Custom, Excise & Service Tax Tribunal
M/S. Kundan Cars Pvt. Ltd vs Commissioner Of Central Excise, Pune on 29 March, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. ST/85089/2016 (Arising out of Order-in-Appeal No. PUN-EXCUS-001-APP-0102-15-16 dt. 15th October 2015 passed by the Commissioner (Appeals) Central Excise, Pune ) For approval and signature: Honble Shri Ramesh Nair, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No
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 : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
======================================================
M/s. Kundan Cars Pvt. Ltd.
:
Appellant
VS
Commissioner of Central Excise, Pune
:
Respondent
Appearance
Shri M.P. Joshi, Advocate for Appellant
Shri V. Kaushik, Assistant Commissioner (A.R) for respondent
CORAM:
Honble Shri Ramesh Nair, Member (Judicial)
Date of hearing : 29/03/2016
Date of decision: 29/03/2016
ORDER NO.
Per : Ramesh Nair
The appeal is directed against Order-in-Appeal No. PUN-EXCUS-001-APP-0102-15-16 dt. 15th October 2015 passed by the Commissioner (Appeals-I) Central Excise, Pune, whereby the Ld. Commissioner upholding the Order-in-Original No. P-I/ADC/ST/123/2013 dt. 27.12.2013 upheld the disallowance of Cenvat Credit of Rs. 8,74,955/- and recovery of interest under Section 75 of the Act. However set aside the penalty imposed under Section 78 of the Finance Act read with Rule 15 (3) of Cenvat Credit Rules.
2. The fact of the case is that the appellant is engaged in providing the services namely Authorized Service Station, Business Auxiliary Services and Servicing of Motor Vehicles. They are also engaged in trading activity of passenger cars purchased from the manufacturer supplier. The appellant are availing Cenvat Credit on various common input service. Show cause notice was issued proposing denial of Cenvat credit attributed to the trading activity of the cars. The adjudicating authority confirmed the demand and imposed penalty under Section 77 & 78. In the appeal filed by the appellant before Commissioner (Appeals) the demand of Cenvat Credit was upheld along with interest under Section 75. However the penalty under Section 78 was waived and the penalty imposed under Section 77 was upheld. Aggrieved by the impugned order, the appellant is before me.
3. Shri M.P. Joshi, Ld. Counsel for the appellant submits that the proportionate Cenvat credit attributed to the trading of passenger car was disallowed on the ground that the trading is exempted service. He submits that explanation under Rule 2(e) of Cenvat Credit Rules, 2004 whereunder the exempted service is defined including trading activity was introduced w.e.f. 1.4.2011. Since, prior to 1.4.2011 the trading activity does not fall under the category of exempted service, there was no provision for reversal of Cenvat Credit attributed to the trading activity. In the present case, the period involved is upto 31.3.2011. In support he placed reliance in the case of Badrika Motors (P) Ltd. Vs. Commissioner of C.Ex. & S. T., Bhopal 2014 (34) STR 349 (Tri.Del.) and Commissioner of Central Excise, Thrupathi Vs. Shariff Motors 2010 (18) STR 64 (Tri. Bang.) which has been upheld by the Honble Andhra Pradesh High Court as reported in 2015 (38) STR J53 (A.P.). He submits that the facts of the above cases are identical to the facts in the present case, therefore the ratio of these decisions are applicable in the present case. He further submits that the entire demand is for the period 2008-09 to 2010-11, however the show cause was issued on 5.4.2013 i.e. after more than two years. He submits that Ld. Commissioner (Appeals) while dropping the penalty under Section 78 in para 12 of the impugned order has given a categorical finding that there is no intention to evade payment of service tax and no ingredient such as fraud, collusion, suppression of facts etc. with intent to evade payment of duty is involved in the present case. On the basis of this finding itself, the demand is not sustainable on limitation. Therefore the impugned order is not sustainable on merit as well as on limitation.
4. On the other hand, Shri V. Kaushal Ld. Assistant Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that the trading activity, even though specified as exempted service w.e.f. 1.4.2011, but even prior to 1.4.2011 the facts remains that the trading activity is not taxable. Therefore no input credit can be allowed in respect of the service commonly used for providing taxable service as well as trading activity. He placed reliance on the following judgment:
(i) Mercedes Benz India Pvt. Ltd. Vs. Commissioner of Central Excise 2015 (40) STR 381 (Tri.-Mumbai)
(ii) Synise Technologies Ltd. Vs. Commissioner of C. Excise, Pune 2015 (39) STR 903 (Tri.-Mumbai)
5. I have carefully considered the submissions made by both the sides. The fact of the case is not under dispute that the appellant is engaged in providing taxable services such as Business Auxiliary Services and Servicing of Motor Vehicles on which the service tax is paid and at the same time the appellant is engaged in the trading activity of the cars on which no service tax is paid. The charge of the Revenue is that they are availing Cenvat Credit in respect of common services which are used for taxable services as well as for trading activity. I find that the very identical issue has been considered by this Tribunal in the case of Badrika Motors Pvt. Ltd. (supra) and Shariff Motors (supra). In the case of Badrika Motors Pvt. Ltd. (supra) the Cenvat credit was denied on the GTA service on the ground that the GTA service has no nexus with the taxable service such as Authorized Service Station and Business Auxiliary Service. This Tribunal has held that no arithmetical correlation is required between the input and output services and accordingly the credit was allowed. In the case of Shariff Motors (supra) similar facts was involved that the assessee had availed the Cenvat credit in respect of GTA service which is used for transportation of motor cycles from factory to show room which were sold as such and credit was utilized for payment of service tax under authorized service station. The Division Bench has allowed the credit on GTA service. This decision has been upheld by the Honble Andhra Pradesh High Court. The operative order portion is reproduced below:
The Andhra Pradesh High Court Bench comprising Honble Mr. Chief Justice Kalyan Jyoti Sengupta and Honble Mr. Justice Sanjay Kumar on 19-12-2013 dismissed the Central Excise Appeal No. 91 of 2010 filed by Commissioner of Customs, Central Excise & Service Tax, Tirupati against the CESTAT Final Order No. 565/2009, dated 12-3-2009 as reported in 2010 (18) S.T.R. 64 (Tri. - Bang.) (Commissioner v. Shariff Motors). While dismissing the appeal, the High Court passed the following order :
This appeal is preferred against the judgment and order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore, dated 12-3-2009 and sought to be admitted on the following suggested question of law :
Whether CESTAT is correct in holding that the GTA service utilized by the assessee as recipient, is input service for providing the output service i.e., authorized service station? The aforesaid question amply suggests that there is no element of law involved on the factual aspect. The learned Tribunal has dealt with this aspect in the manner as follows :
In our view, unless the vehicles are received and sold, there would not be any servicing of the same. Moreover, the definition of the input service is broad enough to cover the input service availed by the Respondents and also the output service rendered by them.
We are of the view that the learned Tribunal has given correct interpretation and this is one possible interpretation and we cannot substitute by another one. Thus, we do not find any element of law involved for admission of this appeal.
Accordingly, the appeal is dismissed. No order as to costs. In view of the above judgments, since the identical facts are involved the appellant is not required to reverse the Cenvat Credit attributed to the trading activity of passenger cars.
As regard the judgments relied upon by the Revenue in the case of Mercedes Benz India Pvt. Ltd. (supra). I find that this matter was taken to the Honble Bombay High Court when the matter was remanded back to the Tribunal therefore the ratio of the judgment of the Tribunal cannot be applied. As regards Synise Technologies Ltd. (Supra), I find that it is a single member bench decision of this Tribunal wherein the Division Bench decision of the Shariff Motors (supra) though distinguished this Synise Technologies Ltd. judgment has followed the Mercedes Benz decision of this Tribunal. Since the Tribunal order was set aside and matter was remanded, Synize Technologies Ltd. does not remain as a good law, therefore the same is of no help to the Revenue. In the case of Mercedes Benz India Pvt. Ltd. Vs. Commissioner of Central Excise (2014 (36) STR 704 (Tri.-Mumbai), I find that this decision is given by the Division Bench of this Tribunal where as the Division Bench decision in the case of Shariff Motors (supra) has been considered by the Honble High Court and upheld the same. In this position the Mercedes Benz (supra) decision of this Tribunal stands distinguished.
As regard limitation, I find that the Ld. Commissioner (Appeals) while dropping the penalty under Section 78 given the following finding:
From the decisions of various higher appellate authorities in the matter, it is clear that there was scope for varying interpretations during the period prior to 01.04.2011 and this appears to be the reason for introduction of Explanation under Rule 2(e) of the CCR. Therefore, I find merit in the Appellants prayer for setting aside the penalty imposed under Section 78 of the Act, considering the fact that explanation to Rule 2(e) of the CCR was added w.e.f. 01.04.2011. This is enough to establish that the matter under consideration was not free from doubt and there was indeed an ambiguity in the issue and therefore I find that the charge of intent cannot be leveled against the Appellant. Thus in absence of the ingredient such as fraud, collusion, suppression of facts etc. with intent to evade duty, it is incorrect to impose penalty under Section 78 of the Act read with Rule 15(3) of the CCR. As regards the imposition of penalty under Section 77, I agree with the Ld. Adjudicating Authority. From the above finding, the Ld. Commissioner (Appeals) has conclusively held that in the absence of ingredients such as fraud, collusion, suppression of fact etc. with intent to evade payment of duty, the penalty is not imposable under Section 78. The Revenue has not challenged this finding therefore the same attained finality. Considering this finding which equally applicable in case of invocation of extended period in terms of proviso to Section 73, the demand is not sustainable on the ground of time bar also. As per my above discussion, I am of the considered view that the impugned order is not sustainable on merit as well as on limitation. Therefore the same is modified. The appeal is allowed.
(Pronounced & Dictated in court) (Ramesh Nair) Member (Judicial) SM.9
Appeal No. ST/85089/2016