Custom, Excise & Service Tax Tribunal
Apeejay Tea Ltd vs Service Tax - Kolkata on 26 September, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 70535 of 2013
(Arising out of Order-in-Original No. 66/Commr/ST/Kol/2012-13 dated 26.02.2013
passed by the Commissioner of Service Tax, Kendriya Utpad Shulk Bhawan,
3rd Floor, 180, Shantipally, Rajdanga Main Road, Kolkata - 700 107)
M/s. Apeejay Tea Limited : Appellant
[Formerly "M/s. Apeejay Surrendra Corporate Services Ltd."]
Apeejay House, 15, Park Street,
Kolkata - 700 016 (West Bengal)
VERSUS
Commissioner of Service Tax : Respondent
Kendriya Utpad Shulk Bhawan, 3rd Floor,
180, Shantipally, Rajdanga Main Road, Kolkata - 700 107
APPEARANCE:
Shri Ajay Sanwaria, Advocate for the Appellant
Shri Prasenjit Das, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 77124 / 2024
DATE OF HEARING / DECISION: 26.09.2024
ORDER:[PER SHRI K. ANPAZHAKAN] M/s. Apeejay Tea Limited(erstwhile "M/s. Apeejay Surendra Corporate Services Ltd."), Apeejay House, 15, Park Street,Kolkata - 700 016, West Bengal [hereinafter referred to as 'Appellant'] are registered with the Service Tax Department under the categories of 'management consultancy service' and 'intellectual property rights service'.
2. The Appellant had availed CENVAT Credit on various 'input services' in terms of the CENVAT Credit Rules, 2004. In the course of its business, the Appellant appointed Mr. Karan Paul, Mrs. Shirin Paul Page 2 of 13 Appeal No.: ST/70535/2013-DB and Ms. Priti Paul (hereinafter collectively referred to as 'business consultants') as their management and business consultants for the Financial Years 2009-10 and 2010-11. For the services of management consultancy rendered by the said business consultants, the Appellant had agreed to pay Rs.7.95 crore and Rs.7.31 crore per annum for the Financial Years 2009-10 and 2010-11 respectively, towards rendering of management consultancy services. As per the terms and conditions stated in the appointment letters, the said business consultants submitted one single bill on the thirty first day of March each year for the whole amount of consultancy fee charged for that year.
2.1. The said business consultants also incurred various expenses on different dates and forwarded those bills along with their own invoices stating such expenses as 'consultancy fee'. The Appellant paid the bill amount directly to the creditors on behalf of the said business consultants and adjusted such payment against the consultancy fee of each person. The appellant has availed CENVAT Credit of the Service Tax paid on such advance payments on the basis of various documents such as bank vouchers, ledger entries and un-numbered invoices. The Department alleged that the above said documents based on which the Appellant had availed CENVAT Credit were not in conformity with Rule 4A of the Service Tax Rules, 1994 read with Rule 9(f) of the CENVAT Credit Rules, 2004. The Department also alleged that the expenditure incurred by the said consultants were all personal expenses and having no relation, directly or indirectly, to their output service. Thus, the Department took the view that there was no room for inclusion of personal expenses in the value of taxable Page 3 of 13 Appeal No.: ST/70535/2013-DB services and alleged that the payment made by the Appellant to the said business consultants for the purpose of their personal expenses cannot be termed as payment made for management consultancy services. Accordingly, the department proposed to deny these credits availed by the appellant on the grounds mentioned above.
3. It was also found that the Appellant had availed CENVAT Credit amounting to Rs.14,94,779/- which pertained to credit availed on (i) input services received by the Delhi Office (ii) input services received by group companies (iii) input services having no relation with the output service, viz. advertisement service, service relating to funeral, choutha, photography services relating to photograph and portrait of Late Jit Paul and (iv) CENVAT Credit availed by mistake/inadmissible.
4. In view of the above, a Show Cause Notice dated 07.03.2012 was issued to the Appellant inter alia demanding as under:
"(i) The irregular Cenvat credit amounting to Rs.1,63,95,162/-[ST] Rs.3,27,903/- [EC] & Rs.1,63,952/-[S&H/EC] totalling to Rs.
1,68,87,017/- as furnished in Annexure should not be demanded and recovered from them under Section73(1) of Finance Act read with rule 14 of Cenvat Credit Rules, 2004;
(ii) Interest at the appropriate rate should not be charged under Section 75 of the Act ibid as applicable from the date of credit till the date of actual receipt;
(iii) Penalty under Section 78 of Finance Act read with rule 15 of Cenvat Credit Rules, 2004 should not be imposed upon them for deliberately suppressing Page 4 of 13 Appeal No.: ST/70535/2013-DB the facts and contravening the relevant provisions of law as discussed in foregoing paras with the intention to evade payment of Service Tax."
5. The said Notice was adjudicated by the Ld. Commissioner of Service Tax, Kolkata vide Order-in- Original No. 66/Commr/ST/Kol/2012-13 dated 26.02.2013 wherein the ld. adjudicating authority has confirmed the recovery of CENVAT Credit of Rs.1,68,87,017/-, along with interest and imposed equal amount of tax as penalty under Section 78 of the Finance Act, 1994.
5.1. Aggrieved against the impugned order, the Appellant has filed this appeal.
6. Regarding the disallowance of CENVAT Credit on management consultancy services amounting to Rs.1,53,92,538/-, the Appellant submits that they were making payment of the personal expenses of the business consultants only as a part of the consideration towards management consultancy services rendered by them; these payments have been made as per the terms and conditions agreed upon in their appointment letter; hence, the Service Tax paid on such management consultancy services, are 'input services' to the appellant in terms of Rule 2(l) of the CENVAT Credit Rules, 2004.The Appellant further submits that the advance memo / invoice issued by the said business consultants contained all the details as specified under proviso to Rule 9(2) of the CENVAT Credit Rules, 2004 i.e., description of the taxable service, assessable value, service tax payable thereon, name, address and service tax registration number of the service provider, etc. The Appellant submits that the Notice admits that the credit availed on the basis of unnumbered invoices, vouchers and Page 5 of 13 Appeal No.: ST/70535/2013-DB other documents were duly accounted for in their Books of Accounts. The Appellant also contends that it is not the case of the Department that the services under reference were not received from the said business consultants. Accordingly, it is the submission of the Appellant that they have rightly availed CENVAT Credit, in terms of the proviso to Rule 9(2) of the CENVAT Credit Rules.
7. Regarding CENVAT Credit amounting to Rs.14,94,779/-, the appellant submits a break-up of the credit availed:
i. Rs.6,73,339/- and Rs.54,218/- pertains to input services received by the Delhi Office ii. Rs.5,09,494/- pertains to input services received by group companies, but utilized by the Appellant.
iii. Rs.1,50,460/- pertained to input services having no relation with the output service, viz. advertisement service, service relating to funeral, choutha, photography services relating to photograph and portrait of Late Jit Paul and; iv. Rs.1,06,968/- pertained to CENVAT Credit availed by mistake/inadmissible.
7.1. Regarding the availment of credit of Rs.6,73,339/- and Rs.54,218/-, the Appellant submits that the services were actually utilized by the appellant-company in Kolkata only; Particularly, the CENVAT Credit of Rs.54,218/- pertains to their Kolkata office, for advising and consultancy on a proposed project at Delhi. The Appellant submits that in terms of Rule 7 of the CENVAT Credit Rules, 2004, the head office can be considered as an Input Service Distributor (ISD) and the credit pertaining to one unit can be distributed by the head office. They submit that Page 6 of 13 Appeal No.: ST/70535/2013-DB the requirement of registration of the head office as an ISD became mandatory only after issue of Notification No. 18/2012 dated 17.03.2012; till such period, the head office could transfer the credit without registration also. Further, the Appellant submits that substantial benefit cannot be denied on account of procedural infirmities.
7.2. Regarding the CENVAT Credit of Rs.5,09,494/-
in respect of credit of services received by the group companies, the Appellant submits that the said credit pertains to input services which were used by them for rendering taxable output services, as per the agreements entered into with the group companies. Thus, the said credit pertains to input services used by them only and hence they are eligible for the credit.
7.3. The Appellant contends in respect of the denial of CENVAT Credit to the tune of RS.1,50,460/- on the allegation that the services in relation to funeral, obituary, choutha, photograph services relating to photograph and portrait of Late Jit Paul, the Appellant has not contested the issue on merit. They have contested the issue only on limitation.
7.4. The Appellant has submitted that the amount of credit of Rs.1,06,968/- availed by the Appellant is inadmissible/availed by mistake and they are agreeing to reverse the said amount.
7.5. In view of the above submissions, the Appellant has prayed for allowing the CENVAT Credit availed by them as mentioned in paras 7.1 to 7.4 supra.
8. The Ld. Authorized Representative of the Revenue submitted that the Appellant had availed CENVAT Credit on the basis of documents which do not contain all the details as prescribed under Page 7 of 13 Appeal No.: ST/70535/2013-DB Rule 9 of the CENVAT Credit Rules, 2004. He further submits that in respect of some of the credit availed by Appellant, the input services were received by their Head Office at Delhi and their group companies, which were not related to the output services rendered by the Appellant. He further contends that the Head Office at Delhi had not registered as ISD to distribute the credit. Accordingly, he submits that the impugned order has rightly denied the CENVAT Credit and therefore he supported the impugned order and the demands raised therein.
9. Heard the parties and perused the appeal records.
10. We observe that the impugned order has denied the CENVAT Credit on various grounds. The break-up of the demands raised and confirmed against the Appellant, as submitted by the Appellant, is given below: -
S. Allegation for denial of credit Disputed No. Amount (in Rs.)
1. Availment of ITC on the basis of bank vouchers, ledger 1,53,92,538/-
entries, unnumbered invoices. Contravention of Rule 4A of Service Tax Rule read with 9(f) of CENVAT Credit Rules. Expenses incurred are personal in nature of the Management consultant and have no nexus with output liability of such person.
2. Availment of ITC on security services, management 6,73,339/-
consultancy, ROIP, maintenance and repair, received by Delhi office. Not registered as ISD
3. Availment of ITC on security services, management 54,218/-
consultancy, ROIP, maintenance and repair, received by Delhi office. Not registered as ISD
4. Availment of credit on services received by other group 5,09,494/-
companies and other places having separate registration. Not registered as ISD
5. Availment of credit on advertising services relating to 1,50,460/-
Funeral, Obituary, Choutha, Photograph servcies relating to photograph & portrait of Late Jit Paul having no relation directly with their output services.
6. Inadmissible (not contested by the Appellant) 1,06,968/-
Total 1,68,87,017/-
Page 8 of 13Appeal No.: ST/70535/2013-DB
11. Regarding the denial of credit as mentioned in Sl. No 1 in the above table, we observe that the appellant has availed CENVAT Credit amounting to Rs.1,53,92,538/- in respect of management consultancy rendered by the business consultants. We find that there is no dispute regarding service of management consultancy rendered by the business consultants to the appellant. CENVAT Credit has been denied in the impugned order on the ground that the invoices and documents based on which credit was availed were not proper documents as prescribed under Rule 9(2) of the CENVAT Credit Rules, 2004. Also, some personal expenses incurred by the business consultants are included in the taxable value which cannot be considered as payments made towards rendering of management consultancy services.
11.1. We have gone through the documents submitted by the Appellant during the course of hearing. We find that the documents based on which CENVAT Credit was availed by the Appellant, contains all the basic information such as description of the taxable service, service tax payable thereon, name, address and registration number of the service provider, etc. Thus, we find that the documents contain all the details as required under proviso to Rule 9(2) of the said Rules. Accordingly, we hold that the documents, based on which the Appellant had availed CENVAT Credit, are valid documents to avail CENVAT. Thus, we do not find any infirmity in availment of the CENVAT Credit by the Appellant on the basis of these documents.
Page 9 of 13Appeal No.: ST/70535/2013-DB 11.2. Regarding the allegation that the business consultants have incurred various 'personal' expenses which have been reimbursed by the Appellant and Service Tax paid on these personal expenses by including the same in the taxable value has been availed as credit, we observe that the Appellant has reimbursed these expenses and deducted the same from their consultancy fee. Further, we observe that these payments have been made as per the terms and conditions agreed upon in their appointment letter; the personal expenses reimbursed by the Appellant to the management consultants are deducted from the consultancy fee payable to them. Thus, we observe that the entire amount paid by the appellant to the business consultants was towards their consultancy fee only and hence we hold that the Service Tax paid on such management consultancy services, are 'input services' to the appellant in terms of Rule 2(l) of the CENVAT Credit Rules, 2004.
11.3. In view of the above, we hold that the Appellant has rightly availed CENVAT Credit of Service Tax paid by the business consultants on the gross value including all the expenses incurred by them during the course of providing management consultancy services. Therefore, we hold that the Appellant has rightly availed the CENVAT Credit of Rs.1,53,92,538/- on the management consultancy services received by them from the said business consultants. Accordingly, we hold that the appellant has rightly availed CENVAT Credit amounting to Rs.1,53,92,538/- and set aside disallowance of credit confirmed in the impugned order.
Page 10 of 13Appeal No.: ST/70535/2013-DB
12. Regarding the CENVAT Credit availed on input services received at the Delhi Office amounting to Rs.6,73,339/- and Rs.54,218/-, we observe services were actually utilized by the appellant-company in Kolkata only. We find that the CENVAT Credit of Rs.54,218/- pertains to their Kolkata office, for advising and consultancy on a proposed project at Delhi. We observe that in terms of Rule 7 of the CENVAT Credit Rules, 2004, the head office can be considered as an Input Service Distributor and the credit pertaining to one unit can be distributed by the head office. The requirement of registration of the head office as an ISD became mandatory only after issue of Notification No. 18/2012 dated 17.03.2012 and till such period, the head office could transfer the credit without registration also. We also observe that substantial benefit cannot be denied on account of procedural infirmities. As there is no dispute that the said services have been used by the Appellant towards rendering of their output services, we hold that the credit cannot be denied on the ground that the invoices issued were in the name of their head office. Even otherwise, we observe that mentioning of the head office's address is only a procedural error, which cannot be a reason to deny the CENVAT Credit which is otherwise eligible to the Appellant. Accordingly, we hold that the CENVAT Credit availed by the appellant on input services received at the Delhi Office amounting to Rs.6,73,339/- and Rs.54,218/-, are eligible to them. Hence, we set aside disallowance of credit confirmed in the impugned order on this count.
13. With regard to availment of CENVAT Credit to the tune of Rs.5,09,494/- on services received by group companies, we observe that the said credit was availed by the Appellant in the course of rendering Page 11 of 13 Appeal No.: ST/70535/2013-DB taxable output services in terms of the agreement entered into with the group companies. Thus, we observe that the said credit are related to input services which were used by the appellant for rendering taxable output services. Accordingly, we hold that the appellant are eligible for the credit and set aside disallowance of credit confirmed in the impugned order on this count.
14. Regarding the credit of Rs.1,50,460/- availed by the appellant, we observe that these services are related to funeral, obituary, choutha, photograph services relating to photograph and portrait of Late Jit Paul. We find that the above services has no direct or indirect connection with the output services rendered by the Appellant. Accordingly, we hold that the credit availed by the Appellant in respect of these services cannot be considered as 'input services'. Therefore, the CENVAT Credit availed to the extent of these services which are not related to any of the output services, are not available to the Appellant. The appellant has not furnished any evidence regarding the demand being by limitation. Accordingly, we uphold the disallowance of these credits in the impugned order.
15. Regarding the CENVAT credit of Rs.1,06,968/-, the Appellant admitted that the said credit is not eligible to them and they have availed it by mistake. Thus, we hold that the appellant is not eligible for the Credit of Rs.1,06,968/-. Hence, we uphold the denial of CENVAT Credit to this extent.
16. Regarding the demand of interest and penalty confirmed in the impugned order, we observe that in respect of the CENVAT Credit which has been held to be allowed in this Order, there was no irregular Page 12 of 13 Appeal No.: ST/70535/2013-DB availment of credit and hence, the question of demanding interest and imposing penalty does not arise. However, in respect of the irregular credit confirmed in the impugned order, we hold that the appellant is liable to pay interest and penalty equal to the irregular credit availed, as the appellant has availed and utilized the credit which is otherwise not entitled to them.
17. In view of the above, we pass the following order:
(i) We allow the CENVAT Credit amounting to Rs.1,53,92,538/- availed by the Appellant in respect of the services provided by the business consultants.
(ii) In respect of the CENVAT Credit availed amounting to Rs.6,73,339/-, Rs.54,218/- and Rs.5,09,494/-, we hold that the Appellant is eligible for the CENVAT Credit and the denial of CENVAT Credit to this extent is set aside.
(iii) We hold that the CENVAT Credit amounting to Rs.1,50,460/- was availed by the Appellant for the services which are not 'input services' for the Appellant and hence, they are ineligible for this credit. We also uphold the denial of CENVAT Credit amounting to Rs.1,06,968/, as the same is not contested by the Appellant.
(iv) We hold that the Appellant is liable to pay interest and penalty equal to the irregular credit availed and confirmed in paragraph (iii) above of this order. However, if the irregular credit availed is paid along with interest within 30 days of receipt of this order, the penalty imposed will stand reduced to 25% of the irregular credit confirmed vide Sl. no. (iii) above, in this order.Page 13 of 13
Appeal No.: ST/70535/2013-DB
18. The Appeal is disposed of on the above terms.
(Operative part of the order was pronounced in open court) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd