Custom, Excise & Service Tax Tribunal
Arising Out Of Order-In-Original ... vs Commissioner Of Central Excise, ... on 27 May, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL:SOUTH ZONAL BENCH BANGALORE Final Order No. 20913 / 2014 Application(s) Involved: ST/Stay/2601/2012 in ST/3565/2012-DB Appeal(s) Involved: ST/3565/2012-DB [Arising out of Order-in-Original No.115/2012 ST (Commr.) dated 27/09/2012 passed by Commissioner of Central Excise and Service Tax , LTU BANGALORE ] Canara Bank Executor, Trustee & Taxation Section, Head Office, BGSE Towers, 51, 1st Cross, J.C. Road. BANGALORE - 560027 KARNATAKA Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax BANGALORE-LTU NULL 100 FT RING ROAD JSS TOWERS, BANASHANKARI-III STAGE, BANGALORE, - 560085 KARNATAKA Respondent(s)
Appearance:
Mr.S. Ananthan, CA M/s. ABARNA & ANANTHAN CHARTERED ACCOUNTANTS No.643, 1st Main, 7th Block II Phase, BSK III Stage, Bangalore - 560 085.
For the Appellant
Mr. R. Gurunathan,
Addl. Commissioner (AR) For the Respondent
CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER
HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER
Date of Hearing: 27/05/2014
Date of Decision: 27/05/2014
Order Per : B.S.V.MURTHY
This appeal has been filed by the appellant against Order-in-Original No.115/2012-ST (Commr.) dated 27.9.2012 passed by the Commissioner of Central Excise and Service Tax, LTU, Bangalore for irregular availment of CENVAT credit for the period from October 2005 to March 2010 for an amount of Rs.1,01,85,956/-.
2.1 The appellant is providing services predominantly falling under the category of Banking and Other Financial Services at the relevant point of time. The assessee bank is mainly providing Banking and other financial services, credit card, debit card, charge card or other payment card services among other services. The bank utilizes various input services and avails the CENVAT credit. Further the bank is also paying taxes as a recipient of service in respect of the services notified for the purpose.
2.2 The bank has obtained centralized registration in respect of all its branches and offices situated across the country. The information is collected from the branches and offices and the taxes are paid accordingly. During the course of audit, it was observed that the bank had utilised the CENVAT credit in excess of 20% for payment of output tax. Further, it was observed that bank has wrongly classified certain services as the services falling u/r 6(5) of the CCR and thereby availing credit of 100% of the same. The period involved in respect of this issue is October 2005 to March 2008. Further, it has also been alleged that there was short payment u/r 6(3)(ii) of the CCR on account of alleged wrong classification of the services u/r 6(5). The period involved in respect of this issue is April 2008 to March 2010. Extended period has also been invoked by alleging willful suppression of fact with intend to evade tax.
2.3 The related show-cause notice was issued purely based on the observations of the audit team. The appellant gave a detailed reply and also appeared in person and submitted various arguments to show that the bank had not excess utilized any CENVAT credit as alleged in the show-cause notice. The utilization has to be considered not on monthly basis but on the basis of the return period which is a period of 6 months. If the return period is considered there is no excess utilization of CENVAT credit. In respect of alleged wrong classification of services, it was contended by the bank that the bank had reversed the credit suo moto in respect of few invoices wrongly classified and there was no error in the classification with respect to other services. The bank produced CA certificate also the sample copies of the invoices to substantiate its contentions. The assessee bank had also pleaded that the show-cause notice issued in this regard is barred by limitation. Since the bank had acted on a bona fide faith the provisions of penalty are not attracted.
2.4 The learned Commissioner did not accept some of the contentions of the appellant. He gave relief partially. In his order dated 27.9.2012, the demand in respect of alleged excess utilization of CENVAT Credit was reduced to Rs.81,23,732/- from Rs.2,15,14,945/- and the demand in respect of wrong classification of services u/r 6(5) was reduced to Rs.20,62,224/- from Rs.56,68,210/-. He further demanded interest u/s 75 and imposed penalty of Rs.81,23,732/- + Rs.20,62,224/- u/r 15(4) of the CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1974. Aggrieved by this order, the appellant has preferred this appeal.
3.1 We heard both the sides in great detail. As regards demand on the ground that the appellants had utilized more than 20% of the service tax payable from CENVAT Credit account, the appellants have produced a Chartered Accountant certificate which shows the details of payments, credit, etc. It is the submission of the learned CA that in the case of Idea Cellular Ltd.: 2009-TIOL-387-CESTAT-Del., the Tribunal had taken a view that the restriction of 20% limit has to be calculated excluding the services which are specified in Rule 6(5) of CENVAT Credit Rules, 2004. As submitted by the learned CA, the Commissioner has accepted the claim that appellants had utilized CENVAT credit in respect of common input services and this credit could have been used. However while calculating, the calculation was made in a different manner which resulted in the conclusion that appellants had utilized more than 20% of CENVAT credit. Two periods were examined by us and in both the cases, we found that the amount of credit utilized by the appellants come to exactly 20%, if the claim of the appellant for method of calculation is accepted. The details are as under:
3.2 It is the claim of the appellant that CENVAT Credit utilized in Col. 3 has to be calculated by deducting the CENVAT credit in respect of Rule 6(5) items. When such a calculation is made on that basis, as observed by us, the percentage comes to 20% only. When we consider that the entire demand is time barred and we take note of the fact that appellants calculated the amount correctly, what emerges is the fact that the appellants definitely entertained a bona fide belief. In any case, as submitted by the learned CA, if a six months period is taken instead of monthly basis, even this would not arise. For this purpose, he relies on the decision of the Tribunal in the case of Idea Cellular Ltd.: 2010-TIOL-325-CESTAT-BANG. In that case, it was held that appellants claim that entire year has to be taken into account while granting stay. The above observations would show that it is a question of interpretation and the appellants have followed the law as they have understood and therefore in respect of this amount, the appellants have made out a case complete in their favour.
3.3 The second demand has arisen because the claim of the appellants that the invoices related to common input services has not been accepted by the Revenue. Learned CA submitted that appellants had produced three CA certificates covering substantial portion of the invoices related to common input services and the Commissioner has given the benefit of treatment of common input services only in respect of these invoices and not in respect of balance invoices which had not been verified by the CA. For ready reference, text portion of one of the certificates is reproduced below.
We have verified the copies of invoices made available by M/s. Canara Bank for the period 2005-08 with the soft copy of the CENVAT data provided by the Bank to the Service Tax department (bearing S. No. assigned by department) in order to ascertain the correct nature of service for which the service providers have billed M/s. Canara Bank. Based on our verification of these invoices and explanation given by M/s. Canara Bank, we certify that the nature of services for which the various service providers have raised bills on M/s. Canara Bank falls under the list of services as per Rule 6(5) of CCR, 2004. The remaining two certificates are also on the same line. From the certificates and the submissions before the original authority, we find that the appellants did not make a clear claim that they had selected invoices randomly and on the basis of these certificates, all the credit taken in respect of common input services have to be treated as correct and the invoices have to be considered as ones relating to services classifiable under services listed in Rule 6(5) of CENVAT Credit Rules, 2004. In such a situation, the observation of the Commissioner that the appellants are eligible only to this extent cannot be faulted with. At the same time, we also have to take note of the fact that the audit observation was based on 1% of the samples and there is no clear finding that these are not common input services. Instead it appears that Department is attempting reclassification of the input services to arrive at this conclusion.
4. Even though we could have remanded the matter back so that the invoices could be verified once again and the appellant is required to produce a proper CA certificate on the basis of random sampling, it would have resulted in further litigation, further adjudication process and additional work for both the sides. Having regard to the fact that the CA certificate covers more than 50% of the invoices in respect of one year and 80% in case of another year, we consider that there is no harm if we hold that the appellants at least have taken the credit on the basis of classification in invoices correctly since no discrepancy has been found by CA and further these very same invoices had been produced to the Department in the form of a softcopy and there is no finding that any verification has been done with the help of softcopy. Therefore, we made a suggestion to the learned CA on 26.5.2014 that if the appellant pays the amount due for the normal period, the matter can be closed even though in our opinion appellant did have a case in their favour. Learned CA submitted that he would consult the client and report back. Accordingly, the matter was adjourned for hearing today. Today when the matter was called, the learned CA submitted a letter sent to the CA firm accepting this offer and requesting for closure of the case. According to the calculation submitted, the total amount payable comes to Rs.3,71,501/- for the normal period. As regards interest, the CA submitted that interest may be held payable only for one month in view of the fact that they had continuous excess carryover of cash in their PLA account from November 2009 onwards and on going through the submissions, we find that from November 2009 till September 2013, the appellants always made excess payment and such excess payment always remained with the Government and this runs into crores. He submitted that this has happened because the appellants have a centralized registration and they always make provisional payment and always make excess provisional payment. In view of the above, we accept their submission that the interest liability also can be calculated only for one month. We also agree that the sentiment expressed in the letter even though they do not agree with the contention of the Department, in order to cooperate with the Department and buy peace and to bring an end to the litigation which involves very small amount, the appellant has chosen to pay the same.
5. Appreciating their sentiments and the offer made, we consider that it would be appropriate to treat the matter closed as suggested. Accordingly we reject the appeal as regards the normal period in respect of the second issue alone and confirm the service tax demand of Rs.3,71,501/- and interest of Rs.4,025/- as submitted by the appellants. The appeal is decided in above terms.
(Operative portion of the order has been pronounced in open court) S.K. MOHANTY JUDICIAL MEMBER B.S.V.MURTHY TECHNICAL MEMBER rv 5