Custom, Excise & Service Tax Tribunal
Spice Digital Limited vs Chandigarh-I on 1 May, 2023
1 ST/413/2011
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
~~~~~
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 413 Of 2011
[Arising out of OIO No. 115/STC/CHD-I/2010 dated 30.11.2010 passed by the
Commissioner of Central Excise, Chandigarh]
Spice Digital Ltd. : Appellant (s)
HIMUDA COMPLEX, Sector-1
Parwanoo, distt. Solen Himachal Pradesh
Vs
Commissioner of Central Excise, Chandigarh : Respondent (s)
Plot No. 19, Sector 17-C Chandigarh APPEARANCE:
Shri P. K. Sahu, Advocate for the Appellant Shri Manoj Nayyer, Authorised Representative for the Respondent CORAM : HON'BLE Mr. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Mr. P. ANJANI KUMAR, MEMBER (TECHNICAL) ORDER No. A/60117/2023 Date of Hearing:01.05.2023 Date of Decision:01.05.2023 Per : S. S. GARG The present appeal is directed against the impugned order dated 31.03.2009 passed by the Commissioner of Central Excise, Chandigarh.
2. Briefly stated the facts of the present case are that the appellant being provider of taxable service is centrally registered with the Service Tax Department through its Parwanoo office, wherein it has been following centralized billing system. Since its registration, the appellant has been paying service tax and filing service tax returns from the said office including for the period 2008-2009. The Department had conducted audit of the appellant's filing of service tax 2 ST/413/2011 returns and vide its audit report, objected to the taking of the Cenvat Credit of Rs. 56,95,997/- allegedly distributed by the appellant's Noida office during the aforesaid period on the ground that the said credit has been distributed without registering itself as "input service distributor." In the audit report, it was observed that the Noida office of the appellant has applied for registration as input service distributor on 16.04.2009 and therefore, the appellant was not entitled to distribute credit through an invoice dated 31.03.2009 issued by Noida office and pertaining to the invoices of April 2008 to March 2009 i.e. prior to registration.
2. On these allegations, a show cause notice dated 16.04.2010 demanding service tax from the appellant was issued on the basis of audit report.
3. The appellant filed its reply to the show cause notice and after following due process, Ld. Commissioner passed the impugned order, confirming the demand mainly on the ground that the Noida office of the appellant was required to take registration as "Input Service Distributor" and its centralized registration of its Parwanoo Office is not sufficient to take credit of the input services received by its Noida Office.
4. Aggrieved by the said order of the Ld. Commissioner, the appellant has filed the present appeal.
5. Heard both the parties and perused the material on records.
6. Ld. Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the Cenvat Credit Rules and the precedent decisions on the same issue.
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7. He further submitted that the Ld. Commissioner has failed to understand that the appellant is centrally registered for payment of service tax and therefore it is entitled to take credit of the input service received by its Noida Unit. He further submitted that in the appellant's own case for the previous period, this Tribunal vide its final order No. 60648 of 2017 in Appeal No. ST/3976/2012 dated 11.04.2017 has allowed the appeal of the appellant. He further submitted that the Revenue has challenged the decision of this Tribunal before the Hon'ble High Court of Punjab and Haryana and the Hon'ble High Court vide its decision 12.11.2018 allowed the revenue to withdraw its appeal on monetary grounds as the amount involved in that appeal was less than Rs. 50.00 Lakhs.
8. On the other hand, the Ld. DR reiterated the findings of the impugned order.
7. After considering the submissions of both the parties and perusal of the material on records, we find that this Tribunal in the appellant's own case for the previous period has allowed the cenvat credit and the Revenue had filed appeal before the Hon'ble High Court of Punjab and Haryana against the said decision but subsequently withdrew their appeal from the Hon'ble High Court on monetary grounds. Here, it is relevant to reproduce the Final Order of the Tribunal dated 11.04.2017:-
"When these are the admitted facts that appellant has received services and service tax has been paid thereon, therefore, in terms of Rule 3 of Service Tax Rules, 2004, the appellant is entitled to avail Cenvat Credit. Whether the head office is registered as input service Distributor or not, is procedural in nature. Therefore, cenvat credit cannot be denied to the appellant. Therefore, in these circumstances, I set-aside the impugned order and allow the cenvat credit to the appellant."
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8. Further, we find that this issue has been considered by the Hon'ble Karnataka High Court in the case of Commissioner of Central Excise, Service Tax & Cus., Bengaluru vs. Hinduja Global Solutions Ltd. 2022 (61) GSTL 417 (Kar.) and the Hon'ble High Court of Karnataka after considering the decision of the Hon'ble Gujarat High Court in case of Commissioner of Central Excise vs. Dashion Ltd. 2016 (41) STR 884 and the decision of the Hon'ble High Court of Rajasthan in the case of Commissioner of Central Excise, Jaipur vs. National Engineering Industries Ltd. - CEA No. 3/2016 dated 08.02.2016 and the Circular of Central Board of Excise and Customs dated 16.02.2018 accepting the judgement of the High Court of Gujarat and Rajasthan, has held that the availment based on invoices issued by input service distributor prior to registration under Service Tax (Registration of Special Category of Persons) Rules, 2005 is only procedural irregularity and hence the denial of credit is bad in law. The relevant findings of the Hon'ble Karnataka High Court are reproduced herein below:-
"8. The dispute involved herein is no more res integra in view of the judgment of the Hon'ble High Court of Gujarat in the case Dashion Ltd., supra which has been accepted by the Department in terms of the Circular dated 16-2-2018. The relevant paragraphs of the judgment of Dashion Ltd., supra is quoted hereunder for ready reference :
7. The second objection of the Revenue as noted was with respect of non-
registration of the unit as input service distributor. It is true that the Government had framed Rules of 2005 for registration of input service distributors, who would have to make application to the jurisdictional Superintendent of Central Excise in terms of Rule 3 thereof. Sub-rule (2) of Rule 3 further required any provider of taxable service whose aggregate value of taxable service exceeds certain limit to make an application for registration within the time prescribed. However, there is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons disentitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. It was in this background that the Tribunal viewed the requirement as curable. Particularly when it was found that full records were maintained and the irregularity, if at all, was procedural and when it was further 5 ST/413/2011 found that the records were available for the Revenue to verify the correctness, the Tribunal, in our opinion, rightly did not disentitle the assessee from the entire Cenvat credit availed for payment of duty. Question No. 1 therefore shall have to be answered in favour of the respondent and against the assessee."
9. Considering this judgment, the Department in the Circular dated 16-2-2018, has observed thus :
"2.(a) Decision of the Hon'ble High Court of Gujarat dated 8-1-2016 in the matter of Commissioner of Central Excise v. Dashion Ltd. in Tax Appeal No. 415 of 2013 & 662 of 2014 [2016-TIOL-111-HC-AHM-ST = 2016 (41) S.T.R. 884 (Guj.)]
(b) Decision of the Hon'ble High Court of Rajasthan dated 8-2-2016 in the matter of Commissioner, Central Excise Commissionerate, Jaipur v. National Engineering Industries Ltd. - CEA No. 3/2016 [2016-TIOL-922-HC-RAJ-CX = 2016 (42) S.T.R. 945 (Raj.)].
2.1 Department has accepted the judgments where the Hon'ble High Courts dismissed the Department's appeal inter alia holding that substantial benefit cannot be denied because of procedural irregularity. 2.2 In the case of Dashion Ltd., the assessee was engaged in manufacture of water treatment plant and other connected items and was availing benefit of Cenvat credit on the duty paid on inputs, capital goods and input services as permissible under Cenvat Credit Rules, 2004. The assessee had five manufacturing units and had its registered office at Vatva, Ahmedabad. The assessee was also providing several taxable services such as erection and commissioning, repairing and maintenance of water treatment plant, etc. 2.3 The revenue authorities, during scrutiny of the records of the assessee, noticed that it was availing the credit of service tax paid for various services by one unit for the purpose of clearance of other unit. After gathering details from the assessee, the adjudicating authority issued show cause notice calling upon the assessee as to why the Cenvat credit of service tax on input service should not be recovered with interest and penalties. In the show cause notice itself, the adjudicating authority had referred to sub-rule (3) of Rule 15 of the Rules of 2004 as basis for such proposal. Two primary objections of the Department were that the assessee had not registered itself under the Service Tax (Registration of Special Category of Persons) Rules, 2005 and that the tax credit from one unit was utilized for discharging tax liability of another unit instead of pro rata distribution amongst different units. The adjudicating authority confirmed the duty demands with interest and penalties.
2.4 Therefore, the points of law examined were that the assessee had utilized credit from one unit for the purpose of duty liability of its other unit without pro rata distribution by the input service distributor and further the assessee had not registered itself under the Service Tax (Registration of Special Category of Persons) Rules, 2005.
2.5 Hon'ble High Court dismissed the department's appeal holding that such view was not sustainable as there was no previous restriction of this nature under Rule 7 of the Cenvat Credit Rules, 2004. Further non-registration of ISD is only a procedural irregularity for which substantial benefit of Cenvat credit cannot be denied when all the necessary records have been maintained by the respondent."
10. The Hon'ble High Court of Madras referring to the judgment of Dashion Ltd., supra, in M/s. Pricol Ltd., supra has held thus :
"4. The above decision has been accepted by the Central Board of Excise and Customs, vide Circular dated 16-2-2018. Therefore, the above questions have to be decided against the Revenue and accordingly, decided so."
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9. In view of our discussion above, by following the ratio of the aforesaid decisions, we are of the considered view that the impugned order is not sustainable in law and we set-aside the same by allowing the appeal of the appellant with consequential relief, if any, as per law.
(Dictated & pronounced in the open Court) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) G.Y.