Custom, Excise & Service Tax Tribunal
M/S. Chowgule Industries Private Ltd vs Commissioner Of Central Excise, ... on 23 January, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. ST/490/12-MUM [Arising out of Order-in- Appeal No. PIII/RS/142/2012 dtd. 23/4/2012 passed by the Commissioner (Appeals-III), Central Excise, Pune] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. Chowgule Industries Private Ltd.
:
Appellants
VS
Commissioner of Central Excise, Pune-III
:
Respondent
Appearance
Shri. Vinay Jain, C.A. for the Appellants
Shri. S. V. Nair, Asst. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 23/1/2015
Date of decision: /2/2015
ORDER NO.
Per : Ramesh Nair
The appeal is directed against Order-in- Appeal No. PIII/RS/142/2012 dtd. 23/4/2012 passed by the Commissioner (Appeals-III), Central Excise, Pune, wherein Ld. Commissioner(Appeals) modified the order-in-original dated 16/12/2011 passed by the Dy. Commissioner, Service Tax Cell, Pune-III. The fact of the case is that the appellant is a holder of Service tax registration and are engaged in receipt of service of Authorized Service Station and Business Auxiliary Service. He also carries trading of motor vehicle parts. The adjudicating authority in the order-in-original dropped the demand of Cenvat Credit of Rs. 33,691/- holding that this demand can not be made under Rules 6(3)(b) of CCR, 2004, the appellant is not providing any exempted service; confirmed demand of Rs. 1,63,370/-and same was appropriated from the amount already deposited. This demand was on account of wrong availment of credit inasmuch as the appellant availed Cenvat Credit in respect of services for which invoice was received but the payment of service to the service provider was made subsequently. The demand of Rs. 1,42,961/- against Cenvat Credit availed on debit notes was dropped; the demand of Rs. 32,159/-was confirmed on courier service which was used in respect of sending of feed back forms and the insurance policies to their customers after deliver/sale of the vehicle. Interest on the confirmed demand was also demanded penalty of Rs. 32,159/- was imposed under Section 78. Aggrieved partly by the said order, the Revenue filed an appeal before the Commissioner(Appeals), wherein the Revenue sought to confirm the demand of Rs. 33,619/- equal to 8% of the value of exempted service as provided under Rule 6(3), CCR, 2004 alongwith interest liability and penalty and also sought to imposed penalty under Section 76 or 78 for wrong availment of Cenvat Credit of Rs. 1,63,317/- . The Ld. Commissioner(Appeals) in the Revenues appeal confirmed the demand of Rs. 33,619/- alongwith interest under Section 75 however did not impose any penalty under Section 76. As regard the appeal of the Revenue in respect of penalty and in relation to demand of Rs. 1,63,370/- the Ld. Commissioner(Appeals) imposed penalty of equal amount of Rs. 1,63,370/- on the appellant under Section 78 of the Finance Act, 1994. Aggrieved by the said order of the Commissioner(Appeals) the appellant is before me.
2. Shri. Vinay Jain, Ld Counsel for the appellant submits that as regard the demand of Rs. 33,619/-which is equal to 8% of value of the trading activity has rightly dropped the demand on the ground that trading activity does not fall under the category of exempted service. He submits that Rule 6(3)(b) of Cenvat Credit Rules, 2004 can be made applicable only in respect of services which are exempted from payment of service tax. He further submits that on very same issue involved that whether trading activity is exempted service or otherwise was under dispute and subsequently vide Circular no . 9/43/4/2011/EX date 29/4/2011 the matter was clarified by the Board. Therefore there is no malafide intention of the appellant for non-payment of service tax of Rs. 33,619. It is his submission that demand was raised by invoking the extended period which is not sustainable. As malafide is not attributed to the appellant, the demand is not sustainable even on the ground of limitation. As regard penalty of Rs. 1,63,370/- imposed by the Ld. Commissioner(Appeals) under Section 78, he submits that Cenvat Credit was disputed only due to the reason that credit was availed on the date of receipt of service invoice whereas in terms of Rule 4(7) credit is admissible only after payment of service value made to the service provider. It is his submission that this is not the case where Cenvat Credit was at all inadmissible, however the credit was availed few days in advance from the date of payment of service value. The appellant has admittedly paid interest for the period from the date of credit taken till the date when service value was paid to the service provider, however the admissibility of the Cenvat Credit was not in dispute otherwise. Therefore under this circumstances lower adjudicating authority has correctly refrained from imposing any penalty under Section 78 invoking the provision of Section 80 of the Finance Act, 1994. Moreover the appellant point out the discrepancy and admittedly paid the amount of service tax of Rs. 1,63,370/- and the same was appropriated by the Adjudicating authority.
3. On the other hand, Shri. S. V. Nair, Ld. Asst. Commissioner (A.R.) appearing for the Revenue reiterates the findings of the impugned order. He submits that as regard demand of service tax amounting of Rs. 33,619/- it was clearly admitted. He submits that as regard non-availability of Cenvat Credit on the services used in trading activity there was no dispute, whether said activity falls under the exempted goods or otherwise since the credit was used for non taxable activity the demand under Rule 6(3)(b) is sustainable. As regard the time bar, Ld A.R. submits that the appellant has never disclosed fact that the input services were used for trading activity therefore is it clear case of suppression of facts, hence extended period was correctly invoked. Regarding demand of Rs. 1,63,370/- in respect of credit taken in advance before the payment of service value to the service provider, he submits that since the credit was admittedly inadmissible and same was paid by the appellant penalty under section 78 was correctly imposable.
4. I have carefully considered the submissions made by both the sides and perused the record.
5. The issue to be decided by me in the present case is whether the demand of Rs. 33,619/- under Rule 6(3)(b) equal to 8% value of the trading activity in terms of Rules 6(3)(b) is correct or otherwise and whether penalty of Rs. 1,63,370/-imposed under Section 78 in respect of denial of Cenvat Credit availed before the payment of Service value to the service provider is legal and correct or not. As regard Cenvat Credit of Rs. 33,619/-, it admitted fact that this demand amount is related to trading activity of the appellant. As per definition of input Service, credit of only those services are admissible, which are used for providing of out put service on which service tax is paid. In the present case this credit is related to the service which is used in relation to the trading activity of the appellant. As regard time bar I agree with the Ld. A.Rs submission that the appellant has not brought the fact that they are doing the trading activity and some cenvatable services are used for said trading activity. In such a situation the department could not know this fact which leads to suppression of fact. I, therefore upheld the demand of Rs. 33,619/- alongwith interest as confirmed by the Ld. Commissioner (Appeals). Regarding imposition of penalty of Rs. 1,63,370/- under section 78, I find that this credit was disputed only due to the reason that same was availed before the payment of service value to the service provider by the appellant however, in principle, the credit was very much admissible to the appellant which the appellant on pointing out discrepancy, immediately paid the amount. Taking into consideration this fact the Ld. Original authority has not imposed penalty either under Sectin 76 or under Section 78 by extending the benefit provided under Section 80 of the Finance Act, 1994. I do not find any infirmity in the findings of the Ld. original adjudicating authority. The Ld. adjudicating authority has given justification in invoking Section 80 which extracted below:-
Noticee had availed Cenvat wrongly credit of Rs. 1,63,370/- in respect of the input service invoices before making payments to the service provider. In this connection, I observe that as per the provisions of Rule4(7) of the Cenvat Credit Rules, 2004, the notice can avail Cenvat credit in respect of input service on after payment of the value of input service and the service tax indicated in the invoice/challan/bill as referred in Rule 9 of the Cenvat Credit Rules, 2004. Therefore, I hold that the notice, by availing aforesaid Cenvat Credit Rs. 1,63,370/-, has violated the provisions of Rule 4(7) fo the Cenvat Credit Rules, 2004 and the amount of Rs. 1,63,370/- so wrongly availed by them is liable to be recovered form them under the provisions of Section 73 of the Finance Act, 1944. Further, I observe that the notice has suppressed the facts of availment of Cenvat credit before the payment to the service provider, from the department and these facts came to surface only when the Audit Officers of the Central Excise and Service tax, Pune III Commissionerate scrutinized the records of the notice. Therefore, the extended period for recovery of service tax liability beyond the period of one year is rightly invokable in the instant case. Further, I hold that the notice is also liable to interest for delayed payment under Section 75 of the Finance Act, 1994. Further, I observe that the notice has accepted the lapse on their part and made payment of Rs. 1,63,370/- towards their liability and have also paid interest of Rs. 3301/-. In the instant case, I observe that there was no malafide intention to evade the service tax by the notice and their only lapse was that they availed said credit before making payment to the service provider, which they made good by making payment of service tax amount alongwith interest. Therefore, I am inclined to extend the benefit under Section 80 of the Finance Act, 1994 to the notice and restrain from imposing any penalty under Section 78 of the Finance Act, 1994 on the noticee. Further, I observe that the penalty under section 76 of the Finance Act, 1994 is imposable only in cases where any person liable to pay service tax 68 fails to pay such tax. In this connection, I observe that the notice has not failed in payment of service tax in terms of Section 68 of the Finance Act, 1994 and hence, I hold that the penalty under Section 76 of the Finance Act, 1994 is not imposable upon the noticee.
I observed that there was no malafide intention to evade the service tax by the noticee and their only lapse was that they availed said credit before the payment of service value to the service provider, which they made goods by making payment of service tax amount alongwith interest. I find that explanation given by the original authority is satisfactory in invoking Section 80 for dropping the penalty proposed under Section 78. Therefore the Ld. Commissioners observations in the impugned order that there is no justification are erroneous and incorrect. In view of this, I set aside the penalty of Rs. 1,63,370/-. The appeal is partly allowed in the above terms.
(Operative part of the order pronounced in the court on / 2/2015) Ramesh Nair Member (Judicial) sk 8