Custom, Excise & Service Tax Tribunal
M/S Ac Nielson Org. Marg Pvt. Ltd vs Commissioner Of Service Tax, Mumbai-Ii on 17 January, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II Appeal No. ST/88261/14 (Arising out of Order-in-Original No. 37-38/ST-II/RS/2014 dated 28.3.2014 passed by the Commissioner of Service Tax, Mumbai-II). M/s AC Nielson Org. Marg Pvt. Ltd. Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent
Appearance:
Shri Yash Parmar, C.A. for Appellant Shri Vivek Dwivedi, AC (AR) for Respondent CORAM:
HONBLE SHRI RAMESH NAIR, MEMBER (JUDICIAL) HONBLE SHRI RAJU, MEMBER (TECHNICAL) Date of Hearing: 17.01.2018 Date of Decision: 30.01.2018 ORDER NO.
Per: Ramesh Nair The following issue arises to be decided in the present case: -
(i) Whether the service provided to World Bank and International Finance Corporation is eligible for exemption Notification No. 16/02-Service Tax dated 2.8.2002, which provides exemption to the services provided to United Nations or an International Organization.
(ii) Whether the appellant are entitled for CENVAT Credit in respect of input services namely, credit of Insurance Auxiliary Service, Outdoor Catering Service and Mandap Keeper Service for the period prior to 1.4.2011.
(iii) Whether the appellant is entitled to utilize CENVAT Credit more than 20% as provided under rule 6(3)(c) of CENVAT Credit Rules, 2002 in the subsequent period when in the previous period the appellant have utilized credit less than 20% of the total tax liability. In other words, whether the short utilization of CENVAT Credit against the eligible 20% can be carried forward in the subsequent month and such carried forward amount can be utilized, which comes to more than 20% of the total tax liability in the subsequent month.
2. Shri Yash Parmar, learned C.A. appearing on behalf of the appellant submits that as regards the service provided to World Bank and International Finance Corporation, these organizations are part of the United Nations. In this regard, he referred to a website print out of the United Nations wherein the World Bank and International Finance Corporation have been listed as United Nation entities. It is his submission that since both these organizations are part of United Nations, service provided to these organizations is clearly exempted under Notification No. 16/2002-ST. He relies on the following judgments: -
(a) CC&CE, Kanpur Vs. Jyoti Capsules 2010 (261) ELT 469 (Tri-Del).
(b) Global Energy Consulting Engg. Pvt. Ltd. Vs. CCCE & Service Tax, Hyde-II 2008 (11) STR 8 (Tri-Bang)
(c) Coastal Gujarat Power Ltd. Vs. CST, Mumbai 2012 (28) STR 377 (Tri-Mum) 2.1 As regards the issue of admissibility of the CENVAT Credit in respect of services of insurance auxiliary service, outdoor catering services and Mandap Keeper service, these are used in or in relation to overall business activity of the appellant. The period involved is prior to 1.4.2011 from when the outdoor catering service was excluded. However, for the period prior to 1.4.2011, the credit on this service is admissible. In support of his contention, he relies on the following judgments: -
(a) CCE, Nagpur Vs. Ultratech Cement Ltd. 2010 (260) ELT 369 (Bom)
(b) CCE, Meerut-II Vs. Hindustan Coca-Cola Beverages Ltd. 2011 (23) STR 269 (Tri-Del) 2.2 Regarding the third issue that whether the CENVAT Credit utilized less than 20% in same month, which was subsequently used in the subsequent month and consequently in those months the utilization of CENVAT Credit exceeded 20%. He submits that as per Rule 6(3)(c), there is no condition that if 20% credit is not utilized in a particular month, the same cannot be utilized in the subsequent month. In absence of such condition, overall credit utilized is within the limit of 20%, the same cannot be denied. He placed reliance on the following judgments: -
(a) Vijayanand Roadlines Ltd. Vs. CCE, Belgaum - 2007 (7) STR 219 (Tri-Bang)
(b) Idea Cellular Ltd. 2009 (16) STR 712 (Tri-Del)
(c) Indian Hotels Co. Ltd. 2014 (36) STR 1268 (Tri-Bang)
3. On the other hand, Shri Vivek Dwivedi, learned Asst. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that as per the explanation given in Notification No. 16/02-ST, service provided to only those international organization, declared by the Central Government in pursuance of Section 3 of the United Nations (Privileges and Immunities) Act, 1947 are exempted. The World Bank and International Finance Corporation are not given in the schedule of Section 3 of the United Nations (Privileges and Immunities) Act, 1947. Therefore, these two organizations are not covered under the United Nation or International Organization.
3.1 Regarding, the CENVAT Credit on various services, he submits that these services do not have nexus with the output service. Therefore, the credit was rightly denied by the lower authority.
3.2 As regards the issue of utilization of 20% CENVAT Credit or in excess to that, he submits that Rule 6(3)(c) clearly provides the ceiling of 20% of the total tax payable in a month. Accordingly, even if the appellants have short utilized the Cenvat credit for the previous month against 20% ceiling, the short utilization of credit cannot be adjusted by availing credit more than 20% in the subsequent month. Therefore, the view taken by the lower authority on the issue is correct and legal.
4. We have carefully considered the submissions made by both sides.
5. As regards the issue of exemption in respect of service provided to World Bank and International Finance Corporation, we find that as per organization structure of United Nations, World Bank and International Finance Corporation are enlisted as United Nations entities, therefore, it is clear that the World Bank and International Finance Corporation are part of the United Nation Organization.
5.1 The contention of the Revenue is that these two organizations are not listed in the schedule of Section 3 of the United Nations (Privileges and Immunities) Act, 1947. In this regard, for the ease of reference, Notification No. 16/2002-ST dated 2.8.2002 is reproduced below: -
Service Tax Services provided to United Nations or International Organisation exempted In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994) and in supersession of the notification of the Government of India in the Ministry of Finance, Department of Revenue, vide GSR 205(E), 24th April, 1998, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all the taxable services specified in section 65 of the said Act provided by any person, to the United Nations or an International Organisation, from whole of the service tax leviable under section 66 of the said Act.
Explanation. - For the purposes of this notification, International Organization means an international organisation declared by the Central Government in pursuance of Section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply. From the reading of the above notification and explanation thereof, it is seen that the definition of international organization as provided therein all the entities of United Nations are covered in the exemption. Therefore, if any entity falls under the umbrella of United Nation, all those entities are covered under the explanation in the exemption notification and apart from those entities, if there are other entities which may or may not part of United Nation, but listed in schedule of Section 3 of the United Nation (Privileges and Immunities) Act, 1947, those entities will be covered under International organization. Therefore, the schedule of Section 3 of the Act applies only in respect of any international organization. However, as regards the entities, which are undisputedly fall under the overall organization of the United Nation, it is covered under the exemption. Therefore, in the present case, World Bank and International Finance Corporation are part of United Nations. Therefore, there is no need to resort to the definition of International Organization for extending the benefit of notification. In this scenario, we hold that the services provided to World Bank and International Finance Corporation being entities of United Nation, exempted under Notification No. 16/2002-ST.
5.2 As regards the issue of admissibility of the CENVAT Credit in respect of service namely, the Insurance Auxiliary Service, Outdoor Catering service and Mandap keeper service, we find that the Insurance Auxiliary service used for indemnification of the officials such as Directors, employees, who play key role in providing the output service. The mandap keeper service used for conducting interviews for hiring employees, therefore, it is directly related to the overall providing of output service. Outdoor catering service is provided to the employees and clients of the appellant and the cost of the outdoor catering is incurred by the appellant. Therefore, it qualifies as input service and the credit is admissible. The exclusion clause was introduced on 1.4.2011. In the present case, the period involved is prior to that date. Therefore, there is no dispute for allowing the credit on the aforesaid services. The issue of admissibility of CENVAT Credit is covered by the judgment cited by the appellant.
5.3 Regarding the issue whether the appellant can utilize the CENVAT Credit more than 20% of the tax payable in a particular month when in the earlier month the entire 20% credit was not utilized and the balance was carried forward and utilized in the subsequent month. In this regard, we are of the view that if in a particular month against the liability of 20% if the appellant utilized less than 20% and the remaining amount is available to the appellant for utilization and the same was utilized in subsequent month. On considering overall period, the total utilization remains within 20% ceiling irrespective in some month utilization is less than 20% and in subsequent month, the utilization is more than 20%, the conditions of Rule 6(3)(c) of CENVAT Credit Rules, 2002, in our view stand complied with. This identical issue has been considered in the case of Vijayanand Roadlines (supra), wherein this Tribunal has passed the following order: - 6.?We have gone through the provisions of Service Tax Credit Rules 2002. The above mentioned rules have been made in exercise of the powers conferred by clause (ee) of sub-section (2) of Section 94 of the Finance Act, 1994 (32 of 1994). These rules are similar to Cenvat Credit Rules. In case of the goods, the duty paid on the inputs, can be taken as Cenvat credit. The credit so taken can be utilized for payment of duty on the goods manufactured and cleared from the factory. If the final products are exempted, no input credit is allowed. The Service Tax Credit Rules, 2002 are similar to the Cenvat Credit Rules. The Service Tax Credit Rules, 2002 have been superseded by the Cenvat Credit Rules, 2004 with effect from 9-9-2004. Presently both the goods and services are covered by the Cenvat Credit Rules 2004. Just as Cenvat credit is taken on the inputs, the service tax paid on input service can be taken as credit and the credit so accumulated can be utilized for payment of service tax on output service in terms of Service Tax Credit Rules 2002. In case a service provider avails credit on any input service and renders such output services which are chargeable to service tax as well as exempted, then the service provider is required to maintain separate accounts for receipt and consumption of input service meant for taxable output service and non-taxable (exempted) output service. However, there is a provision under Rule 3(5) of the Service Tax Credit Rules, 2002 by which the service provider can opt not to maintain separate accounts. In such circumstances, what are his obligations? In order to understand the same, we are reproducing the Rule 3(5) of Service Tax Credit Rules, 2002 herein below :-
(5) In case the service provider opts not to maintain separate accounts of input service meant for consumption in relation to rendering of such output services which are chargeable to service tax as well as exempted services or non-taxable services, he shall be allowed to utilize service tax credit for payment of service tax on any output service only to the extent of an amount not exceeding thirty five percent of the amount of service tax payable on such output service. A careful reading of the above provisions show that when the service provider does not maintain a separate accounts of input service for taxable and non-taxable output service, there is a restriction on utilization of the credit. As per the above rule, the utilization is restricted to 35% of the amount of service tax payable on such output service. At any point of time, the service provider can arrive at his liability which is service tax payable on his output service. He should calculate 35% of his liability. From out of the accumulated credit, he has allowed to utilize up to 35%. There is no indication that the service tax credit accumulated during the earlier period would lapse. In other words, there is no question of lapse of the credit legally taken. In the present case, from May 2003 to March 2004, even though the appellant had input credit available, he chose to pay tax only through PLA. As on November 2003, he had accumulated credit to the tune of Rs. 3,01,932/-. However, for the period from November 2003 to March 2004, the payment was done mostly by utilization of credit. In the month of March 2004, a part of the liability was paid by PLA and another part by utilization of credit. In other words, the total tax paid from December 2003 to March 2004 by utilizing the credit comes to Rs. 4,94,494.00. This is actually equal to 35% of their liability from May 2003 to March 2004. There is no rule which says that the credit accumulated during the month should be used in the same month. In fact no time frame has been fixed in the rules. In these circumstances, the utilization of credit to the extent of Rs. 4,94,494/- during December 2003, January 2004, February 2004 and March 2004 is in order and in consonance with Rule 3(5) of the Cenvat Credit Rules, 2002. The statement showing availment and utilization of input credit by the appellants is also incorporated in this order for proper appreciation of facts :-
Statement Showing Availment and Utilisation of Input Service Credit for discharge of Service tax on output service during the period May 2003 to March 2004 Period Input Credit Availed Service Tax payable on output service Input Credit available for utilisation for payment of service tax (35% of (c) Service Tax paid through PLA Credit Utilized Accumulated Credit available for Utilisation (f) + (d)
(g) Rs.
Rs.
Rs.
Rs.
Rs.
(a)
(b)
(c)
(d)
(e)
(g)
(f) 14-5-2003 to 31-5-2003 42402.92 96249.00 33687.00 96249.00 NIL 33687.00 June 2003 66991.24 119596.00 41859.00 119596.00 NIL 75546.00 July 2003 75512.59 144706.00 50647.00 144706.00 NIL 126193.00 August 2003 126466.82 117150.00 41002.00 117150.00 NIL 167195.00 September 2003 123984.92 126067.00 44123.00 126067.00 NIL 211318.00 October 2003 166697.40 129801.00 45430.00 129801.00 NIL 256748.00 November 2003 158534.49 129097.00 45184.00 129097.00 NIL 301932.00 December 2003 82764.38 144480.00 50568.00 NIL 144480.00 208020 January 2004 361252.17 138166.00 48358.00 NIL 138166.00 118212 February 2004 180606.97 124273.00 43496.00 NIL 124273.00 37435 March 2004 261734.65 143257.00 50140.00 55682.00 87575.00 NIL GRAND TOTAL 16,46,949/-
14,12,842/-
4,94,494/-
4,94,494/-
In fine, we allow the appeal with consequential relief. There is no question of imposition of any penalty. Since the appellants have discharged the duty liability correctly, no interest also can be levied.
6. From the above judgment, it can be observed that issue in the present case is identical to the above reproduced judgment. Accordingly, we are of the view that in the present case, the appellant in overall period did not exceed 20% of CENVAT Credit utilized. Hence, the demand of service tax equivalent to amount of CENVAT Credit utilized in excess to 20% is not sustainable, accordingly set aside.
7. In view of above discussions, the impugned order stand modified in above terms. The appeal is allowed.
(Pronounced in Court on 30.01.2018)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Sinha
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