs. 87,35,678/- when no service tax has been paid on the output service by the appellant, we therefore, hold that assessee need to reverse back an amount of Rs. 87,35,678/- as per the provisions of Section 73 (3) readwith Rule 14 of Cenvat Credit Rules alongwith the applicable interest.
14. With regard to the imposition of penalty on the amount of Cenvat credit availed on the output service provided by the appellant in the exempted jurisdiction, it is seen that an amount of Rs. 5 crores have been paid by the assessee for making good of the wrongly availed Cenvat credit much before the issue of the show cause notice on 14 October 2014. It is a matter of record that amount of Rs. 5 crores have been paid by the assessee vide challan No. 173, 391 and 176 dated 30 July 2014, 1 August 2014 and 11 August 2014 respectively against the demand of Cenvat credit which was being investigated by the department at that time.
15. We also note that the appellant have kept record of all the services which have been provided by them as well as the Cenvat credit which have been availed and utilized by them during the 14 ST/51760 of 2016 period covering from April 2009 to March 2014. We feel that ingredients of invoking the extended time proviso under Section 73 (3) of the Finance Act, 1994, such as, fraud, mis- representation, mis-statement and willful suppression of facts with an intent to evade payment of duty are not present in this case and therefore we hold that the provisions of Section 78 of the Finance Act, 1994 cannot be invoked in given circumstances. We also find that as per the provisions of Section 73 (3) which are reproduced here below :-
"Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub- section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid :
Provided that the [Central Excise Officer] may determine the amount of short-payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the [Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.
Explanation - For the removal of doubts, it is hereby declared that the interest under Section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer], but for this sub-section".
16. We find that the above-mentioned provisions of law provide that if there is no suppression or collusion or willful misstatement with an intent to evade service tax and the required amount of the service tax is paid before the issue of show cause notice in that case, there is no need of issuing of any show cause notice. We feel that since all the facts and details of the Cenvat credit and output services have been recorded in the books of accounts of the assessee and during the enquiry itself, the assessee has made a payment of Rs. 5 crores as details given above, we feel 15 ST/51760 of 2016 that there are no valid ground of issue of show cause notice for demanding of service tax amounting to Rs. 87,35,678/- and for imposition of penalty under Section 78 of Finance Act, 1994. While holding the above view we also take the shelter of Hon'ble Apex court in the case of Uniworth Textiles Ltd. vs. Commissioner of Central Excise Raipur - 2013 (288) E.L.T. 161 (S.C.). The relevant extract of this decision is reproduced here below :-
"25. Moreover, this Court, through a catena of decisions, has held that the proviso to Section 28 of the Act finds application only when specific and explicit averments challenging the fides of the conduct of the assessee are made in the show cause notice, a requirement that the show cause notice in the present case fails to meet. In Aban Loyd Chiles Offshore Limited and Ors. (supra), this Court made the following observations :
"21. This Court while interpreting Section 11-A of the Central Excise Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed that in order to attract the proviso to Section 11-A(1) it must be shown that the excise duty escaped by reason of fraud, collusion or willful misstatement of suppression of fact with intent to evade the payment of duty. It has been observed :
„...Therefore, in order to attract the proviso to Section 11- A(1) it must be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11-A(1) of the Act.‟ It was held that the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held :
...There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11- A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee 16 ST/51760 of 2016 would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso...."
(Emphasis supplied)
26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant".
17. Since, in this case no malafide has been established by the department against the appellant we feel that provisions of Section 78 are not applicable in this case, therefore, we hold that no penalty required to be imposed under the provisions of Section 78 of Finance Act, 1994.
18. Coming to issue at Sl. No. (ii), wherein the demand of Rs. 62,66,437/- has been confirmed by the learned Adjudicating Authority on the Consumer Premises Equipment (CPE) which were lost in transit or lost at the distributor's premises before same being put for use in providing the output service. The appellant have admitted the fact that during the financial year 2012-2013 they have failed to reverse back an amount of Rs. 62,66,437/- on 32,078/- CPEs which were lost either in transit or at the distributor's premises before being used or put for use for providing the output service. However, it has been contended by the appellant that they have regularly been reversing back the Cenvat credit on the lost CPEs which were not put for use for providing output service. In this regard, the following details have been provided by the learned Advocate appearing for the appellant :-
Financial No. of CPEs lost Cenvat credit availed (in Rs.) Cenvat credit already year reversed (in Rs.) 2009-2010 0 0 0 2010-2011 2,261 3,07,406/- 3,07,406/-
17 ST/51760 of 2016 2011-2012 1,24,276 2,27,52,634/- 2,27,52,634/-2012-2013 32,078 62,66,437/- 0
2013-2014 74,164 1,86,89,328/- 1,86,89,328/-
19. A glance at the above table thus points out that during financial year 2010-2011, 2011-2012 and 2013-2014 a substantial amount of Cenvat credit had already been reversed by the appellant for the CPEs which were lost or destroyed before being put for use. However, due to oversight the amount of Rs.66,66,437/- lost in transit CPEs during the financial years 2012-2013 could not be reversed. It has been admitted by the appellant that they own the liability of reversal of this amount of Rs. 66,66,437/- on account of the lost or destroyed CPEs, however, it was argued that there is no malafide involved in the matter as all the details were being maintained in their books of accounts. It has also been stated that before the issue of the show cause notice, a substantial amount of Rs. 5 crore have been deposited by the appellant for making good of the wrongly availed Cenvat credit of Rs. 62,66,437/- as well as the interest due on such credits. We find that there is no valid ground for invocation of Section 78 of the Finance Act, 1994 readwith Rule 15 (3) of Cenvat Credit Rules, 2004 as there was no willful suppression of facts or contravention of the any of the provisions of Finance Act with intent to evade the payment of the service tax as all the facts were recorded in the books of accounts. We find that the appellant have also been reversing for the required amount of the Cenvat credit on the lost or transit CPEs which were not put for use for providing output service. Thus, we hold that as per the provisions of the Rule 3 of the Cenvat Credit Rules, the appellant are required to reverse back the Cenvat credit of Rs. 62,66,437/- as per the provisions of Rule 4 of Cenvat Credit Rules, 2004 readwith Section 73 (1) of the Finance Act, 1994. The appellant are also required to pay interest as per the provision of Section 75 on this amount. However, as stated above, we do not find any valid ground for imposition of penalty under Section 78 readwith Rule 15 (3) of the Cenvat Credit Rules, 2004. While holding this view, we again take shelter of 18 ST/51760 of 2016 Hon'ble Apex Court decision in the case of Uniworth Textiles Ltd. vs. Commissioner of Central Excise, Raipur - 2013 (288) E.L.T. 161 (S.C.).
20. Coming to the issue of reversal of Cenvat credit amounting to Rs. 9,84,62,871/- under the provisions of Rule 3 (5A) of the Cenvat Credit Rules, 2004 for the Consumer Premises Equipments (CPEs) which were lying unused at the consumer premises and which have also been written off fully in the financial accounts from 01/07/2012 to 31 March 2014 by the appellant. The Department has been of the view that the capital goods which have been removed by the appellant after being used, the Cenvat credit availed initially at the time of the purchase of such capital goods required to be reversed in the manner as prescribed under Rule 3 (5) of the Cenvat Credit Rules, 2004. The basic premise on which the Cenvat credit has been asked for the reversal is that the CPEs installed at the consumer premises and where either connection has been disconnected or deactivated and as such no output service is being provided by such CPE; Secondly, as per the facts of the case, the CPEs remained in the custody of the consumer and they are not taken back by the appellant after the consumer has either stopped the subscription or the appellant himself has deactivated services to the such customers. In these circumstances, it is presumed that the CPEs has been removed from the premises of the appellant and accordingly the provisions of Rule 3 (5A) of Cenvat Credit Rules, 2004 will be applicable. During the course of hearing, the learned Advocate has taken us through a chart of deactivation/activation of the CPEs for various subscribers. The learned Advocate has tried to show that it is not the case that a deactivated CPE is not being used at the following years for availing the output service. He has pointed out certain cases where after deactivation, the CPEs have been got activated and output service have been availed by such subscribers through CPEs which were provided by the appellant to the 19 ST/51760 of 2016 subscribers initially. The main argument of the appellant has been that the provisions of Rule 3 (5A) of the Cenvat Credit Rules (under which Cenvat reversal is demanded) is not applicable in their case.
21. Before proceeding further, we feel that it will be appropriate to analyze relevant provision of the Cenvat Credit Rules, 2004 in this regard. The relevant rule covering the given situation is covered by the provision of Rule 3 (5) of the Cenvat Credit Rules, 2004. The text of Rule 3 (5) is reproduced here below :-
"Rule 3 (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 9 :
Provided that such payment shall not be required to be made where any inputs [or capital goods] are removed outside the premises of the provider of output service for providing the output service :
[* * *] Provided further that such payment shall not be required to be made where any inputs are removed outside the factory for providing free warranty for final products "] [* * * * * *] "(5A) (a) If the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely :-
(i) For computers and computer peripherals :
For each quarter in the first year @ 10%
For each quarter in the second year @ 8%
For each quarter in the third year @ 5%
For each quarter in the fourth and fifth year @ 1%
(ii) For capital goods, other than computers and computer
peripherals @ 2.5% for each quarter :
Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the 20 ST/51760 of 2016 amount to be paid shall be equal to the duty leviable on transaction value.
(b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.
(5B) If the value of any,
(i) Input, or
(ii) Capital goods before being put to use,
[on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then] the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods :
Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of [output] services, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.]"
22. It can be seen from the provisions of Rule 3 (5) that the law has provided that in case the inputs or capital goods on which Cenvat credit has been availed are removed as such from the premises of the manufacturer or service provider, the manufacturer or service provider will have to reverse back the Cenvat credits equal to the amount of the credits availed by them. However, under the proviso to Rule 3 (5) it is provided that "such payment shall not be required to be made where any input or capital goods are removed outside the premises of the provider of the output service for providing the output service. Thus, it can be seen that the provider of the output service namely appellant in this case, has taken the Cenvat credit on the CPEs which are the capital goods for providing output service at the premises of the subscribers and as per the provisions of the above-mentioned proviso to Rule 3 (5) the appellant are entitled for availing the Cenvat credit on the CPEs under the capital goods credit and they can also remove such CPEs for installation at the premises of the subscribers for providing the output service.
21 ST/51760 of 2016
23. The provisions of Rule 3 (5A) covers the situation where the goods are cleared after being put for use at the premises of the manufacture or output service provider. Since the goods are not removed after being used from the premises of the manufacturer or output service provider in the given situation in the present case and, therefore, we feel that the provisions of Rule 3 (5A) are not applicable in the present case.
24. The provision of Rule 3 (5B) covers the situation where the value of the inputs or capital goods is written off fully or partially before being put to use. The fact of the matter is that the CPEs which have been installed at the subscribers premises are being used and, therefore, the provisions of sub-Rule (5B) which provides that if the value of any capital goods is written off partially or fully before being put to use and only in that situation the provisions of sub-Rule (5B) will be applicable and Cenvat credit need to be reversed in such situation. In the present case, we feel that since the CPEs are being put to use at the subscribers end and, therefore, even after 4 to 5 years the value of such CPEs is written off in the books of accounts the provisions of sub-Rule (5B) are not applicable. We feel that the Cenvat credit reversal under Rule 3 (5A) as invoked in the show cause notice and confirmed by the impugned order-in-original is legally not sustainable as the facts involved in this case are appropriately covered by the provisions of Rule 3 (5) "proviso" which say that the capital goods can be removed to the subscribers premises for further provision of the output service. It is also relevant to mention here that during the course of arguments, the learned Advocate has taken us through the record of the appeal wherein it has been pointed out that certain deactivated CPEs gets activated after lapse of certain months or years and, therefore, it is also wrong to assume that the CPEs (capital goods) on which the Cenvat credit has been taken by the appellant are not being put for providing the output service. In these circumstances, we feel that the appellant have rightly availed the Cenvat credit on the CPEs which have been placed for 22 ST/51760 of 2016 utilization at the subscribers premises and there is no provision under Cenvat Credit Rules for reversal of the Cenvat credit on such CPEs if they are being used for providing output service. We also take note that the impugned order-in-original has wrongly confirmed the reversal of the Cenvat credit under Rule 3 (5A) of the Cenvat Credit Rules, 2004 which is primarily meant for the capital goods which are put for use for certain period of time and then removed from the factory premises or premises of the output service provider. The facts of the present case are absolutely different as stated in the preceding paras and, therefore, the applicability of Rule 3 (5A) of the Cenvat Credit Rules, 2004 is not sustainable. Thus, we feel that the order-in- original ordering the reversal of Cenvat credit amounting to Rs. 9,98,46,287/- is legally not sustainable.
25. The learned Advocate has also argued that in the present show cause notice dated 14/10/2014 extended time proviso under Section 73 (1) of the Finance Act, 1994 has been invoked and the reversal of Cenvat credit has been demanded by invoking the extended time proviso under sub-Section (1) of Section 73 of Finance Act, 1994 readwith Rule 14 of the Cenvat Credit Rules, 2004. However, it has been mentioned that the Department has always been aware about the situationship of the present case as on the similar grounds, the Department had earlier issued a show cause notice dated 30 March 2013, which has been adjudicated by order-in-original No. V (15) Adj./Noida/Dish TV/25/13 dated 12/01/2018 whereunder the Cenvat credit demand on the similar ground has been dropped by the learned Commissioner for the period 2007-2008 to 2010-2011. We note that as the Department has already been aware about the facts of the matter and therefore we feel that the element of fraud, mis- representation, collusion, mis-statement with an intent to evade service tax are not present in the given circumstances in this case and, therefore, we hold that the show cause notice is also barred by period of limitation. It has already been held by the Apex court in the case of Nizam Sugar Factory versus CCE -
23 ST/51760 of 2016 2006 (197) E.L.T. 465 (S.C.) that the Department cannot allege suppression on the part of the assessee in the subsequent show cause notice and it was fully aware about the facts of the matter at the time of the issue of the first show cause notice.
26. In view of above discussion, we hold as follows :-
(I) that out of total Cenvat credit of Rs. 4,18,94,327/-
confirmed by the impugned order-in-original, we hold that Cenvat credit amounting to Rs. 87,35,678/- pertaining to period 1st February 2013 to 31 March 2014 availed on the capital goods for providing the service in the State of Jammu and Kashmir on which no service tax has been paid by the appellant, the appellant need to reverse back the Cenvat credit amounting to Rs. 87,35,678/- as per the provisions of Section 73 (1) of the Finance Act, 1994 readwith Rule 14 of Cenvat Credit Rules, 2004 ;
(II) we also uphold the reversal of Cenvat credit amounting to Rs. 62,66,437/- on set top boxes which were lost in transit or lost at the distributors premises before being put to use as per the provision of Section 73 (1) of the Finance Act, 1994 readwith Rule 14 of the Cenvat Credit Rules, 2004 ;
(III) we set aside the confirmation of the reversal of Cenvat credit amounting to Rs. 9,84,62,671/- as discussed in the preceding paras on the set top boxes which were deactivated at the subscribers premises.
27. We also confirm appropriate amount of interest as per the provisions of Section 75 of the Finance Act, 1994 readwith the Cenvat Credit Rules, 2004 on the above-mentioned two amounts of the Cenvat credits as confirmed for reversal under para 26 (I) to 26 (II) above.
28. Since, the appellant have already deposited an amount of Rs. 5 crores vide challan No. 00173 dated 30 July 2014, challan 24 ST/51760 of 2016 No. 00391 dated 01/08/2014, challan No. 00176 dated 11/08/2014 before issue of the show cause notice, the amount of the service tax as mentioned at Sl. No. I & II as well as the amount of the interest need to be appropriated from the above- mentioned amount of the Rs. 5 crores. Coming to the issue of imposition of the penalty under Section 78 of the Finance Act, 1994, we feel that in the given circumstances as narrated in the preceding paras, the elements for invocation of provision of Section 78 such as fraud, collusion, willful mis-statement or suppression of facts with an intent to evade payment of service tax have not been found present and therefore we do not approve imposition of any penalty under Section 78 of the Finance Act, 1994. While holding above view, we rely on the decision of Hon'ble Apex court in the following cases :-
1. Uniworth Textiles Ltd. vs. CCE, Raipur 2013-TIOL-13-SC-
Cus wherein it has been held as under -
2. Cosmic Dye Chemical vs CCE, Bombay [1995 (75) ELT 721 (SC)] wherein it has been held as under:
29. In view of above, we hold that the penalty under Section 78 is not invokable in the present case.
30. As per the detailed discussions held in the preceding paras, we also hold that we do not find any valid ground for imposition of the penalty under Rule 15 (1) of the Cenvat Credit Rules, 2004 on the appellant and, therefore, penalty imposed on the appellant under Rule 15 (1) of Cenvat Credit Rules, 2004 is also held legally not sustainable.
31. Accordingly, we allow the appeal partially in terms of findings recorded in the preceding paras and summed up in para 26 to 30.
(Order pronounced in the open court on 11/07/2019.) (Anil Choudhary) Member (Judicial) (C.L. Mahar) Member (Technical) PK