Custom, Excise & Service Tax Tribunal
M/S Stock Holding Corporation Of India ... vs Commissioner Of Service Tax, Mumbai-Ii on 27 August, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. ST/210/12 (Arising out of Order-in-Original No. 02-03/ST-II/WLH/2012 dated 13.01.2012 passed by the Commissioner of Service Tax, Mumbai-II). For approval and signature: Honble Shri Anil Choudhary, 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 : Yes 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? ====================================================== M/s Stock Holding Corporation of India Ltd. Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent Appearance: Ms. Bijal Chandarana, C.A. for Appellant Shri B.K. Iyer, Supdt. (AR) for Respondent CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 27.08.2014 Date of Decision: 27.08.2014 ORDER NO. Per: Shri Anil Choudhary
This appeal is filed by the appellant against Order-in-Original No. 02-03/ST-II/WLH/2012 dated 13.01.2012 passed by the Commissioner of Service Tax, Mumbai-II.
2. The brief facts of the case are that the appellant, M/s Stock Holding Corporation of India Limited (SHCIL in short), renders custodial and depository services under the category of Banking & Financial Services and is registered with the Service Tax department, holding Service Tax Registration for due discharge of service tax. During the period under consideration i.e. 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09, the Appellant had consumed among others the following input services and claimed input tax credit of such input services under the CENVAT Credit Rules, 2004: -
a. Insurance Services b. Club Membership Services c. Residential Telephone Connections d. Outdoor Catering Services e. Cable Operator Services 2.1 For the periods prior to 10.09.2004, the service tax returns consisted of an Annexure providing transaction details of all the input tax credits claimed. Such Annexure was duly filed with the Department. As such, the claim of credit of service tax on such input services was within the knowledge of the Revenue. Consequently, audit was conducted by department and two show cause notices dated 16.10.2008 for the period 2003 to 2008 and dated 23.09.2009 for the period 2008-09 were issued denying the CENVAT credit on the following:-
a) Insurance Services
b) Club Membership Services
c) Residential Telephone Connections
d) Outdoor Catering Services
e) Cable Operator Services 2.2 The show cause notice dated 16.10.2008 was issued for the extended period of limitation. The Appellants replied to the above show cause notices submitting that the CENVAT credit is rightly available to them considering the provisions of Rule 2(l) of the CENVAT Credit Rules. At the time of personal hearing also, the Appellants submitted that they were under the bona fide belief that the CENVAT credit on the above mentioned input services was rightly available to them. Considering the submissions of the Appellants, the Ld. Commissioner (adjudicating authority) allowed the CENVAT Credit with respect to certain input services and disallowed the rest. The details of the same are presented herein below: -
Nature of Service Credit Allowed Credit Denied Total Credit Insurance (Incl. Medical/Health Ins., Group Ins. & Vehicle Ins.) 1,17,86,993 18,14,952 1,36,01,945 Club Membership 1,80,922 0 1,80,922 Residential Telephone Connections 0 21,559 21,559 Outdoor Catering 7,45,935 0 7,45,935 Cable Operators Services 0 1,166 1,166 Total 1,27,13,850 18,37,677 1,45,51,527 2.3 Further, as is evident from above, the total of disallowed CENVAT Credit comes to Rs.18,37,677/- whereas the Order-in-Original wrongly mentioned the disallowances of CENVAT credit as Rs.18,59,705/- and ordered recovery of the same with interest and penalty. The Ld. Commissioner disallowed the CENVAT credit on the following grounds that the input service utilized do not have any nexus with the output service provided by the Appellants. Further the Appellants had suppressed the fact of availment of CENVAT Credit, from the department.
3. The learned C.A. appearing for the appellant submits that the show cause notice for the period 2003 to 2008 has been issued on date 16.10.2008. Further, the fact of availment of CENVAT Credit on services in dispute was with the department right from 2004 onwards. In spite of that the department failed to issue show cause notice within the time frame of one year. Further, the said show cause notice was issued without specifically invoking the extended period of limitation. The Appellants relied on various judgments wherein it has been held that where the facts are known to the department, extended period cannot be invoked.
3.1 She further submits the Order-in-Original has traversed beyond the scope of show cause notice on two aspects: -
a. The show cause notice has not invoked the extended period of limitation whereas the OIO invokes the same and confirms the demand.
b. The show cause notice does not propose to demand penalty u/s 77 whereas the OIO confirms the penalty of Rs.20,000/- u/s 77 3.2 For establishing the nexus, the Appellants has referred to Boards clarification vide circular no. 120/01/2010 dated 19.1.2010 wherein the legislature clearly intended to allow credit of input services which are used directly & indirectly for the rendition of output services and without which the quality & efficiency of the output service would be highly affected. The Appellants, thus submitted that the CENVAT Credit of Rs.18,37,677/- be allowed to them. The Appellants submitted that OIO disallowed the CENVAT Credit of Special Contingency Policy (which pertained to insure against the infedility and forgery of securities, etc). The relevant policy papers were submitted at the time of hearing. The said insurance policy had a direct nexus with the output services provided by the Appellants and hence, they prayed that the CENVAT Credit of Rs.18,14,952/- be allowed to them.
3.3 The Appellants also submitted that the CENVAT Credit of residential telephone connections pertained to those senior employees who were required to respond to the top management and clients even during sick leaves, holidays or even during non-office hours. The said facility of paying the residential telephone bills was only given to senior employees and not to the whole staff in general. The Appellants therefore, prayed that the CENVAT Credit of Rs.21,559/- be allowed to them. The Appellants relied on various case laws wherein the CENVAT Credit of residence telephone connections was allowed to them. The Appellant submitted that they have installed Television sets at its various branches for the purpose of the stock quotes being regularly flashed and business channels being displayed. This helped the clients to take prompt informed decisions about transacting in particular scripts. The said input service has a direct nexus with the output service provided by the Appellants and hence, they prayed that the CENVAT Credit of Rs.1,166/- pertaining to cable operator services be allowed to them.
3.4 The Appellants also submitted that considering the amendment w.e.f. 01.04.2011 in Rule 2(l) of the CENVAT Credit Rules, the CENVAT credit with respect to Insurance services should be allowed to them. The Appellants relied on Circular No.943/04/2011-CX dated 29.04.2011 wherein it was clarified that credit on services received before 01.04.2011 (on which credit is not allowed w.e.f. 01.04.2011) shall be available if its provision had been completed before 1.4.2011. The Appellants also submitted that in the impugned order, there is clerical error. The said fact is evident from the table of disallowance of CENVAT credit wherein the total of disallowances amounted to Rs. 18,37,677/- whereas the Ld. Commissioner mentioned the amount of disallowance as Rs. 18,59,705/-; which is an excess disallowance of Rs. 22,028/- for no reason.
3.5 The Appellants submitted that the penalty u/s. 77 cannot be levied as the same is traversing beyond the scope of the show cause notice even on merits, same is not attracted. The Appellants also submitted that the penalty u/s. 78 cannot be levied as no mens rea or contumacious conduct established by the department. Also, all the transactions were recorded in the books of accounts of the Appellants and hence, there is no suppression on the part of the Appellants. Considering the same, the extended period of limitation cannot be invoked and the matter is time barred. The Appellants, therefore, prayed that the appeal be allowed with consequential relief.
4. The learned AR appearing for the Revenue reiterates the finding recorded by the adjudicating authority.
5. Having considered the rival contentions, I hold that the first show-cause notice is time barred in part, for the period prior to 30.9.2007, as the return for half year ended 30.9.2007 was still not due. It is not in dispute that the assessee filed returns regularly giving required particulars.
5.1 So far insurance service availed for insuring business risk (insurance to safeguard tax for infidelity and forging of securities), I hold the same to be allowable input service.
5.2 So far input service Telephone connection is concerned, at residence of senior officials, the same is held to be essential input for the appellant. The appellant corporation have huge business risk, and have to be vigilant at all times.
5.4 As regards the cable operators services, I hold the same as allowable input service, as the same is utilized in various offices of the appellant for being up-dated with the stock and money market.
6. Thus, the appeal is allowed and the impugned order is set aside. Appellant will be entitled to consequential benefits, if any, in accordance with law.
(Pronounced in Court) (Anil Choudhary) Member (Judicial) Sinha 7