Custom, Excise & Service Tax Tribunal
Cisco Systems (India) Pvt. Ltd vs Commissioner Of Service Tax Bangalore on 3 December, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 27070 / 2013 Application(s) Involved: ST/Stay/28571/2013 in ST/27961/2013-SM Appeal(s) Involved: ST/27961/2013-SM [Arising out of Order-in-Appeal No. 273/2013 dated 15/07/2013 passed by Commissioner of Central Excise (Appeals-II), Bangalore Cisco Systems (India) Pvt. Ltd. No.11, Divyashree Chambers, B Wing, O' Shaguhnessy Road, Akkithimanahalli, BANGALORE KARNATAKA-560025 Appellant(s) Versus Commissioner of Service Tax Bangalore 16/1 , 5th Floor, S.P.COMPLEX, LALBAGH ROAD, BANGALORE, KARNATAKA 560027. Respondent(s)
Appearance:
Mr. T.R. Venkateshwaran, A.A. LEVEL 3, PRESTIGE NEBULA-1-8-12, CUBBON ROAD, BANGALORE -560001 For the Appellant Mr. S. Teli A.R. For the Respondent CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER Date of Hearing: 03/12/2013 Date of Decision: 03/12/2013 During the period from April 2006 to 15th May 2008, the appellant was engaged in providing taxable services under the category of business auxiliary service, business support service and information technology service. During the relevant period, information technology service was not a taxable service and other two services were taxable. The appellant was availing CENVAT Credit of service tax paid on various services such as management, maintenance or repair service, commercial training and coaching service. etc. During the audit of the appellants records, the audit made an observation that the appellants had to maintain separate accounts in respect of services utilized for information technology service and other services. Considering information technology service as an exempted services and because of non-maintenance of separate accounts, appellants became eligible to utilize only 20% of the CENVAT credit available for payment of service tax on the output services. Since the appellants utilized more than 20% during the relevant period, proceedings were initiated by issuing show-cause notice for demand of service tax of Rs. 25, 70,450/- with interest thereon. Penalty was also proposed to be imposed. After culmination of proceedings in the impugned order, service tax demand of Rs. 25,70,450/- and interest of Rs 13,88,195/-(calculated and paid by the appellants) has been confirmed and penalty equal to the service tax demanded has been imposed.
2. The learned Chartered Accountant submits that the appellants had maintained separate accounts. In respect of services which were exclusively used for taxable services, they had availed the entire credit and in respect of common services which were utilized for both taxable and non-taxable services, they have not at all availed credit. As regards services which were exclusively used for output service, which was not taxable they have neither taken the credit nor utilized the same. He submits that under these circumstances, the appellant was not required to limit the utilization of CENVAT credit to 20% of the available credit for payment of service tax since they had fulfilled the obligation under Rule 6(2) of CENVAT Credit Rules 2005. He also submits that the appellants while replying to show-cause notice and during the adjudication proceedings made categorical submission to this effect and also filed certificates issued by Chartered Accountants certifying the fact and the manner in which they had maintained the accounts and the amounts involved and details thereof. He submits that a copy of the audit report was not given to them but a show-cause notice was issued straight away and after the adjudication order was passed, the appellants decided that having regard to the size of their company, the amount involved was small and not worth litigating further and therefore they would limit the litigation only to penalty and CENVAT credit amount with interest would be paid by them. Accordingly they deposited the entire amount of CENVAT credit demanded with interest and also paid 25% of the penalty under Section 78 of the Finance Act 1994. He submits that even though the appellants have a case on merits, they have taken a policy decision not to litigate and he seeks only waiver of penalty imposed on the appellant.
3. Learned A.R. would submit that the appellants have not maintained separate accounts and Commissioner (Appeals) has recorded a specific finding, to this effect. On a query from the Bench, he submits that the basis for the observation is the audit report. He also further points out that the Commissioner (Appeals) has also clearly indicated that the appellants did not file the declaration which was required and therefore they were required to pay service tax and the interest thereon and penalty has been rightly imposed.
4. I have considered the submissions made by both sides and I have also gone through the records. As submitted by the learned Chartered Accountant, the appellants during the adjudication proceedings had clearly stated that they were maintaining separate accounts and they had also stated that they were not at all taking and utilizing the credit relating to common input services and input services exclusively used for exempted services. The original adjudicating authority observed that there is no categorical declaration in ST-3 returns that they have opted for the maintenance of separate accounts for the purpose of fulfilling conditions stipulated under Rule 6 of CENVAT Credit Rules 2004. In paragraph 3, he goes on to observe that assessee has not maintained separate accounts. However, there is no indication in para-3 of the order that any verification of the claim made by the assessee regarding maintenance of separate accounts and certificate issued by the Chartered Accountant was made by verifying the records maintained by the assessee or not. There is also no reason given as to why the Chartered Accountants certificate is not acceptable. While the paragraph is very detailed, on the most important aspect as to why the submissions and the Chartered Accountants certificate are not acceptable, the order is silent. In the same manner, the Commissioner (Appeals) also has taken a view that appellants have not maintained separate accounts and have not filed declaration in ST-3 returns. On going through the records, I find that once the assessee made a claim that they had maintained separate accounts, just because there was an audit report stating that separate accounts were not maintained, in the absence of any statement or letter or any documents containing admission on the part of the assessee that no separate records have been maintained and in the reply to the show cause notice assesse maintained that they had maintained separate accounts, merely based on the audit reports, a finding could not have been and should not have been recorded against the assessee. In the absence of any investigation conducted subsequent to audit report and in the absence of any admission by the appellant and on the contrary, claim made by the appellants supported by Chartered Accountants certificate that separate accounts were maintained, the findings recorded by both the authorities that no separate accounts were maintained cannot be sustained. As regards the declaration in ST-3 if the assessee is maintaining separate accounts as per Rule 6(2)of CENVAT Credit Rules 2004, such manufacturer who opts to maintaining separate accounts need not have to follow any procedure. What is required is that, he should maintain separate accounts and not take the credit attributable to exempted service. The requirement of declaration in ST-3 returns is not available either in Rule 6(2) or under Rule 6(3). Only when an assessee opts to pay the amount as determined under sub-rule 3(a) or Rule 6 of a CENVAT Credit Rules 2004, the procedure prescribed under Rule 3(a) is required to be followed. Even this procedure does not contemplate any categorical declaration to be filed in ST-3 returns. In fact, if we read Rule 6(3) (a) (d) the difference between the correct amount determined as per the condition (c) of the Rule and correct amount paid as per condition (b), the manufacturer has to pay this before 30th June of the succeeding financial year. This also shows that this has nothing to do with ST-3 returns. Further, according to condition (g), the provider of output service is required to intimate the Superintendent of Central Excise of the jurisdiction within 15 days from the date of payment or adjustment certain details as mentioned therein. An analysis of Rule 3(a) would show that it is a detailed procedure separate from ST-3 returns and other applications which are required under other rules. Therefore the observations of both the lower authorities on categorical declarations in ST-3 returns does not flow from the Statute but from their imagination.
5. Even though a lot more can be said about the order, I feel it is a waste of time going into all the aspects and commenting on the order. In my opinion, the claim made by the assessee that they have maintained separate accounts and Chartered Accountants certificate submitted by them have to be accepted in the absence of any contrary evidences produced by the Revenue. Once separate accounts have been maintained, there was no obligation on the assessee to pay the amount and interest as demanded. In any case since the appellant is not contesting the service tax demand and interest thereon, the same is upheld as not contested. As regards penalty, in the facts and circumstance of the case, there is no case whatsoever for imposition of penalty.
6. Even though the matter was listed only for hearing the stay application, the circumstances discussed above compelled me to decide the appeal itself and accordingly, the appeal is allowed with consequential relief, if any, to the appellants.
(Order dictated and pronounced in open court) B.S.V.MURTHY TECHNICAL MEMBER pnr...
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