Custom, Excise & Service Tax Tribunal
Mercer Consulting India Pvt Ltd vs Commissioner Of Central Goods & Service ... on 5 April, 2024
1 ST/55217/2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
~~~~~
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No.55217 Of 2013
[Arising out of OIO No.83/AKM/CST/ADJ/2012 dated 28.09.2012 passed by the
Commissioner (Adjudication), Service Tax, New Delhi]
M/s Mercer Consulting India Pvt. Ltd. : Appellant
7th Floor, Tower-A, DLF, Cyber City,
Gurgaon, Haryana-122003
VERSUS
The Commissioner of CGST, Gurugram : Respondent
Plot No.36-37, Sector-32, Gurugram-122001 APPEARANCE:
Shri Deepak Thakur, Advocate for the Appellant Shri Siddharth Jaiswal and Shri Aneesh Dewan, Authorised Representatives for the Respondent CORAM:HON'BLE Mr. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Mr. P. ANJANI KUMAR, MEMBERp (TECHNICAL) FINAL ORDER No.60162/2024 DATE OF HEARING: 20.03.2024 DATE OF DECISION: 05.04.2024 PER: P. ANJANI KUMAR The appellants, M/s Mercer Consulting (India) Pvt. Ltd. challenge the Order-in-Original No. 83/AKM/CST/ADJ/2012 dated 28.09.2012 passed by Commissioner (Adjudication) New Delhi.
2. Brief facts of the case are that the appellants are engaged in the provision of management consultancy services and are registered for the same. On examination of the records of the appellant, it appeared to the 2 ST/55217/2013 department that the appellants have provided services to Special Economic Zones (SEZ) and instead of availing credit restricted up to 20% of the amount payable on taxable output service, in terms of Rule 6(3) of Cenvat Credit Rules, 2004, they availed full credit; that the appellants recovered advances to the tune of 5,65,79,232/- for provision of services and have not discharged Service Tax on the same; that the appellants have received services from their associated enterprises abroad for which though expenses were booked in the balance sheet, the appellants did not make remittances and did not pay applicable service tax on the same and that during the period May 2008 to August 2008 , the appellants have failed to pay Service Tax on the services received from their associated companies. A show cause notice dated 21.10.2009 was issued to the appellants seeking Service Tax on the above issues. Commissioner (Adjudication) New Delhi, vide the impugned order, confirmed a demand of Rs. 2,01,45,539 along with interest; imposed penalties of Rs,3,00,00,000 under Section 78 of the Finance Act 1994; of Rs.10,000/-
under Section 77 Ibid, read with Rule 15 of Cenvat Credit Rules, 2002/2004 and of Rs.200/- or 2% whichever is higher under Section 76.
Hence,this appeal.
3. Shri Deepak Thakur,Learned Counsel for the appellants submits that demand of Rs.96,92,204/- is not maintainable as Rule 6 of Cenvat Credit Rules, 2004 is not attracted on supplies made to SEZ units; Rule 6 (6A) was inserted to provide,retrospectively,that Rules 6 (1), (2) and (3) do not apply to Services provided to SEZ in view of the amendment the demand does not survive.
3 ST/55217/2013 3.1. Ld. Counsel further submits that the demand of Rs.69,17,440/-
raised on the advances received from the customer is erroneous as the same is raised on the basis of entries reflected in the balance sheet; no corroborative evidence has been produced by the department to show that the services were in fact provided. He further submits that the issue is no longer res integra as the Courts and the Tribunal held in a number of cases that Cenvat Credit cannot be demanded merely on the basis of entries in the balance sheet. He further submits that the advances as pointed out by the Revenue were in fact returned to respective parties or have been utilised in providing services which were exported; therefore, the demand on discount cannot be sustained.
3.2. Adverting to the demand of, Rs. 31,34,129/-plus Rs. 2,39,750/-, on the services received from their associates for which expenseswere booked in the financial records, Ld. Counsel submits that out of the total expense alleged, the appellant has already paid Rs. 2,20,48,575/- to their associated enterprises. He further submits that the Tribunal has been consistently holding that amendment to Rule 6 and Section 67 are not retrospective and do not apply to services which were booked prior to 10-05-2008.
3.3. On the allegation that the appellants failed to pay Service Tax on the services received from associate enterprises on time, Ld. Counsel submits that show cause notice is issued covering the period May 2008 to August 2008, whereas the provision itself came into effect from 10-05-2008; The appellant has paid Service Tax along with interest even before the issue of show cause notice.
4 ST/55217/2013 3.4. Ld. Counsel relies on the following cases in support of his arguments, as above, on all the above issues.
● Tata Consulting Engineers Ltd. vs. Commissioner of Service Tax, Mumbai [2014 (33) S.T.R. 655 (Tri. - Mumbai)] ● Principal Commissioner of GST, Delhi vs. McDonalds India Pvt. Ltd. [2018 (8) G.S.T.L. 25 (Del.)] ● Colt Technology Services India Pvt. Ltd. vs. Commissioner of S.T., Delhi [2019 (29) G.S.T.L. 333 (Tri. - Chan.)] ● GECAS Services India Pvt. Ltd. vs. Commissioner of Service Tax, New Delhi [2014 (36) S.T.R. 556 (Tri. Del.)] ● Sify Technologies Ltd. vs. Commissioner of C. Ex. & S.T., LTU, Chennai [2015 (39) S.T.R. 261 (Tri.Chennai)] , 2011 (21) S.T.R. 252 (Tri. Chennai), 2011 (24) S.T.R. 499 (Tri. Chennai) ● M/s Indian Machine Tools Manufacturers Association vs. Commissioner of Central Excise, Panchkula [Service Tax Appeal No. 4174 of 2012] ● Go Bindas Entertainment Pvt. Ltd. vs. Commissioner of S.T., Noida [2019(27) G.S.T.L. 397 (Tri. - All.)] ● Synergy Audio Visual Workshop P. Ltd. vs. Commissioner of S.T.. Bangalore [2008 (10) S.T.R. 578 (Tri. - Bang)] ● M/s M.P. Audyogik Kendra Vikas Nigam vs. Principal Commissioner of ● Central Goods & Service Tax and Central Excise, Indore [2023-VIL-466- CESTAT-DEL-ST] ● Ramkrishna Sales Pvt. Ltd. vs. Commissioner of Customs, Ahmedabad [2008 (230) E.LT. 431 (Tri. Ahmd.)] ● Sarita Software & Indus Ltd. vs. Commissioner of C. Ex., Visakhapatnam [2010 (251) E.L.T. 248 (Tri. Bang.)] ● Indian National Shipowners Association and Another vs. Union of India and Others [(2009) 21 VST 60] 23. M/s GD Goenka Private Limited vs. Commissioner of Central Goods and Services Tax, Delhi South [Service Tax Appeal No. 51787 of 2022) ● MITC Rolling Mills vs. Commissioner of Central Excise, Nashik [2019 (366) ELT. 882 (Tri. - Mumbai)] ● Aditya College of Competitive Exam. Vs C.C.E. Visakhapatnam reported in 2009 (16) S.T.R. 154 (Tri. Bang.) ● Steel Authority of India Ltd. Vs State of Orissa and Others. (And Other Appeals) reported in 2000 (118) S.T.C 297 (SC)
4. Ld. Counsel further submits that extended period cannot be invoked in the instant case, as the issue pertains to interpretation of the provisionsof 5 ST/55217/2013 law which were fast changing during the relevant time; there was no positive act of suppression, fraud, collusion, misstatement etc. with intent to evade payment of duty and the appellants had reasons to entertain a different opinion from the Revenue. He relies on the following.
● Wonderax Laboratories IPL 2010(255) ELT 60 (DEL) (upheld by the Hon'ble Apex Court 2010 (255) ELT A16(SC) ● M/s. Pioneer Pesticides Pvt. Limited Vs CGST, Jammu 2021 (1) TMI 382-CESTAT Chandigarh ● Indo-gulf Crop Sciences Ltd Vs Commissioner, CE & ST, J & K2021 (3) TMI 777 - CESTAT Chandigarh ● M/s Anu Products Ltd. Vs CCE & ST- J& K2020 (10) TMI 55
- CESTAT Chandigarh ● M/s Bharat Insecticides Ltd Vs CCE& ST J& K2020 (6) TMI 349 - CESTAT Chandigarh ● M/s B.R. Agrotech Ltd. Vs CCE & ST, Jammu 2018 (10) TMI 1828 - CESTAT Chandigarh ● M/sAgro Life Sciences Corporation Ltd. Vs CE & ST, J&K2021 (5) TMI 24 CESTAT Chandigarh ● M/s Jyothy Laboratories Vs CGST, JAMMU2021 (12) TMI 333-CESTAT Chandigarh ● M/s A.N. Manufacturing Pvt Ltd. Vs CCE, JAIPUR-I2018 (10) TMI 756 - CESTAT New Delhi ● M/sShivpriya Cables Pvt Ltd and others Vs CCE & ST ALWAR2017 (11) TMI 1478 - CESTAT New Delhi
5. Shri Siddharth Jaiswal, assisted by Shri Aneesh Dewan, learned Authorised Representatives, for the department, reiterates the findings of the impugned order and submits that as per the explanation provided that where the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called "Suspense account or by any other name, in the books of account of a person liable to pay service tax;the gross amount charged as defined under Section 67(3) (c) of the Finance Act was also amended to provide that "gross amount charged" includes 6 ST/55217/2013 payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be. to any account whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise. He further submits that the clarification issued by the Board vide DOF No.334/1/2008 dated 29.02.2008 also supports the above view; the cases of M/s Sify and M/s GECAS (both supra), though in favour of the appellants, appeal preferred by the Department is pending decision at the Hon'ble Apex Court.
5.1. As regards, the demand of service tax on advances received from customers and non-payment of interest amount on delayed payment of service tax, learned Authorized Representative submits that the Adjudicating Authority has decided on the basis of the documents submitted by the appellants. Regarding the admissibility of credit in respect of supplies made to SEZ, learned Authorized Representative submits that the amendment is only for the period 10th February 2006 to 28th February 2011 as per the Finance Act 2012 and therefore, duty demand for the period October 2005 to 9th February 2006 is not covered by retrospective amendment; therefore, the appellants are liable to pay service tax for that period.
6. Heard both sides and perused the records of the case.
7. We find that the first demand is confirmed on the allegation that the appellants have availed Cenvat Credit in excess of 20% of the amount 7 ST/55217/2013 payable on taxable output service in respect of services provided by them to SEZ, in terms of Rule 6 of CCR, 2002/2004 during the relevant period.
We find that the issue is no longer res integra in view of the retrospective amendment, vide Finance Act 2012, to the effect that Rules 6 (1), (2) and (3) do not apply to Services provided to SEZ. Tribunal held in the case of Tata Consulting Engineers Ltd. (Supra)
6. There is no dispute in this case that during the period April, 2008 to March, 2010, the appellant had rendered services to SEZ unit/SEZ Developers and had also taken Cenvat credit on the inputs/input services used in the provisions of output services. These details of such services rendered to SEZ units/developers were reflected in the half yearly ST-3 returns filed by the appellants. Vide Notification No. 3/2011, dated 1-3- 2011, the Cenvat Credit Rules, 2004, were amended so as to provide that there is no need to reverse any Cenvat credit taken on inputs/input services if such inputs/input services were used in rendering of output services to SEZ unit/SEZ developer. Further, vide Section 144 of the Finance Act, 2012, the said amendment was given retrospective effect from 10-2- 2006 to 20-2-2011. In other words, during the impugned period, there was no need for the assessee to reverse any credit taken on the inputs/input services in respect of which credit was availed for rendering of output services to SEZ units/SEZ developer. The adjudicating authority has completely failed to examine the claim of the appellant, the details of which were provided to him at the time of adjudication. Therefore, we hold that the impugned order is not sustainable in law.
6.1 Further, the Hon'ble High Court of Bombay, in the case of Repro India Ltd., reported in 2009 (235) E.L.T. 614 (Bom.) held that the provisions of Rule 6(3)(b) of the Cenvat Credit Rules are not attracted in the case of exports as Rule 6(6)(v) provides an exception in the case of clearances for export. As per Section 2(m) of Special Economic Zones Act, 2005, supplying goods, or providing services, from a unit in DTA to a SEZ unit or SEZ developer is deemed as "export" and vide Section 8 ST/55217/2013 50 of the said Act, the provisions of SEZ Act shall prevail over the provisions of other enactments. Thus supplies made to SEZ or SEZ developer amounts to "export". Viewed from this perspective also, the appellants are rightly entitled to Cenvat credit on the inputs and input services used in or in relation to rendering of output services to a unit in SEZ or to a SEZ developer.
8. Coming to the Second demand, on the basis of the advances received by the appellants for rendering the services, we find that the demand is raised and confirmed on the basis of figures reflected in balance sheet without causing any enquiry as to whether the services in question were rendered or otherwise. We find that it is not correct to confirm the demand just on the basis of balance sheet without identifying the service provider, service receiver and the consideration received thereof.
Moreover, the appellant submits that most of the advances have been since returned to the respective parties as no services could be provided or the same were adjusted against services exported. We find that Tribunal held in the case of Go Bindas Entertainment ltd. (Supra) as follows:
4. After hearing both the sides duly represented by Learned Advocate Shri Kamal Jeet Singh for appellant and Learned AR Shri Sandeep Kumar Singh, Deputy Commissioner for Revenue, we note that the entire case of Revenue is based upon the comparison of figures, as pointed out in the balance sheet with the figures reflected in the ST-3 returns. The appellant has explained that such difference has occurred on account of the accounting system as per the Income Tax Law, which explanation, in principle, stands accepted by the lower authorities. Even then the lower authorities have gone ahead and confirmed the demand.
9 ST/55217/2013 In any case and in view of the declaration, we note that it is well settled law that no demand can be confirmed by comparing the ST-3 return figures with balance sheet figures, in the absence of any evidence to the contrary that income in the balance sheet, if excess, reflects the providing of taxable services. It is the Revenue who is making the allegations and as such, the onus to prove said allegation lies very heavily upon the Revenue. Inasmuch as, the same has not been done and in view of the foregoing discussions, we find no merits in the Revenue's stand.
9. On the allegation that the appellants have received services from their associated enterprise for which expense was booked but remittance has not been made, we find that the appellant submitted that out of a total expense of 2.53 Cr under dispute, they have already paid 2.20 Cr and the Service Tax of the same has been also paid. We further find that Tribunal in the case of Sify (Supra) held as follows
6. The statutory provision for demanding service tax in respect of transactions between associated enterprises, immediately upon amendment, has been introduced only w.e.f. 10-5-08. Prior to 10-5-08, neither the Finance Act, 1994 nor the Service Tax Rules, 1994 contain any provision enabling demand of service tax prior to the realization of taxable services, in any circumstances. This being so, it is not legally permissible to give retrospective effect to the Explanation inserted in Rule 6 of the Service Tax Rules. The Legislative intention behind the amendments was explained by the Board as for plugging avoidance of tax on the ground of non-realization of money from associated enterprises and the intention of the Legislature in bringing the amendments is to introduce a new provision and not to remove any doubts in the existing provision. It is not, nor can it be, anybody's case that Explanation shall always take effect retrospectively. In the case of Commissioner of Customs v. Skycell Communications Ltd. [2008 (232) E.L.T. 434], the Larger Bench of the Tribunal has held that Explanation placing restrictions prejudicial to the assessee will not be retrospective. In the case of CCE, Shillong v. Vinay Cement Ltd. [1999 (114) E.L.T. 753], 10 ST/55217/2013 the Tribunal has held that since a notification inserting an Explanation has specifically stated that it would be effective from the date of its publication, it takes effect only from that date. In the instant case also, Notification No. 19/08 introducing Explanation to Rule 6 of the Service Tax Rules, 1994 contains a provision that it shall be effective only from the date of its publication. The amendment to Section 67 is a substantive one and will be applicable only from the date of its introduction and not retrospectively, eventhough the Explanation uses the expression "for removal of doubts". The decision of the Tribunal in CCE, Pune v. Bajaj Auto Ltd. [1999 (111) E.L.T. 846] relied upon by the lower appellate authority to conclude that the amendment, which is clarificatory in nature, is retrospective, is not applicable in the facts of the present case, as the Tribunal held in that case that clarificatory amendments are retrospective only when they did not materially change, the existing provisions, while in the instant case, there was no provision either in Section 67 of the Finance Act or Rule 6 of the Service Tax Rules to suggest that in the case of transactions between associated enterprises, service tax has to be paid immediately on entry of the transaction in the books of account.
10. We find that learned Authorized Representative submits that the amendment is only for the period 10th February 2006 to 28th February 2011 as per the Finance Act 2012 and therefore, duty demand for the period October 2005 to 9th February 2006 is not covered by retrospective amendment; therefore, the appellants are liable to pay service tax for that period. For this purpose, we need to examine whether extended period is rightly invoked. We find that Ld. Counsel submits that extended period cannot be invoked in the instant case, as the issue pertains to interpretation of the provisions of law which were fast changing during the relevant time; there was no positive act of suppression, fraud, collusion, misstatement etc. with intent to evade payment of duty and the appellants had reasons to entertain a different opinion from the Revenue. We are of the opinion that the Department has not made out 11 ST/55217/2013 any case for extended period in view of the facts of the case and the case laws relied upon by the appellants.
11. Lastly, coming to the demand of interest and other issues, we find that the appellants have paid the Service Tax of Rs. 2,60,783/- along with interest before the issuance of show cause notice. Therefore, we find that demand cannot be sustained in view of the provisions of Law. When the main demand itself is held to be not sustainable the question of penalty does not arise. In view of the above we find that nothing survives in the impugned order and therefore, the same is liable to be set aside.
We do so.
12. In view of our discussion as above, the appeal is allowed (Order pronounced in the open court on 05/04/2024) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) PK