Custom, Excise & Service Tax Tribunal
Ve Commercial Vehicles Limited vs Indore on 23 July, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Principal Bench, New Delhi
COURT NO. IV
DATE OF HEARING : 14/05/2018.
DATE OF DECISION: 23/07/2018.
Excise Appeal No. 53127 of 2016
[Arising out of the Order-in-Original No. 40/PR. COMMR/IND/
CEX/2016 dated 25/07/2016 passed by The Principal
Commissioner, Central Excise, Customs & Service Tax, Indore.]
M/s VE Commercial Vehicles Limited]
(Formerly M/s Eicher Motors Ltd.) ] Appellant
Versus
CST, Indore Respondent
Appearance S/Shri Amit Jain and Dhruv Tiwari, Advocates - for the appellant. Shri R.K. Mishra, Authorized Representative (DR) - for the Respondent.
CORAM: Hon'ble Shri C.L. Mahar, Member (Technical) Hon'ble Shri Ajay Sharma, Member (Judicial) Final Order No. 52631/2018 Dated : 23/07/2018 Per. C.L. Mahar :-
The brief facts of the matter are that the appellant is engaged in manufacture of light commercial, medium commercial and heavy commercial vehicles and parts thereof falling under Chapter 87 of the 1st Schedule to the Central Excise Tariff Act,
2 EX/53127 of 2016 1985. The appellant in his course of business have engaged various transport agencies such as M/s All India Transport Agency, Mumbai and M/s Rail Road Logistics (India) Pvt. Ltd. for the purpose of providing logistic and business support in the form of transportation of final products to the premises of the body builders, transportation of vehicles from the premises of the body builders to the depot or factory of the appellant and transportation of vehicles from depot/factory of the appellant to the buyer‟s premises. The appellant had availed Cenvat credit as per the provisions of the Cenvat Credit Rules on the service tax paid for above-mentioned services under the service tax category "support services for business". A show cause notice had been issued by the Revenue to the appellant alleging that they had wrongly availed Cenvat credit of Rs. 4,73,31,151/- as they are entitled for Cenvat credit on such reviews. Thus, the Department has asked the appellant to reverse back the above-mentioned amount of Cenvat credit as per the provisions of Rule 14 of Cenvat Credit Rules, 2004 readwith Section 11A of the Central Excise Act, 1944, penalty provisions under Section 11AC readwith Rule 15 of Cenvat Credit Rules, 2004 has also been invoked. The matter came to be adjudicated on the first round of the litigation wherein the above charges were confirmed by the learned Commissioner vide his order-in-original dated 27/08/2008. The appellant approached this Tribunal, wherein the matter was remanded back for re-consideration before the Original Adjudicating Authority. The matter got re-adjudicated vide order-
3 EX/53127 of 2016 in-original dated 25th July, 2016 wherein the Adjudicating Authority has accepted the contentions of the appellant that they are entitled for Cenvat credit of the service tax paid by them on the business support services. However, out of the total Cenvat credit of Rs. 4,73,31,151/-, input service credit amounting to Rs. 3,03,35,302/- was held to be not admissible since same was availed in June, 2007 prior to payment of value of services as well as payment of the service tax thereon. It is also mentioned that the appellant paid service tax on these services in the month of August 2007 to October 2007 while credits were taken in the month of June, 2007. The learned Commissioner has held that the appellant has availed the Cenvat credit before payment of the service tax in contravention to Rule 4 (vii) of the Cenvat Credit Rules, 2004 and it has been held by him that the appellant are not entitled to credit of service tax as the service tax was not paid at the time of availing Cenvat credit on the service availed by them.
2. An amount of Rs. 1,24,80,608/- out of the above- mentioned amount of Rs. 3,03,35,302/- has also been found inadmissible to the appellant on an additional ground that same has also been availed on the strength of a letter which cannot be considered as a proper document for availing Cenvat credit as per the provisions of Rule 9 of the Cenvat Credit Rules readwith Rule 4 (a) (i). The penalty of Rs. 3,03,35,302/- has also been imposed on the appellant under Section 11AC of the Central 4 EX/53127 of 2016 Excise Act, 1944 readwith Rule 15 sub-rule (ii) of the Cenvat Credit Rules, 2004.
3. The appellant are before us in the second round of litigation against the above-mentioned order-in-original dated 25th July, 2016. It has been the contention of the learned Advocate appearing on behalf of the appellant that there is no denial of the fact that the appellant has availed business support services and service tax has been paid by the appellant as the service recipient and therefore they are very much entitled to avail the Cenvat credit of the services availed by them as input services. It has further been contended that pre-mature availment of Cenvat credit before making the payment of value of services and service tax does not make them disqualified for availing the credit on the inputs on which they have paid the service tax later on. It is further been added that it is not the case of the Department that the appellant has availed the Cenvat credit before availing the input services, it was that the service tax was not paid to the service provider after availing input tax credits in their books of accounts. The learned Counsel argued that the appellant was in a bonafide belief that the service tax may not be applicable on the type of services availed by them which made them to hold back the payment of value of service including the service tax to the provider of the services. The amount was later on paid and, therefore, that itself makes the credit availed by them as a valid credits and thus, it has been argued that there is no violation of the provisions of the Cenvat Credit Rules.
5 EX/53127 of 2016
4. It has been the contention of learned Advocate that the substantive benefit of the credit cannot be denied to the appellant only on the ground of procedural or technical lapse. The learned Advocate has relied upon several judgments in support of his argument. The case laws cited by the learned Advocate are as mentioned herein below :-
(i) Mangalore Chemicals & Fertilizers Ltd. vs. DC -
1991 (55) E.L.T. 437 (S.C.);
(ii) Union of India vs. Bharat Aluminium Co. Ltd. -
2011 (263) E.L.T. 48 (Chhattisgarh) ;
(iii) CCE vs. Pepsico India Holdings Pvt. Ltd. - 2006 (205) E.L.T. 543 (Tri. - Chennai) ;
(iv) Twenty First Century Printers Ltd. vs. CCE -
2009 (234) E.L.T. 277 (Tri. - Ahmd.) ;
(v) Gujarat Pipavav Port Ltd. vs. CCE - 2009 (14) S.T.R. 53 (Tri. - Ahmd.) and
(vi) J.K. Sugar Ltd. vs. CCE - 2011 (270) E.L.T. 225 (Tri. - Del.).
5. The learned Counsel for the appellant has also argued that Cenvat credit cannot be denied to them being pre-mature because of the fact that service tax was paid at the later date by the appellant then availing Cenvat credit. The learned Advocate has placed reliance on following decisions to support his argument :-
(i) Gujarat Pipavav Port Ltd. vs. CCE - 2009 (14) S.T.R. 53 (Tri. - Ahmd.) and
6 EX/53127 of 2016
(ii) J.K. Sugar Ltd. vs. CCE - 2011 (270) E.L.T. 225 (Tri. - Del.).
6. Regarding denial of the Cenvat credit of Rs. 1,24,80,608/- out of the above-mentioned amount of Rs. 3,03,35,302/- on an additional ground that same was availed on the strength of a simple letter issued by M/s All India Transport Agency, Mumbai. The revenue has contended that the letter cannot be considered a proper document or an invoice under the provisions of Rule 9 (1) of the Cenvat Credit Rules. It has been the contention of the learned Advocate that Rule 9 (2) provides that any document which contains all the particulars prescribed under Central Excise Rules and Cenvat Credit Rules is a valid document for availing Cenvat credit. The learned Advocate has taken us through the details of particulars which are available on the document on the strength of which Cenvat credit were availed by the appellant. It was pointed out that the documents contained details, such as, serial number, name, address, registration number of service provider, name and address of the service recipient, description and value of the taxable service and service tax paid thereon. It has been the argument of the learned Advocate that since the document on the strength of which Cenvat credit has been availed contains all the information required to be given on any invoice, bill or challan as per the dictate of the Central Excise Rules and, therefore, Cenvat credit cannot be denied only on the ground that the document on the strength of which Cenvat credit 7 EX/53127 of 2016 has been availed is not in the particular format. The learned Advocate has placed reliance to support his argument on the following case laws :-
(i) Vodafine Essar Spacetel Ltd. vs. CCE - 2016 (43) S.T.R. 124 (Tri. - Kolkata);
(ii) Eupec-Welspun Coatings India Ltd. vs. CCE -
2009 (235) E.L.T. 347 (Tri. - Ahmd.);
(iii) CCE vs Stelko Strips Ltd. - 2010 (255) E.L.T. 397 (P&H);
(iv) CCE vs. Aarti Steels Ltd. - 2017 (347) E.L.T. 415 (P&H);
(v) CCE vs. Jalaram Plastic Pack - 2014 (34)
S.T.R. 36 (Tri. - Ahmd.) and
(vi) Everest Industries Ltd. vs. CCE - 2014 - TIOL
- 1037 - CESTAT - MAD.
7. The learned Advocate has also argued that liability to pay interest on the credits availed by them but not utilized does not arise as the credits were only taken into the books of accounts and same was not utilized till September 2007. Before full utilization of such credits between August, September and October, they have made payment of the value of the service as well as the service tax on the business support services availed by them. The learned Advocate has relied upon Hon‟ble Karnataka High Court judgment in the case of CCE & ST, LTU, Bangalore vs. Bill Forge Pvt. Ltd. - 2012 (279) E.L.T. 209 8 EX/53127 of 2016 (Kar.), wherein the Hon‟ble High Court has held that even on the wrongly availed Cenvat credit, the liability to pay interest will arise only when same has been utilized wrongly towards payment of central excise duty. Since, in this case the balance of the Cenvat credit has always remained more than the amount of Cenvat credit taken in the books of accounts same cannot be held to have been utilized towards payment of central excise duty and, therefore, the question of payment of interest under Section 11AB on the same does not arise. The learned Advocate has also contended that penalty as imposed under Rule 15 (2) of the Cenvat Credit Rules readwith Section 11AC of Central Excise Act is not imposable on them as they have no intention of evading the central excise duty and it is only a matter of interpretation whether the Cenvat credit taken by them are as per the provisions of law or not.
8. We have also heard the learned Departmental Representative who has reiterated the findings as given by the Adjudicating Authority.
9. We have heard both sides and also perused the record of appeal. There are two main questions before us to answer in this case, namely (i) whether the Cenvat credit of Rs. 3,03,35,302/- taken in the books of accounts by the appellant prior to making payment of service tax to the provider of the services can be denied to them as per the provisions of Cenvat Credit Rules, 2004 ; (ii) whether Cenvat credit amounting to Rs. 1,24,80,608/-
9 EX/53127 of 2016 which has also been rejected on additional ground that same was not taken on the basis of prescribed documents as provided under Rule 9 (1) of Cenvat Credit Rules is available to them or not.
10. The answer to other issues pertaining to interest and penalty will further depend on the answer of above two questions.
11. Coming to the first question whether the Cenvat credit taken in the books of accounts before making actual payment of the service tax can be held to be illegal and not proper as per the provisions of Cenvat Credit Rules, 2004, we are of the opinion that as it is a matter of record that the above-mentioned Cenvat credits were taken towards availment of business support services during the month of June 2007 by the appellant. It is also a matter of record that Cenvat credits were availed only after receiving of services and we find that the credits-in-balance in the appellant‟s books of accounts have always remained above Rs. 3,03,35,302/- for the following months of July, August, September 2007.
12. In this regard, a glance at the table mentioned below will make the issue much clear :-
10 EX/53127 of 2016 Thus, it can be seen that barring the month of August, 2007 (where the balances were short only by an amount of Rs. 6 lakhs for having balance above the disputed amount of Rs.
11 EX/53127 of 2016 3,03,35,302/-) for rest of the months the balances have been above the disputed amount and thus, it can be seen that Cenvat credits availed without making payment of same have remained unutilized, before service tax payable on them was actually paid.
13. It is also an admitted fact that the appellant have paid service tax due on these services to the provider of services during the month of August to October 2007. The details of the payments given to the service providers are as given in the table below :-
Thus it can be seen that the service tax of Rs. 95 lakhs was paid in the month of August 2007 and balance amount was paid by October 2007. From this it transpires that actually entire Cenvat credits of Rs. 3,03,35,302/- have remain unutilized before making full payment of service tax by October, 2007.
12 EX/53127 of 2016
14. In view of the above facts, we find that though the credits might have been availed in the books of accounts their actually utilization have only started after the month of October, 2007 and before that the appellant have already made payment of service tax. Thus, we find that there was no utilization of Cenvat credit without payment of service tax. When holding the above view, we place also our reliance on the order of the Tribunal in the case of India Cement Ltd. vs. CCE - 2018 (5) TMI 603 - CESTAT HYDERABAD. The relevant extract of this judgment is reproduced below :-
"6. On careful consideration of the submissions made, we find that the service tax liability on the GTA Services under reverse charge mechanism for the period in question is not disputed by both sides; as also the discharge of such service tax liability by the appellant. It seems that the appellant has availed such service tax credit before discharging the same to the Government of India. We find that the absence of any dispute that appellant has discharged the tax liability as per the provisions of service tax rules and there also being no dispute as to eligibility to avail CENVAT credit before few days in advance is only a procedural lapse. This ration has been laid down by the Tribunal in the case of Emerson Innovation Centre, vs. CCE, Pune - 2016 - TIOL - 3217 - CESTAT MUM.
wherein it was held as under :-
4. We have carefully considered the submissions made by both the sides and perused the records. We find that the rejection of refund to the extent of Rs.
17,57,529/- was upheld by the learned Commissioner on the admitted fact that at the time of taking credit 13 EX/53127 of 2016 the service charges and service tax thereon was not paid but it is also accepted that the same has been paid subsequently. In our view at the time of sanction of refund when the service charges and service tax stood paid to the service provider the refund cannot be denied for the reason that the appellant was not entitled for the CENVAT credit initially. But after payment of service charges and service tax to the service provider they became entitled for the CENVAT credit and the sanction of refund claim thereafter cannot be disputed. The decision of this Tribunal in the case of Gujarat Pipavav Port Ltd. vs. CCE, Bhavnagar - 2009 (14) S.T.R. 53 (Tri. - Ahmd.). The relevant extract of this judgment is reproduced below :-
"2. Learned Advocate appearing for the appellants submits that this was a procedural lapse on the part of the appellant in availing advance service tax credit prior to the payment of service tax of input service availed by them but ultimate credit is available to them in the next month. They are ready to pay interest for the intervening period. I agree with the above contention of the learned Advocate. The entire credit cannot be denied to them. Admittedly, the same stands availed premature and in any case was available during the subsequent period. Inasmuch, as, the same is utilized by the appellant, interest in accordance with law is required to be paid. Taking a lenient view, I do not find it a fit case for imposition of penalty.
3. In view of the above, denial of credit and imposition of penalty is set aside. Interest as per law is confirmed".
From the above decision it can be seen that only credit availed at premature stage cannot be reason 14 EX/53127 of 2016 for denial of credit. In the above decision, it was held that at the most interest can be charged. In the present case, the fact is that the CENVAT credit was availed only for claiming the refund under Rule 5 and there was no utilization of the credit of payment of service tax. Therefore, even the interest is not applicable in the facts of the present case. As per our above discussion and taking support of the case of Gujarat Pipavav Port Ltd. (supra), the impugned order is modified and the appeal is allowed".
15. Apart from above, we are also of the view that only taking credit in the books of accounts does not amount to same having been utilized by the appellant because firstly, the balance of credits was always above the disputed amount and secondly, the value of service including service tax was also paid by the appellant between July 2007 to October 2007, we find no wrong, in this way, in utilization of the Cenvat credit. This view is also supported by Hon‟ble Karnataka High Court judgment in the case of Bill Forge Pvt. Ltd. (supra). The relevant extract of this judgment is reproduced below :-
"19. Rule 14 of the CENVAT Credit Rules, 2004 reads as under:
Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded. - Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacture or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.
15 EX/53127 of 2016 A reading of the aforesaid provisions makes it very clear that the said provision is attracted where the Cenvat Credit has been taken or utilized wrongly or has been erroneously refunded. In view of the aforesaid judgment of the Apex Court, the question of reading the word „and‟ in place of „or‟ would not arise. It is also to be noticed that in the aforesaid Rule, the word „avail‟ is not used. The words used are „taken‟ or „utilized wrongly‟.
Further the said provision makes it clear that the interest shall be recovered in terms of Section 11A and 11B of the Act.
20. From the aforesaid discussion what emerges is that the credit of excise duty in the register maintained for the said purpose is only a book entry. It might be utilised later for payment of excise duty on the excisable product. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. It matures when the excisable product is received from the factory and the stage for payment of excise duty is reached. Actually, the credit is taken, at the time of the removal of the excisable product. It is in the nature of a set off or an adjustment. The assessee uses the credit to make payment of excise duty on excisable product. Instead of paying excise duty, the cenvat credit is utilized, thereby it is adjusted or set off against the duty payable and a debit entry is made in the register. Therefore, this is a procedure whereby the manufacturers can utilise the credit to make payment of duty to discharge his liability. Before utilization of such credit, the entry has been reversed, it amounts to not taking credit. Reversal of cenvat credit amounts to non-taking of credit on the inputs.
21. Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in 16 EX/53127 of 2016 addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly.
22. In the instant case, the facts are not in dispute. The assessee had availed wrongly the Cenvat credit on capital goods. Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry. Thus the assessee did not take the benefit of the wrong entry in the account books. As he had taken credit in a sum of Rs. 11,691-00, a sum of Rs. 154-00 was the interest payable from the date the duty was payable, which they promptly paid. The claim of the Revenue was, though the assessee has not taken or utilized this Cenvat credit, because they admitted the mistake, the assessee is liable to pay interest from the date the entry was made in the register showing the availment of credit. According to the Revenue, once tax is paid on input or input service or service rendered and a corresponding entry is made in the account books of the assessee, it amounts to taking the benefit of Cenvat credit. Therefore interest is payable from that date, though, in fact by such entry the Revenue is not put to any loss at all. When once the wrong entry was pointed out, being convinced, the assessee has promptly reversed the entry. In other words, he did not take the advantage of wrong entry. He did not take the Cenvat credit or utilized the Cenvat Credit. It is in those circumstances the Tribunal was justified in holding that when the assessee has not taken the benefit of the Cenvat credit, there is no liability to pay interest. Before it can be taken, it had been reversed. In other words, once the entry was reversed, it is as if that the Cenvat credit was not available. Therefore, the said judgment of the Apex Court has no application to the facts of this case. It is only when the assessee had taken the credit, in other words by taking such credit, if he had not paid the duty which is legally due to the Government, the Government would have sustained loss to that extent. Then the liability to pay interest from the date the 17 EX/53127 of 2016 amount became due arises under Section 11AB, in order to compensate the Government which was deprived of the duty on the date it became due. Without the liability to pay duty, the liability to pay interest would not arise. The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise".
On the basis of above facts and position of law, we don‟t find any lapse in availing Cenvat credits of Rs. 3,03,35,302/-.
16. Now coming to the second question whether the Cenvat credit can be denied because the document on the strength of which Cenvat credit has been availed is not in the given format as provided under Rule 9 (1) of Cenvat Credit Rules, 2004. As discussed in the preceding paras, we find that the document on the strength of which Cenvat credit of Rs. 1,24,80,608/- was taken, are having all the particulars which are relevant for availing the Cenvat credit. The document has all the details such as name, service provider, service recipient, value of service and service tax amount paid. We find that though the document may not be with the name of the prescribed document which are mentioned under Rule 9 (1) of Cenvat Credit Rules, 2004, however, all the particulars which are relevant have mention on it. It can be seen that Rule 9 (2) proviso provides as under :-
"[(2) No CENVAT credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document :
18 EX/53127 of 2016 Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, [assessable value, Central Excise or Service tax registration number of the person issuing the invoice, as the case may be,] name and address of the factory or warehouse or premises of first or second stage dealers or [provider of output service], and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit.]"
It is clear from above that even if the document on the strength of which Cenvat credit is taken is not in the prescribed documents under Rule 9 of the Cenvat Credit Rules, 2004, the credit cannot be denied, if it has the necessary details as provided in the proviso above. Since, the document of the appellant has all the relevant particulars as are the requisite under the above-mentioned proviso to Rule 9 (2), the credit cannot be denied to the appellant. Therefore, we do not find such document as an invalid document for availing Cenvat credit. We also find that Department do not have any other ground for rejection of such credit except that the document is not on a given format. Such an argument is certainly not acceptable in view of the fact that it has repeatedly been held by this Tribunal as well as the higher courts that substantive benefit of Cenvat credit cannot be denied on mere procedural or technical lapses. We specially place our reliance on the judgment in the case of 19 EX/53127 of 2016 Twenty First Century Printers Ltd. (supra). The relevant extract of this judgment is reproduced below :-
"3. After hearing both the sides, we observe that the only ground on which the credit is denied and penalties imposed that the Bills of Entry under which the imported goods were cleared by M/s. Godfrey Phillips (India) Ltd. were not endorsed for diversion of the said goods to the appellant‟s manufacturing unit. The duty paid character of the goods in question was never in doubt. In fact there is a tacit admission on the part of the Revenue that the very same goods on which duty was paid by the importer were received in the factory of the manufacturer (appellant).
4. It is well settled that in the absence of any doubt about the duty paid character of the inputs that received in the factory and their utilization in the manufacture of final products, cleared on payment of duty, the denial of credit on the technical and procedural grounds is not called for. The Hon‟ble High Court of Gujarat in the case of M/s. Vimal Enterprises v. UOI - 2006 (195) E.L.T. 267 (Gujarat) has observed that the entire endeavour of the Revenue should be to make the scheme effective and not to deny the beneficial provisions on the basis of technical breaches. As such, we find no justification for denial of credit or for imposition of penalty. Hence, the impugned order is accordingly set aside and all the appeals are allowed with consequential relief to the appellants".
17. Thus, we find that since the veracity of duty payment nature of the document on which Cenvat credit was availed is not in doubt, we do not find any reason for denial of Cenvat credit on the strength of such document.
20 EX/53127 of 2016
18. In view of above, we are of view that the order-in-original is without any merit and, therefore, we set aside the same and accordingly, appeal is allowed.
(Order pronounced in open court on 23/07/2018.) (Ajay Sharma) (C.L. Mahar) Member (Judicial) Member (Technical) PK