Custom, Excise & Service Tax Tribunal
M/S Deloitte Haskins & Sells vs Cce, Thane-I on 26 September, 2014
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. IV APPEAL NO. ST/200 & 211/10 (Arising out of Order-in-Original No. 06/BR-06/ST/Th-I/2010 dated 29.01.2010 passed by the Commissioner of Central Excise, Thane-I.) For approval and signature: Honble Shri Ashok Jindal, Member (Judicial) Honble Shri P.S. Pruthi, Member (Technical) =====================================================
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 Deloitte Haskins & Sells
: Appellant
Versus
CCE, Thane-I
: Respondent
Appearance
Shri V. Sridharan, Sr. Advocate
Shri Vinay Jain, C.A.
: For Appellant
Shri K.M. Mondal, Spl. Counsel
: For Respondent
CORAM:
HONBLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HONBLE SHRI P.S. PRUTHI, MEMBER (TECHNICAL)
Date of Hearing : 26.09.2014 Date of Decision: .01.2015
ORDER NO.......................................................
Per: P.S. Pruthi:
The present appeals have been filed against Order-in-Original No. 06/BR-06/ST/Th-I/2010 dated 29.01.2010 & Order-in-Original No. 07/BR-07/ST/Th-I/2010 dated 29.01.2010 passed by the Commissioner of Service Tax, Mumbai-I.
2. The brief facts of the case are that the appellant M/s Deloitte Haskins & Sells is a firm providing services of practising Chartered Accountants and Management Consultancy Services to clients in India and abroad. The appellants were operating from the following locations, each with a separate Service Tax registration number, and the accounting operations were carried out from Worli address.
Sr. No. Address 1 Mafatlal House, Backbay Reclamation, Mumbai - 400 020.
2No. 12, Dr. Annie Besant Road, Worli, Mumbai 400 018.
3Maker Tower E-Wing, Cuffe Parade, Mumbai 400 005.
4Meher Chambers, R. Kamani Road, Ballard Estate, Mumbai 400 001.
3. During the period April September, 2006 a demand of Rs. 1,92,10,120/- was raised for wrong availment CENVAT credit while providing exempted services as well as taxable services and such availment is in violation of CENVAT Credit Rules, 2004. They did not maintain separate records for the exempted and taxable services in terms of Rule 6(1) of the CENVAT Credit Rules. Therefore, as per Rule 6(3)(c) they could utilise credit only to the extent not exceeding 20% of the amount of Service Tax payable on output services. They also availed CENVAT credit of Rs. 31,25,737/- wrongly on input services on invoices raised on the registered unit at Worli whereas the credit was taken in another registered unit at Mafatlal House, Mumbai. Similarly for the period October, 2006 to March, 2007 they provided exempted and taxable services without maintaining separate records. Thus they were required to pay Rs. 2,78,23,485/- in terms of Rule 6(3)(c). They also availed CENVAT credit at premises other than the premises mentioned in the invoices to the extent of Rs. 5,65,600/-. Two show-cause notices were issued culminating in the Orders dated 29.01.2010. In their defence, the appellant stated that the exempted services shown in ST-3 returns were actually the services rendered prior to 01/03/2006 when notification no. 59/1998-ST dated 16/10/1998 exempting all services provided by Chartered Accountants, except a few services, was in existence. The same was withdrawn vide notification no. 2/2006-ST dated 01/03/2006. However, the billings for the exempted services were raised subsequently. It was also contended that appellants had not rendered any exempted services after 01/03/2006 nor it had claimed any benefit under notification no. 25/2006-ST dated 13/07/2006 which provided exemption to some services provided by Chartered Accountants or under notification no. 4/2004-ST dated 31/03/2004 which provided exemption to services provided to SEZs. Hence they were not required to maintain separate accounts in respect of input services received for providing taxable & exempted services and were entitled to utilize the full CENVAT credit. Regarding the wrong availment of CENVAT credit, it was contended that that it was merely a procedural defect that the input invoices were raised on the Worli address by the input service providers, although input services were received and consumed by the unit at Mafatlal House; therefore, CENVAT credit cannot be denied on this account.
3.1 The Commissioner adjudicated the case and confirmed the demand of Rs. 1,92,10,120/- and Rs. 31,25,737/- vide Order-in-Original dated 29.01.2010 relating to the period April September, 2006. He also confirmed the demand of Rs. 2,78,23,485/- and Rs. 5,65,600/- vide Order-in-Original relating to the period October, 2006 March, 2007. He also imposed penalties under Section 76 & 78 of the Finance Act, 1994 and under Rule 15 (4) of the CENVAT Credit Rules in the first case and penalties under Section 76 under Rule 15 (4) in second case.
4. Heard both sides.
5. The learned Counsel for the appellant stated the following :-
(i) On the issue of availment of CENVAT credit in excess of the 20% limit, the learned Counsel stated that the appellants have not provided any exempted services during the impugned period. The appellants also explained that the exempted services shown in the ST-3 returns pertain to the period prior to 01.03.2006 when Notification No. 59/98 was in force. Since the payment thereof was received in the impugned period (April, 2006 onwards), the same has been shown in the exempted service column as no other appropriate column was available in the ST-3 Returns. According to the learned Counsel, the Commissioner has not disputed this factual submission of the appellant and the only allegation in the show-cause notice for the period April, 2006 to September, 2006 is that the appellant had provided exempted as well as taxable services. And the learned Commissioner confirmed the demand on the ground that the representational services provided by Chartered Accountants under Notification No. 25/2006 and services provided to SEZ units under Notification No. 4/2004 are unconditionally exempted and the appellants cannot pay Service Tax thereon, and therefore restriction on availment of CENVAT credit upto 20% applies in this case. But the show-cause notices do not allege that the reason for denying CENVAT credit is that the notification grant unconditional exemption. The learned Counsel relied on
(a) CCC Vs. Toyo Engineering India Ltd. 2006 (201) ELT 513 (SC)
(b) CCE, Vs. Ballarpur Industries Ltd. 2007 (215) ELT 489 (SC)
(c) Commissioner Vs. Electricity Pole Manufacturing 2006 (116) ELT A66 (SC)
(d) Collector Vs. Sunrise Structural & Engg. (P) Ltd. 2003 (154) ELT A241 (SC)
(e) Commissioner Vs. Carborandum Universal Ltd. 2008 (223) ELT A94 (SC) to justify his stand that confirmation of demand beyond scope of show-cause notice is not sustainable in law.
(ii) The Notifications No. 25/2006 and 4/2006 are conditional notifications. As regards Notification No. 25/2006, he contended that it provides exemption to services relating to representation before statutory authorities, whereas they had charged consolidated amount for entire work i.e. drafting, compliance, appearance and sometimes their contract is for entire taxation related issues. Therefore, they chose to pay tax on the entire amount and not to avail exemption. Similarly, he contended that Notification No. 04/2004 which grants conditional exemption to services provided to SEZ units. Therefore, they paid Service Tax because it is beyond their control to ensure that the service receiver follows the conditions of the notification such as maintenance of proper records. He relied on the case of Sobha Developers Ltd. Vs. CCE, reported at 2011 TIOL-1170-CESTAT-Bang.
(iii) Unlike Section 5(A) (1A) of the Central Excise Act, there is no provision in the Finance Act, 1994 requiring that unconditional exemption has to be necessarily availed. He relied on the following case laws Crown Products Pvt. Ltd. Vs. CCE, Nashik 2012 (28) STR 406 (Tri.-Mum.) and MPS Ltd. Commissioner of Service Tax, Bangalore in appeal No. ST/763/2011 decided on 14.06.2013.
(iv) The 20% restriction contained in Rule 6(3)(c) of the CENVAT Credit Rules, 2004 is only for utilization of the CENVAT credit and the remaining credit does not lapse. With effect from 01.04.2008, even the restriction of 20% has been done away with. And therefore, balance credit could have been utilized in subsequent periods. Subsequently, the appellants had made payment in cash which is much more than the amount sought to be recovered in the present case as mentioned at page 21 of Appeal Memo; therefore the demand is liable to be set aside. He relied on Federal Express Corporation Vs. CST 2013 TIOL 1137- CESTAT-Mum.
(v) The reliance by the learned Special Counsel on the decision of the Hon'ble Supreme Court in the case of Orient Weaving Mills (P) Ltd. Vs. UOI 1978 (2) ELT J 311(SC) is not applicable because there is no provision in Service Tax Law unlike as in Section 38 of Central Excise Act which provides that notification shall have effect as if enacted in this Act. He relied on Hotel Balaji and Others Etc. Vs. State of Andhra Pradesh 1993 Supp. 4 SCC 536.
(vi) As regards the invoices in the name of Worli Office, the credit has been taken only at Mafatlal House Office and they have produced a CA certificate to this effect. And the same being a curable defect, therefore CENVAT credit cannot be denied on procedural grounds because the service was received by Mafatlal Office. He relied on various decisions such as:-
(a) CCE, Vapi Vs. DNH Spinners - 2009 (16) STR 418
(b) Parekh Plast (India) Pvt. Ltd. Vs. CCE, Vapi 2012 (25) STR 46 (Tri. Ahmd.)
(c) Modern Petrofils Vs. CCE, Vadodara 2010 (20) STR 627 (Tri.-Ahmd.) In any case, the Mafatlal Office had paid Service Tax in cash amounting to Rs. 43,57,051/- which is much more than the amount in dispute on this issue.
(vii) The extended period of limitation cannot be invoked as the issue is of interpretation of the statutory provisions and procedural infractions. The suppression of information is not established in the show-cause notice, therefore even penalties are not sustainable.
6. The learned special Counsel appearing for the Revenue stated the following:-
(i) Both the units are separately registered. Therefore the appellant cannot mix-up the input services intended for consumption at one unit with the other. He added that it is not established that the input services were actually meant for consumption by the unit at Mafatlal House Office and that input services invoices were wrongly raised to the Worli unit.
(ii) It is not open to the appellant to pay Service Tax on its own volition and contend that it is not providing exempted services. He referred to Orient Weaving Mills (P) Ltd. (supra) and CCE Vs. Parle Exports Pvt. Ltd. 1988 (38) ELT 741 (SC) wherein the Hon'ble Supreme Court held that when a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is, as if it were contained in the Act itself.
(iii) On the issue of payment of duty when exemption is available, the judgements relied upon by the learned Counsel during the hearing are based on different facts. In the case of the Excise duty paid and MODVAT credit availed were identical and there was no Revenue implication, therefore Honble Apex Court dismissed the Revenue appeals. Similarly, in the case of Punjab Tractors Ltd. 2005 (181) ELT 380, Narmada Chematur Pharmaceuticals Ltd. 2005 (179) ELT 276 (SC), the Honble Apex Court held that duty can be paid on exempted inputs to avail MODVAT credit. But, penalty is imposable for violation of Rules 57C and 57F of the erstwhile Central Excise Rules, 1944.
(iv) On issue of limitation, the learned Special Counsel stated that the fact of wrongly addressed invoices was not evident from ST-3 returns. The documents were submitted only on 05.03.2007 after vigorous follow up by the department. Further the appellant never revealed that they were availing credit on inputs used for taxable and exempted services. In any case for the period October, 2006 to March, 2007, the return was filed on 25.04.2007 and the demand raised on 23.04.2008 i.e. well within the period of one year.
7. We have gone through the rival contentions. There are essentially two issues to be resolved. The first issue is whether the credit of input Service Tax is available on basis of invoices which were addressed to the Worli office but the credit thereof was availed in the Mafatlal House office. We find that in similar cases, credit has been allowed. In the case of Commissioner Vs. DNH Spinners 2009 (16) STR 418 (Tri.-Ahmd.) the Tribunal held that credit cannot be denied on technical grounds that the documents were not in the name of assessees factory at Silvassa but the same were issued in the name of the Head office of the assessee situated at Mumbai. In the case of Modern Petrofils Vs. CCE 2010 (20) STR 627 (Tri.-Ahmd.) it was held that credit may not be denied because the invoices were in the name of the Head office instead of factory, as long as there is no allegation that the inputs services are not relatable to the factory and were consumed in the factory. Following these decisions, we hold that credit cannot be denied for the procedural infraction that the addressee in the invoices was another office of the appellant.
7.1 It is not the case of Revenue that the input services have not been used to provide the output services. It is also not the case of Revenue that the input services were consumed both in the Mafatlal House office and in the Worli office. The appellants claim is that the invoices are normally addressed to the Worli office which is also their Financial Accounting office. Therefore we see no reason to disallow the credit. It was submitted by the learned Counsel during the hearing that he would not mind if this part of the matter is remitted to the Commissioner for factual verification. Accordingly we allow the CENVAT credit on principle, but remand the case to the Commissioner for verifying that the inputs services in respect of these invoices were actually used in the Mafatlal House office and not in the Worli office.
8. The second matter to determined in this case is whether the appellant had provided taxable and exempted services so as to fall under the restrictive clause of Rule 6(3)(c) which allows credit only to the extent of 20% of the Service Tax payable on output services. There are two aspects which the appellants have taken up in their defence. The first is their claim that the exempted services shown in the ST-3 returns actually related to the services provided before 01.03.2006. Further the receipts from such services rendered was shown in the ST-3 returns for the period in dispute because there was no column in the ST-3 returns to reflect this income suitably and therefore it was shown under the column value of exempted services. We note that Revenue has nowhere were controverted this factual statement at any stage of the proceeding. We accept the statement to be true.
8.1 The second aspects is the claim that, although they were providing services of Chartered Accountant, they did not avail the exemption under Notification No. 25/2006 dated 13.07.2006 and were paying tax on all Chartered Accountant services provided by them. We extract the Notification below for convenience of understanding-
.................... hereby exempts the taxable services falling under sub-clauses (s), (t) and (u) of clause (105) of section 65 of the Finance Act, provided or to be provided by a practicing chartered accountant, a practicing cost accountant and a practicing company secretary respectively, in his professional capacity, to a client, relating to representing the client before any statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice, from the whole of service tax leviable thereon under section 66 of the said Finance Act. It is seen that Notification No. 25/2006 provides exemption to a client only in respect of services relating to representing the client before any statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice. The appellants contention is that the invoices raised by the appellant to their clients reflect composite services. By way of illustration, learned Counsel showed some invoices, for example invoice No. TAX/000911/2006-2007 issued to Abacus International PTE. Ltd. Some details of this Invoice are extracted below Invoice No. TAX/000911/2006-2007 issued to Abacus International PTE. Ltd.
Certificate under Section 197
1. Regular follow-up with the income-tax authorities for issuance of the certificate for lower withholding tax under Section 197 of the Indian Income Tax Act, 1961.
2. Appearing before the Assessing Officer for discussion on issues raised by him in connection with certificate for lower withholding tax.
Meeting with CFO
4. Meeting with the CFO of Abacus on 24 April, 2006 and discussions on various issues.
6. Review of the order of the Commissioner of Income-tax (Appeals) for assessment year 1999-2000 and preparation of a note in this regard.
7. Preparation and filing of appeal to the Income-tax Appellate Tribunal against the order of the Commissioner of Income-tax (Appeals).
9. Preparation for and appearing before the Commissioner of Income-tax (Appeals) in connection with the appeal for assessment year 2000-01.
12. Preparation and filing of letter requesting for rectification of the order passed by the Assessing Officer.
Invoice No. TAX/000931/2006-2007 issued to Hazira Cryogenic Eng. & Con. Mgmt. P. Ltd.
Professional services rendered during the period 1st April, 2006 to 30th September, 2006 in connection with:
Assessemnt year 2002-03
1. Preparation for and appearing before the Commissioner of Income-tax (Appeals) in connection with the appeal for assessment year 2002-03.
5. Review of the assessment order passed by the Assessing Officer under Section 143(3) and preparation of rectification letter to be filed with the Assessing Officer.
13. Preparation of responses to the Assessing Officer and Tax Recovery Officer in the case of Mr. Giovanni Toricelli for assessment year 2003-04.
Invoice No. TAX/000931/2006-2007 issued to Sandeep Chemicals Pvt. Ltd.
Professional services rendered in your case in respect of Sales Tax Act and other Allied Acts during the year 1st April, 2006 to 31st March, 2007.
The invoices indicate that some of the services are in the nature of service rendered as regular follow-up with the income-tax authorities, appearing before the Assessing Officer. They are composite invoices involving various jobs undertaken such as regular follow-up; review of the order of the Commissioner of Income-tax (Appeals), Preparation and filing of appeal to the Income-Tax Appellate Tribunal, review of the assessment order passed by the Assessing Officer under Section 143(3) and preparation of rectification letter to be filed with the Assessing Officer, preparation of responses to the Assessing Officer and Tax Recovery Officer in the case of Mr. Giovanni Toricelli for assessment year 2003-04, professional services rendered in respect of Sales Tax Act and other Allied Acts during the year 1st April, 2006 to 31st March, 2007.
8.2 Essentially the argument of the appellant is that the invoices do not represent only the fees relating to representing the client before a statutory authority but also include fees for other services provided under the invoices as shown for some invoices above by way of illustration. This contention is acceptable because it does appear that activities such as review of an Order or professional services rendered in respect of Sales Tax Act may not be covered under exemption Notification as they do not relate to representing the client before any statutory authority in the course of proceedings initiated under any law by way of issue of notice. We find that the fees relating to activities covered by exemption under Notification No. 25/2006 are not segregated from the fees relating to jobs which are not exempted. It is obvious that the department cannot demand Service Tax on the entire amount. Unfortunately, the Revenue has not even attempted to do any segregation, if at all it was possible, in the consolidated invoices between taxable activities and exempted activities. Revenue has not referred to any invoice for an examination and analysis with respect to the exemption under Notification No. 25/2006. In fact, there is no finding whatsoever on this aspect. In the absence of specific breakup of the total amount in the invoice for each job undertaken, it cannot be concluded that the appellants availed the exemption under Notification No. 25/2006.
8.3 As mentioned above, Revenue has not examined the records in detail to see the nature of actual activities undertaken by them. The first show-cause notice does say that the assessee did not care to reply to letters of the department. We find from para 7 of show-cause notice dated 19.10.2007 that letters were written to the assessee on 03.07.2007, 13.07.2007, 23.07.2007, 07.08.2007, 31.08.2007 & 13.09.2007. Similarly in the show-cause notice dated 24.08.2008 it is stated in para 6 that the assessee had not submitted the information even after two weeks time was given by the Superintendent. We view that, at times, when the volume of documents is large, it can take some time for the assessee to produce all the documents. The show-cause notice dated 23.04.2008 also states that the assessee have not furnished the copies of invoices issued for exempted services. It is apparent that the invoices were not examined to see the exact description of activities undertaken by the appellant. Issue of show-cause notice without examining and analysing of all the documents does not serve any purpose.
8.4 The second aspect is the claim of the appellant that Notification No. 04//2004 dated 31.03.2004 under which they had provided services to SEZ units is a conditional notification. Notification No. 04/2004 is extracted below:-
.. the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service of any description as defined in clause (90) of sub-section (1) of section 65 of the said Act provided to a developer of Special Economic Zone or a unit (including a unit under construction) of Special Economic Zone by any service provider for consumption of the services within such Special Economic Zone, from the whole of service tax leviable thereon under section 66 of the said Act, subject to the following conditions, namely:-
(i) the developer has been approved by the Board of Approvals to develop, operate and maintain the Special Economic Zone;
(ii) the unit of the Special Economic Zone has been approved by the Development Commissioner or Board of Approvals, as the case may be, to establish the unit in the Special Economic Zone;
(iii) the developer or unit of a Special Economic Zone shall maintain proper account of receipt and utilisation of the said taxable services. We note that one of the conditions of the Notification is that the developers or units of SEZ shall maintain proper account of receipt and utilisation of the said taxable service. We appreciate the appellants contention that it is not in their control to ensure that the service receiver maintains proper records. Hence, they paid Service Tax on such services correctly. Reliance is placed on the case of Sobha Developers (supra) in which it was held that Notification No. 4/2004 read with Rule 25 of SEZ Act, 2005 is a conditional exemption and therefore the restriction under Rule 6 of the CENVAT Credit Rules would not apply.
8.5 We also find that this aspect of conditionality in Notification No. 4/2004 has not been discussed at all by the Commissioner in the impugned order. The Commissioner simply states that the appellant devised his own way of defeating the provisions of Rule 6 (3)(c) by paying Service Tax on their own volition in respect of exempted services. We cannot appreciate this finding of the Commissioner in view of the legal frame work in which the Notifications No. 25/2006 and 04/2004 operate. We reject this finding. Rather we do agree with the argument of the learned C.A. about the lack of provisions in Service Tax law which are akin to Section 5(A)(1A) of the Central Excise Act. It was held in the case of Crown Products Pvt. Ltd. (supra) and in the case of MPS Ltd. (supra) that there is no law barring an assessee from paying tax on exempted services and claiming refund thereafter.
8.6 Section 5A (1A) of the Central Excise Act is extracted below:-
For the removal of doubts, it is hereby declared that where an exemption under sub-Section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacture of such excisable goods shall not pay duty of excise on such goods. But such provision does not exist in Service Tax Law. The judgements cited above specifically note that the law makers have not chosen to prohibit service providers from paying tax when a notification provides exemption. In any case, we have also discussed above that the Notification No. 04/2004 does not grant absolute or unconditional exemption. The reliance place by the learned Special Counsel for the Revenue on the judgement in the case of Orient Weaving Mills (P) Ltd. (supra) and Parle Exports Pvt. Ltd. (supra) related to periods when Section 5A(A1) had not been introduced in the Central Excise Law. Even otherwise, all that these judgements held is that a Notification is part of the Statute. In our view there is no doubt that a notification is part of the Statue. But the issue at hand is somewhat different. It was held by the Hon'ble Supreme Court in the case of Hico Products (supra) that exemption by means of notification issued under Rule 8 does not take away the levy or have the effect of erasing levy of duty. The object of the exemption notification is to forgo due duty and confer certain benefits upon the manufacturer. Further, in a recent judgement in the case of Reliance Industries Ltd. (supra), the Hon'ble Apex Court held that the above view of this Court can be traced to the maxim which sanctions the non-observance of statutory provision Cuilibetlicet renuntiare juri pro se introducto. Everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy. Thus it is clear that under Service Tax law, the assessee is not prohibited from paying tax on goods exempted under a notification. Having held so, we find that the appellant had not provided exempted and taxable services in terms of Rule 6(2) of the CENVAT Credit Rules and therefore the restriction of availment of CENVAT credit up to 20% of the value of taxable services provided would not apply.
9. Having held that the demand of Service Tax duty does not sustain, we do not find it necessary to go into aspects of extended time period as well as penalties.
10. The impugned orders are set aside. The demand of Rs. 1,92,10,120 in Order-in-Original No. 06/BR-06/ST/Th-I/2010 dated 29.01.2010 is set aside. The demand of Rs. 2,78,23,485/- in Order-in-Original No. 07/BR-07/ST/Th-I/2010 dated 29.01.2010 is also set aside.
10.1 The demands of Rs. 31,25,737/- and Rs. 5,65,600/- on account of wrongly addressed invoices are set aside and CENVAT credit is allowed. However, the matter regarding these demands is remanded to the adjudicating authority only for purpose of verification that the input services were used in Mafatlal House Office for providing the output services. The confirmation of interest and penalty in respect of these demands is also set aside.
11. Appeals are allowed in above terms.
(Pronounced in Court on .......... 01.2015) (Ashok Jindal) Member (Judicial) (P.S. Pruthi) Member (Technical) Sp 19