Custom, Excise & Service Tax Tribunal
M/S. Nuware Systems Pvt. Ltd vs Commissioner Of Service Tax on 5 September, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
COURT - I
Appeal Nos.: ST/908 & 909/2011
(Arising out of Review Adjudication No: 23/2011 dated 17.2.2011 & Review Adjudication Order No.27/2011 dated 23.2.2011 passed by the Commissioner of Service Tax, Bangalore.)
Date of Hearing: 03.09.2013
Date of decision: 05.09.2013
For approval and signature:
SHRI M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Nuware Systems Pvt. Ltd.
Appellant
Vs.
Commissioner of Service Tax
Bangalore.
Respondent
Appearance For the appellants : Mr. S. Ramasubramanian, Advocate For the respondents : Ms. Sabrina Cano, Superintendent (AR) CORAM SHRI M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) FINAL ORDER No._______________________2013 Per M.V. Ravindran These two appeals are directed against Order-in-Revision No.23/2011 dated 17.2.2011 and Order-in-Revsision No.27/2011 dated 23.2.2011.
2. Since both the appeals are filed by the very same assessee on an identical issue, they are being disposed of by a common order.
3. The relevant facts that arise for consideration are the appellant herein preferred refund claims for the period July 2008 to December 2008 in respect of unutilized CENVAT credit under the provisions of Rule 5 of CENVAT Credit Rules read with Notification No.5/2006-CE (NT) dated 14.3.2006 on the ground that the said CENVAT credit is unutilized. The refund claims were also filed on the ground that the credit availed by the appellant is of the service tax paid on input services which have been utilized for providing output services. Appellant was issued show-cause notices by the lower authorities to show-cause as to why the refund claims should not be rejected. The appellants contested the show-cause notices before the adjudicating authority. The adjudicating authority after considering the submissions made by the appellant, partly allowed the refund claims. Against the refund claims rejected by the adjudicating authority, the appellants were in appeal before the first appellate authority and having failed, they are also before the Tribunal in separate proceedings. During the pendency of an appeal filed against the rejection claim by the adjudicating authority before the first appellate authority, Commissioner of Service Tax issued show-cause notices to the appellants for reviewing the order of the adjudicating authority to the extent adjudicating authority has allowed the refund claims. The said show-cause notices were adjudicated by the Commissioner a revisionary authority and has rejected the refund claims which were allowed by the adjudicating authority. Against such an order, the appellants are before this Tribunal.
4. Learned CA appearing on behalf of the appellant would submit that twin issue arises in these cases. It is his submission that the right of assessee to appeal to the Tribunal against the revision order passed under Section 84 still remains as has been held by the Tribunal in the case of T.A. Pai Management Institute vs. Commissioner of Central Excise, Mangalore: 2013 (29) S.T.R. 577. It is his submission that the appellant had availed CENVAT credit on service tax paid on maintenance charges, rent paid for the ground floor and service tax paid on rent paid to the owner and on his direction paid to his wife. It is his submission that CENVAT credit availed is not being disputed by the department in the entire proceedings. The only question which has been raised by the revisionary authority is regarding the eligibility to claim the refund on an amount which according to the revisionary authority is having no nexus with the output services exported. On merits, it is his submission that the appellants have rented ground floor, first floor and second floor of the building along with car parking, etc., for providing output services which are exported. It is his submission that the appellant was required to pay the maintenance charges to the society/apartment on which service tax was charged. It is his submission that availment of such service tax credit is correct, inasmuch as the said maintenance charge is towards the premises which have been rented by them for providing output services i.e., Information Technology Software Services and other services. It is his submission that the appellant had in fact got themselves registered as service tax provider and by mistake and due to oversight did not register the ground floor of the said premises in the centralised registration certificate. It is his submission that there is no dispute that ground floor, first floor and second floor has been occupied by the appellant for providing output services and therefore, denial of CENVAT credit of the service tax paid on the rent of the ground floor should not be upheld. As regards the third issue, it is his submission that the appellant entered into an agreement with Mr. Mohammad Oomer Sait who was the sole and absolute owner of the entire building. It is his submission that Mr. Mohammad Oomer Sait subsequently informed the appellant that instead of giving rent cheque on his name, the same may be bifurcated into his name as well as his wife name. This was done so by the appellant. He would submit that both Mr. Mohammad Oomer Sait and his wife are registered with the service tax authorities and have issued invoices indicating payment of service tax on the amount of the rent received by them. It is his submission that Revenue authorities have not put on records that invoices raised by Mrs. Tahseen Oomer Sait is incorrect or that she has not paid the service tax to the department. It is his submission that on merits itself, he has got a good case but at the same time, he would also raise a legal point as to whether the Commissioner as a revisionary authority can review an order which was appealed against to the first appellate authority. It is his submission that the first appellate authority has passed an order before the revisionary authority, could pass impugned orders. It is his submission that the decision of the Honble High Court of Punjab and Haryana in the case of Commissioner of Central Excise vs. Shiva Builders: 2011 (22) S.T.R. 513 (P&H) is directly on the point. It is also his submission that on technical ground as well as on the merits, the appellant is eligible for the refund of the amount which has been sanctioned by the adjudicating authority but has been rejected by the revisionary authority.
5. Learned departmental representative on the other hand would draw my attention to the very same facts. It is her submission that the revisionary authority in this case has come to the conclusion that maintenance charges which has been paid by the appellant for the car parking is not eligible for availing CENVAT credit. It is her submission that on this point there was no nexus with the output services rendered by him, for such services received. It is her submission that as regards the service tax paid on the rent for the ground floor of the premises which was not registered during the relevant time and was not included in the centralized registration certificate is not eligible to avail CENVT Credit. As regards the credit of service tax paid on the rent paid to Mrs. Tahseen Oomer Sait, it is her submission that Mrs. Tahseen Oomer Sait had never entered into any agreement with the appellant. She would submit that Mr. Mohammed Oomer Sait is the sole and absolute owner of the premises and was collecting the rent from the appellant earlier. She would also draw my attention to the agreement entered into by the appellant with Mr. Mohammed Oomer Sait and pointed out that the appellant is not required to pay any rent to Mrs. Tahseen Oomer Sait. She would submit that it is an internal matter between the appellant and Mr. Mohammed Oomer Sait as to give different rent cheques; appellant cannot avail the service tax paid by Mrs. Tahseen Oomer Sait as CENVAT credit. It is her submission that legal point raised by the learned CA as to the Commissioner as a revisionary authority cannot take up the matter for disposal is incorrect, inasmuch as provisions of Section 84 clearly mandates that the Commissioner of Central Excise may call for the record of the proceedings and after issuing a show-cause notice shall pass an order. It is her submission that the appellant was aggrieved by the order of the adjudicating authority to that extent he has filed an appeal before the first appellate authority cannot preclude the right to exercise under provisions of Section 84 of the Finance Act, 1994. She would submit that Honble High Court of Karnataka in the case of CST, Bangalore vs. Motor World: 2012 (27) S.T.R. 225 (Kar.) has held that non-payment of tax and interest would be a part of the tax itself and if not collected, would be prejudicial to the interest of the Revenue. It is her submission that this ratio is squarely applicable to this case as the appellants claim for refund which he is not entitled if allowed, is prejudicial to the cause of the Revenue.
6. I have considered the submissions made at length by both sides and perused the records. The issue to be decided in these cases is whether appellant is eligible for the refund of the service tax paid by the service provider and utilized by him for rendering output services.
6.1 The undisputed facts are that the appellant is registered with the authorities as service provider under various categories and holds a centralized registration certificate. It is also undisputed that appellant is operating from rental premises for which he had entered into an agreement with the owner. It is also undisputed that the entire agreement mandates that the appellant should pay the maintenance charges and other charges which come along with the renting of the premises.
6.2 On this factual matrix, it is to be seen that whether the appellant is eligible to avail CENVAT credit of the service tax paid. On the issue of the CENVAT credit of service tax paid on the maintenance charges, I find that there is no dispute as to the fact that the car parking area and other maintenance charges levied by the apartment is in respect of the space rented by the appellant for rendering his output services. If there is service tax liability which has been discharged by the service tax provider and collected from the appellant, and if the premises are used by the appellant for rendering output services, I do not see any reason for denying such CENVAT credit to the appellant and consequent refund.
6.3 As regards the non-registration of ground floor in the centralized registration certificate, I find that the appellant being registered with the authorities under STP, the appellants were admittedly rendering their output services from the premises which have been rented to them i.e., ground floor, first floor and second floor. Non-inclusion of the ground floor in the centralized registration certificate may be at the most curable defect which was subsequently cured. Be that as it may, it is not disputed that rent paid for such ground floor was also taxed under the category of renting-out of immovable property by the owner. It is seen from the records that the appellant has paid such service tax to the owner and hence in my view is eligible to avail the CENVT credit of the service tax paid on the rent for the ground floor.
6.4 As regards the CENVAT credit of the service tax paid on the rent to Mrs. Tahseen Oomer Sait, I find that Revenue has made a big issue out of no issue. In the case in hand, it is undisputed that Mrs. Tahseen Oomer Sait has issued an invoice to the appellant under the provisions of Service Tax Rules wherein the service tax registration number of the service provider is mentioned and charging of the service tax from the appellant is mentioned and details of premises is also indicated. A combined reading of the invoices would indicate that the appellant has paid service tax for the rent paid to Mrs. Tahseen Oomer Sait though not having entered into an agreement would itself not mean that the appellant is not eligible for CENVAT credit of such service tax paid for more than one reason.
6.5 Firstly, when the appellant pays service tax to service provider and has got documentary evidence which is as per the provisions of the Finance Act, 1994 and the Rules made thereunder, such CENVAT credit cannot be denied. Secondly, though the appellant has entered into an agreement with Mr. Mohammed Oomer Sait for renting of the entire premises, subsequently on written request of the owner, due to presumably his own tax problem, had directed the appellant to issue two different cheques. The issuance of two different rent cheques, one in the name of Mr. Mohammed Oomer Sait and Mrs. Tahseen Oomer Sait would not mean that the appellant is not paying any rent to the owner of the premises. In my view, point raised by the Revenue in denying the refund is hyper technical. This view is unsustainable and liable to be set aside, more so when it is undisputed that Mrs. Tahseen Oomer Sait has paid the service tax and indicated on the invoice.
6.6 As regards the legal points raised by the learned counsel regarding the power of revisionary authority to review the order which was in appeal before the first appellate authority, I find that the decision of the Honble High Court of Punjab and Haryana in the case of Shiva Builders (supra) were considering the very same issue, wherein their lordships have held as under; which in my view is favouring the assessee herein.
4. Learned counsel for the revenue submits that the issue in appeal before the Commissioner (Appeals) related only to validity of Order-in-Original levying service tax and not to enhancement thereof and thus, Section 84(4) of the Finance Act, 1994 could not apply.
5. We are unable to accept the submission. Section 84 of the Finance Act, 1994 to the extent relevant is as under:-
(1) The Commissioner of Central Excise may call for records of a proceeding under this chapter which has been taken by the subordinate to him and may make such inquiry or cause such inquiry to be made and subject to the provisions of this chapter, pass such order thereon as he thinks fit.
(2) xx xx xx (3) xx xx xx (4) No order under this section shall be passed by the Commissioner of Central Excise in respect of any issue if an Appeal against such issue is pending before the Commissioner of Central Excise (Appeal).
(5) No such order under this section shall be passed after the expiry of two years from the date of which the order sought to be revised has been passed. A perusal of above provision shows that if any issue is pending in appeal, the revisional jurisdiction could not be exercised. No doubt in the appeal of the assessee, the issue was only validity of Order-in-original, by virtue of Section 35A(3) of the Central Excise Act, 1944, the Commissioner (Appeals) could also go into the question of higher liability of the assessee. The said provision is as under:-
35A. Procedure in appeal.
(3) The Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such order as he thinks fit confirming, modifying or annulling the decision or order appealed against; Provided that an order enhancing any penalty or fine in lieu of refund shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order:
Provided further that where the Commissioner (Appeals) is of opinion that any duty of excise has not been levied or paid or has been short- levied or shortpaid or erroneously refunded, no order requiring the appellant to pay any duty not levied or paid, shortlevied or short-paid or erroneously refunded shall be passed unless the appellant is given notice within the time limit specified in section 11 A to show cause against the proposed order.
6. In view of above provision, even higher liability of the assessee had to be treated to be in issue before the Commissioner (Appeals). Thus, exercise of revisional jurisdiction under Section 84(4) of the Finance Act, 1994 when appeal had been preferred was not permissible. The view taken by the Tribunal is consistent with above statutory provision.
6.7 I find that the reliance placed by the learned departmental representative on the judgment of the Karnataka High Court in the case of CCE vs. Motor World (supra) will not carry the case of the Revenue any further, inasmuch as in the said judgment, their lordships were considering altogether a different issue and were not considering this specific issue of the power of the revisionary authority under Section 84 to review an order when an appeal has been filed by the assessee against the very same adjudicating authority. I find that in judgment their lordships in the case of Shiva Builders (supra) is directly on the point, as is already reproduced hereinabove.
6.8 In view of the foregoing, I find that the impugned orders of the revisionary authority are unsustainable and are liable to be set aside.
7. The impugned orders are set aside and the appeals are allowed with consequential relief, if any.
(Pronounced in Open Court on 05.09.2013.) (M.V. RAVINDRAN) Member (Judicial) rv 12