Custom, Excise & Service Tax Tribunal
International Flavours And Fragrances ... vs Commissioner Of Gst&Amp;Cce (Chennai ... on 3 September, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
REGIONAL BENCH - COURT NO. - III
Excise Appeal No. 40275 of 2019
(Arising out of Order-in-Appeal No.525/2018 (CTA-II) dated 30.10.2018 passed by
the Commissioner of GST & Central Excise (Appeals - II), Chennai)
M/s. International Flavours and Fragrancies
India P. Ltd. Appellant
1 - 5, Seven Wells Street
St. Thomas Mount
Chennai - 600 035.
Vs.
Commissioner of GST & Central Excise Respondent
Chennai South Commissionerate, MHU Complex 692, Anna Salai, Nandanam Chennai - 600 035.
APPEARANCE:
Ms. S. Sridevi, Advocate for the Appellant Shri S. Govindarajan, AC (AR) for the Respondent CORAM Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Final Order No. 41031 / 2019 Date of Hearing: 03.09.2019 Date of Decision: 03.09.2019 Brief facts are that the appellants are engaged in the manufacture of flavouring essences and hold central excise registration. During the course of audit, it was noticed that appellant availed CENVAT credit based on the invoices issued by M/s. BPS Engineering (BPS for short) for rendering welding, fabrication service etc. to the appellants. The invoices charged service tax at full rate. On verification through ACES, it was found that though the appellant had taken credit of service tax based on the invoices raised by BPS, 2 the service provider that is BPS had not paid the service tax during the years 2013 - 14, 2014 - 15, 2015 - 16 and 2016 - 17. When the fact of non-payment was pointed out, the appellant vide letter dated 3.4.2017 submitted the workings and challans dated 9.2.2017. It was stated by the appellant that instead of reversing the credit or paying the amount in their name, they have paid an amount of Rs.6,26,494/- towards service tax and Rs.2,60,782/- towards interest on behalf of BPS. The department was of the view that as per Rule 9(1)(bb) of CENVAT Credit Rules, 2004, the challan for availing the credit is not a valid document as the amount was not paid by BPS to the Government and it amounted to suppression of facts with intent to evade payment of duty by the service provider namely BPS. Show Cause Notice was issued to the appellant proposing to demand an amount of Rs.6,26,494/- along with interest and for imposing penalty. After due process of law, the original authority confirmed the demand along with interest and imposed penalty. In appeal, Commissioner (Appeals), upheld the same. Hence this appeal.
2. On behalf of the appellant, ld. counsel Ms. S. Sridevi appeared and argued the matter. She submitted that the appellant had paid the service tax along with service charges to BPS for the services rendered by them. Thereafter, when it was pointed out that the service provider had not deposited the service tax collected from them to the Government, the appellant after having talks with BPS had made arrangements for depositing the service tax along with interest with the Government on behalf of BPS. This was because there were dues pending towards service charges for BPS. By adjustment, the appellants had paid the service tax amount along with interest on behalf of BPS only. Since the service tax has been 3 fully paid to the Government, the confirmation of demand and disallowance of credit cannot sustain. It is also submitted by her that Rule 9(1)(bb) of CENVAT Credit Rules, 2004 will apply only if the credit is taken on supplementary invoices. In the present case, credit has been taken on the original invoice issued by the service provider. Merely because the appellant deposited the service tax amount on behalf of BPS, the department has assumed that the payment was deposited with the Government only after taking credit. She prayed that the impugned order may be set aside and the appeal be allowed.
3. On behalf of the department, ld. AR Shri S. Govindarajan appeared and argued the matter. He much stressed upon Rule 9(1)(bb) of CENVAT Credit Rules and explained that when the credit has been availed on the invoices for which the service provider has evaded payment of service tax by suppression of facts, the service recipient is not eligible to take credit. In the present case, it is clear that the service provider has not paid the service tax to the Government since the appellants have sought to pay the amount at a later stage. Thus, while taking credit the amount was not deposited to the Government and therefore the authorities below have rightly disallowed the credit.
4. Heard both sides.
5. On perusal of the facts, it is seen that the appellant has paid the service tax to the service provider along with service charges. Merely because the service provider failed to deposit the service tax collected from the appellant to the Government, the department has issued the Show Cause Notice invoking Rule 9(1)(bb) of CENVAT Credit Rules. First of all, it has to be seen that the credit has not been availed on supplementary invoice but has been availed on the original 4 invoice issued by the service provider. Rule 9(1)(bb) will apply only in a case where supplementary invoice is issued at a later stage to benefit the service recipient to avail credit. In the present case, the service provider though collected the service tax from the appellant has failed to deposit with the Government. The appellant has made arrangements to adjust their dues pending with the service provider and paying the service tax on behalf of the service provider. The letter dated 21.12.2016 issued by the service provider (BPS) to appellant would establish that they have paid the service tax on behalf of BPS after adjusting all the pending dues between parties. Thus, it is very much clear from the facts that the appellant has paid the service tax at the time of paying the service charges. Merely because the service provider failed to deposit the same with the Government, the credit cannot be denied at the end of the service recipient. The Tribunal in the case of L.G. Electronics India Pvt. Ltd. Vs. Commissioner of Central Excise, Noida - 2017 (48) STR 248 (Tri. All.) had occasion to analyse the similar issue and held that non- payment of service tax by service provider cannot be a ground for denying credit at the end of the service recipient.
6. From the above discussion and following the decision referred supra, I am of the view that the disallowance of credit is unjustified. The impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Dictated and pronounced in open court) (SULEKHA BEEVI C.S.) Member (Judicial) Rex