Custom, Excise & Service Tax Tribunal
Hdfc Bank Ltd vs Cce Thane Ii on 4 June, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
WEST ZONAL BENCH
COURT No.
Appeal No. ST/85742/2014
(Arising out of Order-in-Original No. 04/AC/COMMR/Th-II/ST/2013
dated 29.11.2013 passed by Commissioner of Central Excise, Thane-
II)
HDFC Bank Ltd. Appellant
Kamala Mills Compound,
Trade World C wing, 10th floor,
Senapati Bapat Marg,
Lower Parel,
Mumbai 400 013.
Vs.
Commissioner of Central Excise, Thane-II Respondent
3rd floor, Navprabhat Chambers, Ranade Road, Dadar (W), Mumbai 400 028.
Appearance:
Shri Abhishek Rastogi, Advocate for the Appellant Shri M. Suresh, Authorised Representative for the Respondent CORAM:
Hon'ble Mr. S.K. Mohanty, Member (Judicial) Hon'ble Mr. Sanjiv Srivastava, Member (Technical) FINAL ORDER NO. A/86061/2019 Date of Hearing: 13.03.2019 Date of Decision: 04.06.2019 PER: SANJIV SRIVASTAVA This appeal is directed against the order in original No 04/AC/COMMR/Th-II/ST/2013 dated 29.11.013 of the Commissioner Central Excise Thane-II. By the said order Commissioner has held as follows:-
"ORDER-
In the facts and circumstances of this case, which have been, discussed and found upon-
2 ST/85742/2014
(i) I determine and confirm the demand of Rs 6,80,01,435/- (Rupees six crore eighty lakh one thousand four hundred and thirty five only) for being recovered from M/s HDFC Bank Limited, Kamala Mills, Trade World, C- Wing, 10th Floor Senapati Bapat Marg, Lower Parel Mumbai 400 013 along with accrued interest at applicable rates, in terms of and under Rule 14 of the CENVAT Credit Rules, 2004 in read with Section 73 and Section 75 of Chapter V of the Finance Act, 1994.
(ii) I also impose a penalty of Rs 6,80,01,435/- (Rupees six crore eighty lakh one thousand four hundred and thirty five only) for being recovered from M/s HDFC Bank Limited, Kamala Mills, Trade World, C-Wing, 10th Floor Senapati Bapat Marg, Lower Parel Mumbai 400 013 under Rule 15(3) of the CENVAT Credit Rules, 2014 in read with Section 78 of Chapter V of the Finance Act, 1994."
2.1 During course of audit scrutiny of the records of the appellant, it was found that they had availed certain inadmissible credits as detailed in table 1, in their CENVAT Account Table 1 Inadmissible Credit as Per the Show Cause Notice Description 2008-09 2009-10 2010-11 2011- Total 12 Furniture/ 156488 109707 737517 308435 370790 Fixtures 30 03 9 4 66 Rent a cab, 0 301132 506005 271621 107875 Club and 1 8 1 90 association, travel agent and transportati on services.
Exempted 293676 369926 121858 131287 201347 Services 7 7 68 7 79 Total 185855 176812 246211 711344 680014 97 91 05 2 35 2.2 A show cause notice dated 5th March 2013 has been issued to the appellants seeking to deny the inadmissible credit as above by invoking provisions of Rule 14 of 3 ST/85742/2014 CENVAT Credit Rules, 2004 read with proviso to Section 73(1) of Finance Act, 1994. Interest under Section 75 ibid read with Rule 14 to has been demanded and penalties under Section 76 read with Rule 15(1), Rules 15(3) and 15(4) read along with Section 78 ibid have been proposed.
2.3 This show cause notice has been adjudicated by the Commissioner as per his order referred in para 1, supra. Aggrieved appellants have preferred this appeal.
3.1 In their appeal, Appellants have assailed the order of Commissioner stating that-
i. The furniture and fixtures against which they have availed the credit are their inputs used for providing the output services. Since these goods qualify as inputs for them CENVAT Credit is admissible to them in respect of these items.
ii. Even if these goods have been capitalized in their book of accounts then also the eligibility to CENVAT Credit as inputs cannot be disputed as has been held in case of Shri Rama Multi Tech Ltd. [2009 (238) ELT 699 (T-Ahd)].
iii. They rely on the definition of inputs as it existed at material times and the decisions in case of British India Corporation [AIR 1963 SC 1459], Mundra Port & Special Economic Zone Ltd [2009 (018) STT 0314 CESTAT], Liquidators of Pursa Limited [1954 (25) TRR 265 SC] to hold that these goods are input for them and credit is admissible.
iv. The services of Rent a Cab, Transport of Goods by Road Services, Travel Agent's Services/ Tour Operator Services all are input services as defined at material times, for their business and hence credit should not be denied as has been held in case of Cable Corporation of India Ltd. [2008 (12) STR (T-Mum)], Mundra Port & Special Economic Zone Ltd [2009 (018) STT 0314 CESTAT], Victor Gasket India Ltd [2008-TIOL-409-CESTAT-MUM], Aditya Birla Nuvo Limited [2009-TIOL-322-CESTAT-MUM}, GTC 4 ST/85742/2014 Industries Limited [2008 (12) STR 468 (T-LB)}, Hindustan Zinc Limited [2009 (16) STR 704 (T-Bang)] & Semco Electrical Pvt Ltd [2010-TIOL-162-CESTAT-MUM] v. Interpreting the definition of input services in terms of the decisions in case of Good Year India Ltd [1997 (95) ELT 450 (SC)], Coca Cola Private Limited [2009 (242) ELT 168 (Bom)], Rohit Surfactants Pvt Ltd [2009 (15) STR 169 9T-Del)], ITC Limited [2009-TIOL-1199-CESTAT-BANG]. Royal Hatcheries [1994 (53) ECR 200 (SC)], R M Foods [2009 (243) ELT 632 9T-Ahd)], Dell International Services India Pvt Limited [2009 TIOL 1957 CESTAST BANG], Ultratech Cement Ltd [2010 (260) ELT 369 (BOM)] vi. Forex Broker Services are not used exclusively for providing exempted interbank forex trading and hence the credit has been rightly availed by them.
vii. Demand is barred by limitation as there is no case for invoking extended period as they have not suppressed or misdeclared anything from the department. They rely on decisions in case of Pahwa Chemicals Private Limited [2005 (189) ELT 257 (SC)], Anand Nishi Kawa Co Ltd [2005 (188) ELT 149 (SC)], Apex Electricals {1992 (61) ELT (Guj)]. Tamil Nadu Housing Board {1994 (74) ELT 9 (SC)] viii. Interest is not justified in the present case.
ix. Penalty under Section 78 is not imposable in view of decisions in case of HMM Ltd [1995 (76) ELT 497 (SC), Coolade Beverages Ltd. [2004 (172) EL 451 (ALL)], Guru Instrument [1998 (104) ELT (ALL)], Smitha Shetty {2004 (174) ELT 313 (T)], Tamil Nadu Housing Board {1994 (74) ELT 9 (SC)], Port Officer [2010 (257) ELT 37 (Guj)], {2001 (138) ELT 811 (T-Kol)], Transpek Industries Ltd [1999 (108) ELT 562 (T)], Paramjit Sandhu Engg[1999 (30) RLT 595 (T)], Avon Scales Co [1999 (31) RLT 373} & Mechino Enterprises [1998 (26) RLT 386].
5 ST/85742/2014 4.1 We have heard Shri Abhishek Rastogi, Advocate for the Appellants and Shri M Suresh, Joint Commissioner, Authorized Representative for the revenue.
4.2 Arguing for the appellants learned counsel submitted that-
i. Thought the Furniture and Fixtures are treated a s Capital Goods in books for accounting and income tax purposes, they are inputs for providing their output services namely banking and financial services.
ii. It has been held in case of Aarti Industries Ltd [2017 (349) ELT 356 (T)] that there is no restriction of claiming depreciation on 'inputs' in terms of Rule 4 (4) of CCR, 2004.
iii. Chair table, display units, sofa etc are part of office infrastructure essential for providing BOFS.
Iv Relying on decisions in case of ICICI Lombard General Insurance Company [2016 (2) TMI 316 CESTAT-MUM}, Agarwal Foundaries [2015 (6) TMI 910 CESTAT Bangalore} Hyderabad Menzies Aircargo Pvt Ltd [2017 (5) TMI 563 CESTAT-Hyderabad} credit in respect of these goods as inputs should be allowed v. Capitalization of expense is not material for deciding eligibility of credit as held in Shree Rama Multitech Ltd [2011 266 ELT (T-Ahd)], Kisan Sahakari Chini Mills Ltd [2010 (261) ELT 308 (T-Del)], Sanghvi Forging & Engineering Ltd [2014 302 ELT 136 (T-Ahd)] vi. There is a nexus between the input services, viz Club or Association Services, Tour Operator Service , Travel Agent Services, used by them and their output services. Hence credit in respect of these services should not be denied to them as held by the various decisions referred below:
A. Club or Association Services o Essel Petropack [2015 TIOL 77 CESTAT Mum} o Finolex Cable [2015 TIOL 2632 CESTAT MUM] 6 ST/85742/2014 o Pidilite Industries [2018 TIOL 1007 CESTAT MUM] o Reliance Industries Ltd [2016 TIOL 2392 CESTAT MUM] o Shree Cement [2017 11 TMI 483 Raj HC] o Mangalam Cement [2017 11 TMI 483 (Raj HC)] o Alliance Global Services IT India Pvt Ltd [2016 (44) STR 113 (T-Hyd)] B. Rent a cab Service (upto 1st April 2011) o Maruti Suzuki India Ltd [2017 49 STR 261 (P & H)] o Mangalam Cement [2017 11 TMI 483 (Raj HC)] o Circular No 943/04/2011-CX dated 29.04.2011 C. Tour Operator Service and Travel Agent Service o Wills Processing Services (India) Pvt Ltd [2016 (1) TMI 1130 CESTAT Mum] o Barclays Wealth Trustees India Pvt Ltd. [2018 6 TMI 383 CESTAT MUM} o Pidilite Industries [2018 TIOL 1007 CESTAT MUM] o Reliance Industries Ltd [2016 TIOL 2392 CESTAT MUM] o Savita Oil Technologies Ltd [2018 4 TMI 1385 CESTAT MUM] o Semco Electrical Pvt Ltd [2009 12 TMI 143 CESTAT MUM] o Vidyut Metallics (P) Ltd [2012 11 TMI 376 CESTT MUM] o Indoswift Laboratories Ltd [2015 1 TMI 1147 CESTAT New Del] D. GTA Service o Federal Mogul Goeteze (India) Ltd [2011 (9) TMI 120 (P & H)] o Drolia Electrosteels (P) Ltd [2011 (10) TMI 33 CESTAT DEL] 7 ST/85742/2014 vii. Forex Broker services have not been used for Interbank forex trading. These services are used for-
Foreign exchange broking services to customers on which bank is paying service tax Purchase and sale of foreign exchange with its customer other than banks on which bank is paying service tax.
As per Rule 6(3B) of CCR (effective from 1st April 2011) CENVAT Credit should not have been denied to them.
viii Show cause notice is barred by limitation.
4.3 Arguing for the revenue learned Authorized Representative while reiterating the findings in impugned order submitted-
i. Appellant has taken the credit in respect of the Furniture and Fixture items not as inputs but as capital goods. They have capitalized these goods in their book of accounts and also claimed depreciation against them. In view of this fact that they have capitalized these goods in their book of accounts, they cannot now claim them as inputs. Thus the decisions relied upon by the appellant will not be relevant in the present case for determining the eligibility to CENVAT Credit as CENVAT Credit.
ii. The services which appellants claim as input services are in basically employee related services. These services have not be used for providing the taxable output services but have been used for welfare of the employee, by way of providing transportation facilities to them, for carriage of their luggage at the time of their transfer etc. These have not been used for providing any output services. Since these services as have been admitted by the appellants in appeal memo and also during the course of argument. Since these services have been not been used for providing any output services they cannot be treated as input service for the purpose of CENVAT Credit Rules, 2004.
8 ST/85742/2014 iii. Appellants have not substantiated the assertions made by them to effect that the Forex Broking Services have been used for any transaction other inter-bank transactions of purchase and sale of foreign currency. Since interbank transaction of purchase and sale of foreign currency is exempt from payment of tax as per Notification No 19/2009-ST, appellants were not entitled to CENVAT Credit in respect of these Forex Broking Services.
iv. Commissioner has rightly held that extended period of limitation is invokable in the present case because the documents submitted did not disclose the fact of about availment of credit in respect of inadmissible heads or counts. They themselves have been taking varying stands as evident from their letter dated 07.08.2012 and 08.04.2013. These issues would have never surfaced if not detected during the course of audit. Hence extended period of limitation is applicable in present case and demand not barred by limitation.
v. Since appellants have evaded payment of tax by suppressing the relevant facts from the department penalty under Section 78 is justified.
vi. Interest is statutory liability associated with delay in payment of sums due to Government; hence demand of interest to needs to be sustained.
5.1 We have considered the impugned order along with the submissions made in appeal and during course of arguments.
5.2 The issues that need to be addressed in the present appeal are as follows:
I. Admissibility of CENVAT Credit on various items of Furniture and Fixture to the provider of Banking and Financial Services.
II. Admissibility of CENVAT Credit on various services such as club and association services, rent cab service, travel agent service, tour operator service 9 ST/85742/2014 and GTA Services as input service to the provider of Banking and Financial Services.
III. Admissibility of CENVAT Credit against Forex Broker Services IV. Whether extended period of limitation as provided for by proviso to Section 73 (1) applicable in present case.
V. Whether demand for interest under Rule 14 of CENVAT Credit Rules, 2004 read section 75 of Finance Act, 1994 and penalty imposed under Rule 15 of CENVAT Credit Rules, 2004 read section 78 of Finance Act, 1994 justified.
5.3 Admissibility of CENVAT Credit on various items of Furniture and Fixture to the provider of Banking and Financial Services.
5.3.1 Appellants have claimed credit in respect various items of Furniture and Fixtures viz chair, table, display units, sofa, file cabinets, ladder, safe deposit locker Sinage and Sinage Board, Defender Safe Sleeper for locker, Storewel, Exhaust Fan Strong Room Door, Grill Gate and Furniture work. They have claimed that these goods were used for providing the output services and hence should be treated as input as defined by Rule 2 (l) of CENVAT Credit Rules, 2004. They have relied upon various case laws in this regard which have been referred in their appeal and written submission.
5.3.2 The case of revenue for denying the CENVAT Credit in respect of these goods is that the credit has been taken by the appellant in respect of these goods as Capital Goods. Further Appellants have capitalized these goods in their book of accounts and have also claimed depreciation against the same under Income Tax Act, 1961. 5.3.3 In terms of Board Circular 943/4/2011-ST dated 29th April 2011 it has been clarified as follows:
3 How is the "no Credit of all goods used in the factory is allowed relationship except in so far as it is specifically denied. The whatsoever with expression "no relationship whatsoever with the the manufacture manufacture of a final product" must be interpreted 10 ST/85742/2014 of a final and applied strictly and not loosely. The expression product" to be does not include any goods used in or in relation to determined? the manufacture of final products whether directly or indirectly and whether contained in the final product or not. Only credit of goods used in the factory but having absolutely no relationship with the manufacture of final product is not allowed. Goods such as furniture and stationary used in an office within the factory are goods used in the factory and are used in relation to the manufacturing business and hence the credit of same is allowed.
5.3.4 Following the Board Circular CENVAT Credit has been extended by the Tribunal in respect of Furniture and Fixtures used in factor of manufacture in case Agarwal Foundries [2015 (6) TMI 910 CESTAT Bangalore] and M/s Hyderabad Menzies Air Cargo Pvt Ltd [2017 (5) TMI 563 CESTAT Hyderabad)]. Alo in case of ICICI Lombard [2016 (2) TMI 316 CESTAT Mumbai] Credit has been extended in respect of Furniture items, stating-
"6.2 As regards the Cenvat credit availed on the Furniture and Fittings, we find that the said furniture and fittings are nothing but tables and chairs which were procured by appellant during the relevant period. It is a common knowledge that any insurance company is required to have chairs and tables to render services to their clients. In our considered view, the said tables and chairs are used for rendering services of general insurance, accordingly, the appeal filed by the appellant on this issue needs to be allowed and we do so.
6.3 The reliance placed by the learned Departmental Representative on the judgment of Bharti Airtel (supra) will not carry their case any further, as we find in that case the Tribunal has recorded a clear findings that the appellant therein had not established that products were used for purpose of providing mobile telephone services, on the other hand, in the case before us, we find that the appellant has been taking a consistent plea that these tables and chairs are utilized for rendering the services as the employees need to sit and work on these tables and chairs."
11 ST/85742/2014 5.3.5 We also find that in case of Bharti Airtel [2013 (29) STR 401 (T-MUM] it has been held-
"42.With regard to PFBs which were used as protective shelter for transmission equipments, the lower authority found that these goods were classifiable under Chapter 94 of the CETA Schedule and hence not covered under Rule 2(a)(A)(ii). We find that it is not in dispute that the PFBs are classifiable under Heading 9406 in Chapter 94 of the CETA Schedule and that this Chapter is not specified in sub-clause (i) of Rule 2(a)(A). Therefore all our reasonings recorded in relation to the towers will be applicable to PFBs also. The technical literature produced by the learned counsel says that the base station hardware has to be protected from the weather and, for this purpose, the equipments are housed in PFBs. However, these considerations are not relevant to the definition of capital goods given under Rule 2(a)(A)(i). The definition primarily requires the capital goods to be classifiable under specific Chapters, Headings and Sub-headings mentioned therein. PFBs fall under Chapter 94 which is not specified in sub- clause (i). They are not components or accessories of any goods specified in that sub-clause either. Thus PFBs have no place in sub-clause (iii) also. Hence CENVAT credit cannot be claimed on PFBs as capital goods. The same conclusion can also be reached in respect of office chairs which are goods of Chapter 94. Further the chairs cannot be held to have been used for providing telecom service, in the absence of evidence.
43.The appellant has also claimed CENVAT credit on printers which are office equipments. The definition of capital goods under Rule 2(a)(A) indicates that the capital goods used by a manufacturer of final product will not include any equipment or appliance used in an office. The learned counsel for the appellant has argued that this exclusion does not apply to a provider of output service and, therefore, the printers used by the appellant are liable 12 ST/85742/2014 to be treated as 'capital goods'. The learned JCDR has argued that, though the item is covered by Chapter 84 specified in sub-clause (i) of Rule 2(a)(A), it will not fall within the ambit of the definition of 'capital goods' as there is no direct nexus between this item and the output service provided by the appellant. The appellant has not established sufficient nexus between printers and their output service. There is substance in this submission. The appellant has not proved that the printers were used for the purpose of providing mobile telephone service.
44.In the absence of evidence that the chairs or printers were used for providing mobile telephone service, both these items would stay outside the ambit of the definition of "input" also.
45.We have also considered the decisions cited by the appellant in the above context. In the case of Hotel Leela Venture Ltd., window cleaning equipment was held to be capital goods for the purpose of Notification No. 28/97 which provided a definition for 'capital goods'. Needless to say that, in the present case, one has to consider the definition of capital goods given under Rule 2(a) of the CENVAT Credit Rules, 2004 and not one given in any Exemption Notification. In the case of Aditi Technologies (P) Ltd., the question considered by this Tribunal was whether certain furniture imported by the assessee could be regarded as 'office equipment' within the meaning of this term used in Exemption Notification No. 1/95-Cus. In the case of DSL Software India Ltd., the question considered by the Tribunal was whether modular furniture imported by the party answered the description of goods given in Exemption Notification No. 140/91-Cus. The decision in the cases of Aditi Technologies and DSL Software was followed by the Tribunal in the cases of Aztec Software Technology Services Ltd. and Oracle India Pvt.
Ltd. to allow the benefit of Notification No. 1/95-C.E., dated 4-1-1995 to the assessees (100% EOUs) in respect 13 ST/85742/2014 of components of computer workstation procured under CT3 certificates. We are afraid, none of these judgments is relevant to the instant case. The question which we have considered is whether the chairs and printers used by the appellant could be held to be goods "used for providing mobile telephone service". In the absence of evidence to show that these items were used for providing the said service, we are constrained to take a view against the appellant. In the result, the decision of the adjudicating authority in regard to chairs and printers has also to be sustained."
5.3.6 The decision of tribunal in case of Bharti Airtel, supra has been affirmed by the Bombay High Court as reported [2014 (35)STR 865 (BOM)]. While affirming the said decision Hon'ble Bombay High Court has held as follows:
"21. A plain reading of the definition of 'capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 6805, grinding wheels and the like, and parts thereof falling under Heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub-clauses (i) and (ii) which are used either in the factory for manufacture of final products but does not include any equipment or appliance used in the office and those used for providing output service. A combined reading of sub-clause (a)(A)(i) and (iii) and sub- rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clauses (i) and (iii) used for providing output services can qualify as capital goods and none other.
22. Further the definition of 'input' as defined Rule 2(k) includes all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final 14 ST/85742/2014 product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production, and as provided in sub-clause (ii) all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation 2 of sub-rule (k) is also relevant which provides that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Similarly a plain reading of the definition of input indicates that in the present context clause (i) of Rule 2(k) may not be of relevance as same pertains to manufacturing activity and pertains to goods used in relation to manufacture of final product or any other purpose within the factory of production. Sub-clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service.
31. In the light of the aforesaid discussion we examine whether on the rules as they stand the appellants would be entitled to the credit of the duty paid on the item in question on the output service namely the cellular service. We may observe that a plain reading of the definition of 'capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 6805, grinding wheels and the like, and parts thereof falling under Heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub-clauses (i) and (ii) which are used either in the factory for manufacture of final products but does not 15 ST/85742/2014 include any equipment or appliance used in the office and those used for providing output service. Further in the CKD or SKD condition the tower and parts thereof would fall under the Chapter Heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules so as to be capital goods. Further the appellants contention that they were entitled for credit of the duty paid as the Base Transreceiver Station (BTS) is a single integrated system consisting of tower, GSM or Microwave Antennas, Prefabricated building, isolation transformers, electrical equipments, generator sets, feeder cables etc. and that these systems are to be treated as "composite system"
classified under Chapter 85.25 of the Tariff Act and be treated as 'capital goods' and credit be allowed, also is not acceptable. It is clear that each of the component had independent functions and hence, they cannot be treated and classified as single unit. It is clear that all capital goods are not eligible for credit and only those relatable to the output services would be eligible for credit. The goods in question in any case cannot be held to be capital goods for the purpose of Cenvat credit as they are neither components, spares and accessories of goods falling under any of the chapters or headings of the Central Excise Tariff Schedule as specified in sub-clause (i) of the definition of capital goods. Hence a combined reading of sub-clauses
(a)(A) (i) and (iii) and sub-rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clause (i) and (iii) used for providing output services can only qualify as capital goods and none other. Admittedly the goods in question namely the tower and part thereof, the PFB and the printers do not fall within the definition of capital goods and hence the appellants cannot claim the credit of duty paid on these items. Even applying the ratio of the judgments as relied upon by the appellants as observed above the said goods in the present context cannot be classified as capital goods.
16 ST/85742/2014
32. As regards second contention of the appellants that the tower and part thereof, the PFB and the printers would also falls under the definition of 'input' as defined under Rule 2(k) also cannot be sustained. The definition of inputs as defined under Rule 2(k) includes all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production, and as provided in sub- clause (ii) all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation (2) of sub-rule (k) is also which provides that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. A plain reading of the definition of input indicates that in the present context, clause (i) of Rule 2(k) may not be of relevance as same pertains to manufacturing activity and pertains to goods used in relation to manufacture of final product or any other purpose within the factory of production. Sub-clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods.
33. The alternative contention of the appellant is that tower is an accessory of antenna and that without towers antennas cannot be installed and as such the antennas 17 ST/85742/2014 cannot function and hence the tower should be treated as parts and components of the antenna. It is urged that antennas fall under Chapter 85 of the Schedule to the Central Excise Tariff Act and hence being capital goods used for providing cellular service falling under Rule 2(a)(A)(iii) as part of capital goods falling under Rule 2(a)(A)(i) towers become accessories of antenna and should be held as capital goods for availing of credit of duty paid. The argument at the first blush appeared to be attractive however a deeper scrutiny shows that the same is without substance. It would be misconceived and absurd to accept that tower is a part of antenna. An accessory or a part of any goods would necessarily mean such accessory or part which would be utilized to make the goods a finished product or such articles which would go into the composition of another article. The towers are structures fastened to the earth on which the antennas are installed and hence cannot be considered to be an accessory or part of the antenna. The position in this regard stands fortified from the decision of the Supreme Court in the case of "Saraswati Sugar Mills v. CCE, Delhi [2011 (270) E.L.T. 465]". From the definition of the term 'input' as defined in 2(k) of the Credit Rules it is clear that the appellant is a service provider and not a manufacturer of capital goods. A close scrutiny of the definition of the term capital goods and input indicates that only those goods as used by a manufacturer would qualify for credit of the duty paid. As observed hereinabove a service provider like the appellant can avail of the credit of the duty paid only if the goods fall within the ambit of the definition of capital goods as defined under Rule 2(a)(A) of the Credit Rules. The contention of the appellant that they are entitled for the credit of the duty paid towers and PFB and printers is defeated by the very wording of the definition of input. In any case towers and PFB are in the nature of immovable goods and are non-marketable and non-excisable. If this be the position then towers and parts 18 ST/85742/2014 thereof cannot be classified as inputs so as to fall within the definition of Rule 2(k) of the Credit Rules. We clarify that we are not deciding any wider question but restricting our conclusion to the facts and circumstances which have fell for our consideration in these appeals."
5.3.7 Since the issue is squarely covered by the decision of jurisdictional High Court against the appellants we do not find any merits in the submissions made by the appellants. Since in case of ICICI Lombard tribunal has failed to take note of the decision of Bombay High Court on the issue we find that decision is per incurriam and cannot be a binding precedent.
5.3.8 Decisions have been relied upon by the appellants to effect that capitalization of expenses is not relevant for determining eligibility to CENVAT Credit. The judgment where they refer to inputs condition prescribed by Rule 4(4) of CENVAT Credit Rules, 2004 is not applicable. This condition is only in respect of admissibility of credit on Capital Goods. However in our view appellant has to take a stand at the time of claiming the CENVAT Credit as to whether he intends to take the credit in respect of the goods under consideration as inputs or capital goods. Once he claims that the goods are capital goods then he has to follow the prescriptions for availing the credit as such. Since the scheme of credit in respect of Capital Goods is not identical with the scheme credit on inputs such flip flop from Capital Goods to inputs should not be permissible. However following the decision of Bombay High Court that these goods do not qualify either as Inputs or Capital Goods we hold that credit is not admissible in respect of these goods.
5.3.9 Now coming to the Board Circular. A five member bench of Hon'ble Supreme Court has in case of Ratan Melting & Wire Industries [2008 (321) ELT 22 (SC)] settled the issue with regards to applicability of circulars and has held as follows:
19 ST/85742/2014
"6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law."
5.4 Admissibility of CENVAT Credit on various services such as club and association services, rent cab service, travel agent service, tour operator service and GTA Services as input service to the provider of Banking and Financial Services. 5.4.1 Appellants have claimed CENVAT Credit in respect of various input services as detailed below:
o Club or association services - They are required to organize various meetings, conferences, seminars etc., in relation to its banking and financial services activities including with customers, for which they avail services of various clubs. They are required to participate in various corporate events organized by different corporate associations. Organizing seminars, conferences and participating in various corporate associations is an integral part of business of the Appellant and is crucial for its business promotion.
o Rent a Cab Services (upto 1st April 2011) - The nature of output services provided by them is such that it often requires employees to travel between various offices and to various locations for official 20 ST/85742/2014 purposes. Employees of the Bank often work in office till late and it is duty of the bank to provide transportation. Further there was no restriction on availment of CENVAT credit on rent a cab service prior to April 2011.
o Tour Operator Services & Travel Agent Services - These are essential for commuting of the employees both within the city and outside the city for the purpose of conducting client meetings etc., which is integral part of providing output services. The nature of output services provided by Appellant is such that it often requires employees to travel between various offices and to various locations for official purposes. In this connection, they avail services of travel agents to book required tickets for various modes of transport.
o Goods Transport Agency Services - Theses services have been used for transporting goods in relation to relocation of employees from one city to another during the course of employment. 5.4.2 Commissioner has denied the CENVAT Credit in respect of these services claimed to be input services observing as follows:
"19. The noticee has firstly claimed eligibility of club and association service as being eligible for CENVAT credit as being a input service to provide output service. The noticee has not indicated that these services have been availed in the name of its employee or in their own name. Even otherwise, they would not be eligible in view of prima facie view of CESTAT in Vikram Ispat 2009 (15) STR 71.
20. The noticee has next claimed eligibility for cenvat credit for transport of good by road services. These services, of their admittance, are for relocating of employees from one city to another on transfer. Such transfer has no nexus to providing of output services. This service is personal to the employee and is a part of his or 21 ST/85742/2014 her service facility. This service is used to shift the house hold goods of the employees from one location to another upon such transfer. These would be ineligible for cenvat credit.
21. The next is rent a cab and travel agent services. The notice seeks to disentitle the noticee from its claim from being admissible. The noticee says that these services have been availed from ferrying employees from one place to another and from one station to another. They state that "Employees of the HDFC often work in office till late. It is the duty of the noticee to provide transportation" from office to home. Such ferrying of employees from office to home would have no direct or indirect to rendering of the output services by the noticee. In view thereof, the availed cenvat credit on these counts would also be not admissible.
22. The noticee herein has claimed cenvat credit in respect of services, which are personal in nature to staff. The law was silent on the eligibility of these benefits upto 01.03.2011. It clarified its intent with effect from 01.03.2011. We find that this benefit now has been specifically denied. This meant that the law has prevaricated in the past. It had always been a case of causus omissus. Only that it has now been specifically mentioned. Its intent to deny such benefits always existed."
5.4.3 Appellants have relied on various case laws in support of their contention that the order of Commissioner denying CENVAT credit in respect of these input services is erroneous.
5.4.4 It's a common knowledge the perks and facilities to the employee even that of ferrying the employees from home to work place or on their relocation from one station to another on transfer etc., are provided not in term of the service contract with the client or a customer, but are provided in terms of the employment contract with the 22 ST/85742/2014 employee. These perks and facilities in terms of the employment contract are to be provided even if at particular period of time there is no output service to any client thus these are provided independent of any transaction in output services. In terms of the employment contract employees in lieu of salary, perk and facilities offered by the employer, provides his services to the employer. Thus all the facilities and perks as referred herein are specific to the employment contract and independent of the service contract that employer enters with recipient of the output service. All the perks, salary and facility given under the employment contract is normally referred as CTC (Cost to the Company) against the employment of particular individual. 5.4.5 Since these facilities provided are not the part service contract with the client of Bank they cannot be considered to be used for providing the output services. In light of the above observation the definition of input services as it existed both prior to amendments in 2011 and after amendment in 2011 needs to be examined-
Prior to 1st April 2011
(l) "input service" means any service, -
(i) used by a provider of taxable service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit 23 ST/85742/2014 rating, share registry, security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
With Effect from 1st April 2011
(l) "input service" means any service, -
(iii) used by a provider of taxable service for providing an output service; or
(iv) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
but excludes services,-
(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-
(a) construction of a building or a civil structure or
a part thereof; or
(b) laying of foundation or making of structures for
support of capital goods, except for the
provision of one or more of the specified
services; or
(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of
clause (105) of section 65 of the Finance Act, in so 24 ST/85742/2014 far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;";
5.4.6 From the perusal of the definition of "input services"
as it existed both prior and post 1st April 2011, it is quite evident that the main body of the definition continues to remain the same, amendments have been made in the inclusion part of the definition to delete the phrase "activities relating to business, such as" and exclusion clause have been added. As per the exclusion clause- (B), services specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act have been in general put in exclusion category except for specified exceptions.
(C), services such as membership of club and travel benefits extended to employees on vacation such as leave or home travel concession, when such services are used primarily for personal consumption of any employee have been put under the exclusion category.
5.4.7 It is the submission of the appellants that prior to 1st April 2011 they were covered by the inclusive clause of definition as the phrase used "activities relating to business, such as" is wide enough to cover all such services against which they have taken the credit. They have relied upon the decision of Bombay High Court in case of Coca Cola Private Limited [2009 (242) ELT 168 (Bom)]. In the said decision Hon'ble Bombay High Court has held as follows:
25 ST/85742/2014 "23. We now propose to consider some of the expressions used in the definition of input service. Firstly what does the expression means and includes mean. The definition of input service uses the term means and includes. These expression must be understood as now judicially recognized. In Regional Director v. High Land Coffee Works - 1991 (3) SCC 617, the Hon'ble Supreme Court has held as under :
The word include in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. The word include is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import but also those things which the interpretation clause declares that they shall include. [See (i) Strouds Judicial Dictionary , 5th edn. Vol. 3, p. 1263 and (ii) C.I.T. v. Taj Mahal Hotel 1, (iii) State of Bombay v. Hospital Mazdoor Sabha.
This has been reiterated in C.I.T. v. T.T.K. Health Care Ltd.
- (2007) 11 SCC 796.
In M/s. Mahalakshmi Oil Mills v. State of Andhra Pradesh, AIR 1989 Supreme Court 335, the Court dealing with the expression means and includes observed as under :
As Lord Watson observed in Dilworth v. Commissioner of Stamps (1899) AC 99 the joint use of the words "mean and include" can have this effect. He said, in a passage quoted with approval in earlier decisions of this Court :
Section 2 is, beyond all question, an interpretation clauses, and must have been intended by the Legislature to be taken into account in construing the expression "charitable device or bequest," as it occurs in Section 3. It is not said in terms that "charitable bequest" shall mean one or other of the things which are enumerated, but that it shall 26 ST/85742/2014 "include" them. The word "include" is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word "include" is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to "mean and include" and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions.
(emphasis supplied) The Supreme Court in the case of Bharat Coop. Bank (Mumbai) Ltd. v. Coop. Bank Employees Union - (2007) 4 SCC 685 observed as under :
It is trite to say that when in the definition clause given in any statute the word "means" is used, what follows is intended to speak exhaustively. When the phrase "means" is used in the definition, to borrow the words of Lord Esher M.R. in Gough v. Gough - (1891) 2 Q.B. 665 it is a "hard and fast" definition and no meaning other than that which is put in the definition can be assigned to the same. (Also see : P. Kasilingam and Ors. v. P.S.G. College of Technology and Ors. MANU/SC/0265/1995). On the other hand, when the word "includes" is used in the definition, the legislature does not intend to restrict the definition; makes the definition enumerative but not exhaustive. That is to say, the term defined will retain its ordinary meaning but its scope would be extended to bring within it matters, which in its ordinary meaning may or may not comprise. Therefore, the use of the word "means" followed by the 27 ST/85742/2014 word "includes" in Section 2(bb) of the ID Act is clearly indicative of the legislative intent to make the definition exhaustive and would cover only those banking companies which fall within the purview of the definition and no other.
Considering these judicial pronouncements, it is clear that the expression means and includes is exhaustive. By the word includes services which may otherwise have not come within the ambit of the definition clause are included and by the words means these are made exhaustive.
24. The next expression to be considered from the definition is 'such as'. A few dictionary meanings of the term 'such as' are reproduced. Concise Oxford Dictionary, Such as means for example or of a kind that; Chambers Dictionary, such as means for example :
In Good Year India Ltd. v. Collector of Customs - 1997 (95) E.L.T. 450 the Supreme Court observed as under :
The words such as stainless steel, nickel monel, incoloy, hastelloy in sub-heading (2) are only illustrative of the various metals from which valves can be made but the said description is not exhaustive of the metals.
The words such as therefore are illustrative and not exhaustive. In the context of business, those are services, related to the business. They may not be exhaustive, but are illustrative.
25. The expression Business is an integrated/continuous activity and is not confined restricted to mere manufacture of the product. Therefore, activities in relation to business can cover all the activities that are related to the functioning of a business. The term business therefore, in our opinion cannot be given a restricted definition to say that business of a manufacturer is to manufacture final products only. In a case like the present, business of assessee being an integrated activity comprising of manufacture of concentrate, entering into franchise agreement with bottlers permitting use of brand name by 28 ST/85742/2014 bottlers promotion of brand name, etc. the expression will have to be seen in that context See (i) Pepsi Foods Ltd. v. Collector - 1996 (82) E.L.T. 33, (ii) Pepsi Foods Ltd. v. Collector - 2003 (158) E.L.T. 552 (S.C.).
The Hon'ble Supreme Court in State of Karnataka v. Shreyas Paper Pvt. Ltd. 2006 SCC affirmed the view taken by the Hon'ble Karnataka High Court reported at 2001 (121) STC 738, which, inter alia, held as under :
Business comprises of the regular and systematic activity with an object of earning of profits. The machinery, plant, building and the land over which they have erected or constructed are only the tools of such business. Assets and liabilities including goodwill are the necessary ingredients to constitute a business, besides the stocks and other movable and immovable items connected with the said business.
In Mazgaon Dock Ltd. v. Commissioner of Income tax and Excess Profits Tax - AIR 1958 SC 861 the Hon'ble Supreme Court held as follows :
14. The word "business" is, as has often been said, one of the wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense.
15. "The word 'business connotes", it was observed by this court in Narain Swadeshi Weaving Mills v.
Commissioner of Excess Profits Tax, 1955 1 SCR 952 "some real, substantial and systematic or organised course of activity or conduct with a set purpose."
The term "business" therefore, particularly in fiscal statutes, is of wide import.
26. The definition of input service employs the phrase activity relating to business. The words relating to further widens the scope of the expression activities relating to business. This is in view of following observations of Supreme Court in Doypack Systems (P) Limited v. Union of 29 ST/85742/2014 India - 1988 (36) E.L.T. 201 (S.C.), interpreting the expression in relation to :
48. The expression in relation to (so also pertaining to), is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Aziz (A.I.R. 1968 Madras 79, 81 paragraphs 8 and 10, following and approving Nitai Charan Bagchi v. Suresh Chandra Paul (66 C.W.N. 767), Shyam Lal v. M. Shayamlal (AIR 1933 All. 649) and 76 Corpus Juris Secundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject matters, even then these would be brought within the purview of the vesting by reason of the above expressions. In this connection reference may be made to 76 Corpus Juris Secundum at pages 620 and 621 where it is stated that the term relate is also defined as meaning to bring into association or connection with. It has been clearly mentioned that relating to has been held to be equivalent to or synonymous with as to concerning with and pertaining to. The expression pertaining to is an expression of expansion and not of contraction.
The expression Relating to thus widens the scope of the definition.
27. Similarly, the use of the word activities in the phrase activities relating to business further signifies the wide import of the phrase "activities relating to business. The Rule making authority has not employed any qualifying words before the word activities, like main activities or essential activities etc. Therefore, it must follow that all and any activity relating to business falls within the definition of input service provided there is a relation between the manufacturer of concentrate and the activity. Therefore, the phrase "activities relating to business" are words of wide import.
30 ST/85742/2014
28. In CIT v. Chandulal Keshavlal & Co. - (1960) 38 ITR 601 (SC) the Apex Court held as under :
The test laid down by this case therefore was that in the absence of fraud or an oblique motive and if a transaction is of a nature which is entered in the course of a business of the assessee and is commercially expedient that it does become a deductible allowance. If as a result of the transaction the assessee benefits is immaterial that a third party also benefits thereby. (Emphasis supplied) Similarly, in Eastern Investments Limited v. CIT - 1951 (20) ITR 1 the Hon'ble Apex Court held as under :
Most commercial transactions are entered into for the mutual benefit of both sides, or at any rate each side hopes to gain something for itself. The test for present purposes is not whether the other party benefited, nor indeed whether this was a prudent transaction which resulted in ultimate gain to the appellant, but whether it was properly entered into as a part of the appellants legitimate commercial undertakings in order to indirectly facilitate the carrying on of its business.
Further, in Commissioner of Income Tax v. Royal Calcutta Turf - 1961 (41) ITR 414 it was held that deduction may be allowed in cases where the payment or expenditure is incurred for the purpose of the trade of the subject making the return and it does not matter that this payment may inure to the benefit of a third party."
5.4.8 The issue needs to be examined as per the test laid down by the Hon'ble Bombay High Court after analyzing the entire definition and highlighted by us in bold. As per the test laid down by Hon'ble Bombay High Court even the facilities/ perks provided to employees as per the employment contract is a part of appellants legitimate commercial undertaking in order to facilitate the carrying on of its business. Further appellants have relied upon various specific decisions to support their case for 31 ST/85742/2014 individual input services. Also they have relied upon the CBEC Circular No 943/4/2011 dated 29.04.2011. As per 2 and 12 in table in the said circular, it has been clarified as follows:
2 Is the credit of only specified The list is only illustrative. The goods and services listed in the principle is that cenvat credit is definition of inputs and input not allowed when any goods and services not allowed such as goods services are used primarily for used in a club, outdoor catering personal use or consumption of etc, or is the list only illustrative? employees.
12 Is the credit available on services The credit on such service shall be received before 1.4.11 on which available if its provision had been credit is not allowed now? e.g. completed before 1.4.2011.
rent-a-cab service 5.4.9 However with effect from 1st April 2011, the phrase "activities relating to business, such as" has been deleted from the inclusion part of the definition and hence the obligations on the part of appellants to their employees in terms of employment contract, cannot be termed to be covered by the said inclusion clause neither they have been provided in course of providing the output service. Since these facilities have been provided as part of the employment contract of the employee they are purely meant for the personal consumption of the employee and hence are covered by the exclusion clause. 5.4.10 In view of the discussions as above we hold in light of the decisions referred that for period prior to 1st April 2011 these services will fall within the category of input services. However for the period post 1st April 2011 we hold that these services when provided for by the appellant to its employee in terms of employment contract do not qualify as input services for providing the output taxable services to the client/ customer in terms of service contract, hence CENVAT Credit in respect of these will not be admissible post 1st April 2011, if any part of these services have been received by the employee after that date.
5.5 Admissibility of CENVAT Credit against Forex Broker Services 32 ST/85742/2014 5.5.1 The CENVAT Credit availed in respect of Forex Broker Services has been sought to be denied for the reason that these services are used for providing exempt service. Services referred to in sub clause (zm) or (zzk), as the case may be, of clause (105) of Section 65 of Finance Act, 1994, provided to a Scheduled bank, by any other Scheduled bank, in relation to inter-bank transactions of purchase and sale of foreign currency, has been exempted from payment of service tax by Notification No 19/2009-ST dated 07.07.2009. Appellants do not dispute the position but have claimed that these services have been used not only for providing the services exempted by the under the said notification, but have also been used for providing (i) forex broking services and (ii) purchase or sale of foreign exchange with its customer other than bank. Accordingly appellants have claimed that CENVAT Credit in respect of these services have been rightly claimed by them. 5.5.2 The position in law is very clear if the Forex Broking Services have been utilized exclusively for providing the exempted output service, then no credit in respect of said input service will be admissible to the appellants. However in case said input service of Forex Broking has been used by the appellant as common input for providing both exempted and non exempt services, then the credit will have to be dealt with as per the provisions of Rule 6 of the CENVAT Credit Rules, 2004. However apart from making a bald assertion in their reply to show cause notice and in appeal, appellants have not substantiated their claim by producing the relevant records. Commissioner has in his order, recorded as follows:
"23. The noticee submit that this service is not exclusively used for interbank forex trading, but also used for securities and forex broking and purchase and sale of foreign currency. The noticee did not explain this use of input service also for providing taxable output services. The notice, before the audit officers, in their letter 27.08.2012 have stated that "non levy of tax on interbank 33 ST/85742/2014 transactions is in view of reducing the hardships of exchange of CENVAT documents between Banks. As is evident the transactions in FX trading are taxable and the notification sorts not to exempt the same for interbank transactions but only to make it zero rated to avoid hardships". In view of conflicting claims, it would be difficult to accept the noticee's claim that this input service is also used for taxable service. ......"
5.5.3 Making such bald statements without substantiating the same with relevant documents showing actual transactions in Forex trading cannot be a reason for agreeing with said assertions. In our view appellants should have made such assertions and produced the relevant records and documents in support of their claim. The said documents/ records have not been even produced even before us along with the appeal or at the time arguments.
5.5.4 The reliance placed by the appellant on rule 6(3B) introduced with effect from 1st April 2011 and the Circular No 334/3/2011-CX dated 28.02.2011 is totally misplaced. Since the demand relates to period from 07.07.2009 to 31st March 2012, this rule can be applicable only in respect of the transactions pertaining to period 1st April 2011. Nothing has been produced showing that the this rule have been given retrospective effect by way of Validating provisions in Finance Act, 2011. Rule 6(3B) of The CENVAT Credit Rule, 2004 as introduced with effect from 1st April 2011 reads as follow:
"(3B) Notwithstanding anything contained in sub-rules (1), (2) and (3), a banking company and a financial institution including a non-banking financial company, providing taxable service specified in sub-clause (zm) of clause (105) of section 65 of the Finance Act, shall pay for every month an amount equal to fifty per cent. of the CENVAT credit availed on inputs and input services in that month."
The said rule only provides a manner for determining the amount to be reversed by the banking company and a 34 ST/85742/2014 financial institution including a non-banking financial company every month. This rule do not provide that credit in respect of input services used exclusively for providing the exempted services is admissible subject to reversal of 50% of that. We do not find any merits ion the contention of appellants that order of Commissioner has been passed contrary to intent of Rule 6(3B).
5.5.5 In our view the matter needs to go back to the original adjudicating authority for allowing appellants one more opportunity to substantiate their claim that during the relevant period i.e. from 07.07.2009 to 31.03.2012, they were providing both exempted and taxable output services using this common input service. In case they are able to substantiate their claim to the satisfaction of Commissioner, the issue will have to be dealt by the Commissioner as per the provisions of Rule 6 of CENVAT Credit Rules, 2004 as they existed at the relevant time. In case appellants are not in position to substantiate their claim with relevant documents/ records, they should accept this demand and pay the same without demur. Accordingly in respect of this issue, we remand the matter back to Commissioner for considering the claim of appellants supported by the documents/ records for taking a final view in the matter.
5.6 Whether extended period of limitation as provided for by proviso to Section 73 (1) applicable in present case.
5.6.1 Commissioner has in his order on the issue of invoking extended period of limitation observed as follows:
"24 The noticee has stated that the demands are time barred. They had submitted availment of cenvat credit in their ST-3 returns. But then these returns or accompanying documents did not elaborate that the credits were being taken on inadmissible counts or heads. Their afterthought or the varying stand is clear from their letters dated 27.08.2012 and 28.04.2013. The noticee were self assessors of payable tax and for this purpose 35 ST/85742/2014 they did also avail and utilize cenvat credit. In the process, they knowingly claimed inadmissible cenvat credit. Upon identification by the audit, they sought to defend the indefensible. The knowledge was gained by the jurisdictional service tax authorities only upon audit. The extended period of limitation, in these circumstances, has rightly been invoked."
5.6.2 On the contrary relying on various decisions specifically of Chhattisgarh High Court in case of Bharat Aluminium Company [2012 9 TMI 337 Chhattisgarh HC] they have submitted that extended period of limitation cannot be invoked in the present case.
5.6.3 The facts about the taking the credits in respect of the inputs and input services which do not qualify as "inputs" in terms of CENVAT Credit Rules, 2004 was never brought to the knowledge of the department. In the ST-3 return the appellants have indicated the quantum of credit availed but the fact of availing the credit in respect of inadmissible credit on inputs and input services not covered by the CENVAT Credit Rules, 2004 has never been brought to the knowledge of department. Having not done so they have clearly suppressed the relevant information with the intention to evade payment of service tax, and these facts could have never been brought to light if not detected during audit. After the introduction of self assessment scheme a lot of trust has been expressed by the Government in the good senses of assessees. Not many documents are called for along with the returns. But the trust imposed does not imply that assessee could go on a fishing expedition and evade the tax due or take inadmissible credits waiting for the revenue to catch them. It is also not a race against time whereby he gets the license that if the revenue cannot catch them within the normal period of limitation their inadmissible claims made without substantiation with the relevant information will become valid claims as action is barred by limitation. It is now settled law that non disclosure of any information that 36 ST/85742/2014 was relevant for determining the claim made and available with the assessee, at the relevant time, shall amount to suppression with intent to evade payment of duty. We find that in similar circumstances in following decisions invocation of extended period has been upheld:
i. Tamilnadu Coop Textiles Processing Mills Ltd [2007 (207) ELT 593 (T)] "9.We have considered the decisions cited before us. In the case of Padmini Products (supra), it was held that, where there was scope for doubt as to whether the goods were dutiable or not, the extended period of limitation under the proviso to Section 11A(1) would not get attracted. In the present case, there was no scope for the Mills to doubt whether grey fabrics processed by them were handloom fabrics or powerloom fabrics. In TNHB's case, it was held that the assessee must be aware that duty was leviable and must be found to have deliberately avoided paying duty so that the extended period of limitation could be invoked for demanding the duty from them. This condition, in our view, stands satisfied in the present case. In the case of Chemphar Drugs & Liniments (supra), it was held that conscious or deliberate withholding of information by manufacturer was necessary to invoke the larger period of limitation. The facts and circumstances of the present case, which have already spelt out, indicate that the Mills deliberately suppressed material facts before the Department. In the relevant invoices, they declared the goods as handloom fabrics, even though they were aware of the fact that the goods were dutiable powerloom fabrics. In the case of G.T.C. Industries (supra), the Tribunal did not find any evidence of the job worker having suppressed any fact with intent to evade payment of duty on the goods manufactured by them and removed under the brand name of G.T.C. Industries Ltd. and, accordingly, it was held that the longer period of limitation was not invocable against the job
37 ST/85742/2014 worker. This decision of the Tribunal is not applicable to the present case of the Mills for reasons already noted by us. In the case of Karmayogi Dyeing Pvt. Ltd. (supra), it was found by the Tribunal that the wrong declaration of fabric by the processor (job worker) was based on the declaration given to them by the supplier of grey fabric, and, in the absence of anything to indicate that the processor had colluded with the other party for wrong declaration, it was held that the extended period of limitation would not be available. This decision is also not applicable to the facts of the present case inasmuch as the grey fabric supplier (Co-optex) has not been shown to have misdeclared the fabrics in their delivery documents to the Mills. They were using different product code numbers for grey handloom fabrics and grey powerloom fabrics in the delivery documents and the scope of this practice was known to the processor (the Mills). Hence there was no question of collusion between the Mills and Co-optex. In their appeal, the Mills have raised a feeble plea that the relevant facts were known to the Department and hence the allegation of suppression against them is not sustainable. However, they have not established that the relevant facts were known to the Department prior to the investigating officers' visit to their premises. Even if it be assumed that the Department had knowledge of the relevant facts, the Mills can still be found to have suppressed such facts as held by the Tribunal in the case of Bajaj Tempo Ltd. (supra).
10.For the reasons already recorded by us, it is held that the extended period of limitation was rightly invoked in this case for demanding duty from the Mills in respect of the processed powerloom fabrics supplied to Co-optex during the period of dispute."
ii. Rail Tel Corporation of India [2015 (40) S.T.R. 1131 (Tri. - Del.)] 38 ST/85742/2014
6. We find that the appellant had registered itself under leased circuit service and as has been analysed above the impugned service rendered clearly and unambiguously fell under the scope of leased circuit service. Thus for the appellant who operates in this field and was even registered for leased circuit service, and therefore was not unaware thereof. Bona fide belief is not some sort of hallucinatory belief. It is a genuine belief of a reasonable person operating in an appropriate environment. Thus for such as assessee as the appellant, it could not have been a bona fide belief on its part that the service rendered did not fall under leased circuit service because there was no scope of any confusion or ambiguity in that regard. Further, the appellant did not timely provide the information sought and had to be issued repeated reminders. Therefore we are of the view that the appellant is guilty of suppression of fact and therefore the extended period has rightly been invoked and mandatory penalty is clearly imposable."
iii. In case of Pasupati Spinning and Weaving Mills [2015 (318) ELT 623 (SC)]Hon'ble Apex Court held "4. .......Equally, we do not think that there is any ground for interference on the extended period of limitation being applicable inasmuch as CESTAT is again correct in saying that as the declaration and RT-12 returns being vital documents submitted by the respondent (appellant herein) did not mention the vital word "hanks", they suppressed a material fact which, to their knowledge, would not bring their sewing thread within the exemption Notification. ......"
iv. Reliant Advertising [2013 (31) STR 166 (T)]-
5.6.4 "17. Ld. Counsel for the respondent/assessee has contended that since no penalty as proposed in the Show Cause Notice was imposed in the adjudication order, invoking the provisions of Section 80, invocation of the extended period of limitation is also unsustainable. This contention does not commend acceptance by this Tribunal.
39 ST/85742/2014 The adjudicating authority clearly recorded a finding that failure of the assessee to disclose the position in conformity with the position in its balance sheet, in the ST- 3 returns filed amounts to suppression of the correct taxable value from the department; that this position is fortified by the figures in the balance sheet of the assessee admitted by Ms. Shaifali Singh, in her statement recorded on 23-8-2006. Since there is a suppression by the assessee, rationally concluded by the adjudicating authority, invocation of the extended period of limitation is legitimate. The adjudication order is thus impeccable and warrants no interference. The appellate authority erred in reversing the adjudication order."
5.6.5 The decision in case of Bharat Aluminum Corporation, relied upon by the appellants do not help the cause of the appellants. This decision has been passed relying on the decision of Apex Court in case of Continental Foundation Joint Venture [2007 (216) ELT 177 (SC)]. While discussing the issue on suppression the Apex Court stated "Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct." Since the facts in that case were known to both the parties Hon'ble Apex Court held charge of suppression cannot be invoked. That is not the case here. In this case certain information which was available with the appellants was never disclosed to revenue, with the intention to evade payment of tax. This decision of Apex Court is clearly distinguishable and so is the decision of Hon'ble Chhattisgarh High Court.
40 ST/85742/2014 5.6.6 In view of discussions as above we hold that extended period of limitation as provided for by proviso to Section 73(1) of Finance Act, 1994 is invokable in the present case.
5.7 Whether demand for interest and penalty imposed under Section 78 of Finance Act, 1994 justified.
5.7.1 Since the appellants have taken the inadmissible credit and utilized the same for payment of Service Tax, the demand of interest in respect of the inadmissible credit is justified in terms of provisions of Rule 14 of CENVAT Credit Rules, 2004 read with Section 75 of Finance Act, 1994. It is now settled law that interest under Finance Act, 1994 is statutory liability put on the person who has unduly withheld the amounts due to government. In case of Pratibha Processors [1996 (88) ELT 12 (SC)] Hon'ble Apex Court has laid down:
"13. In fiscal Statutes, the import of the words -- "tax", "interest", "penalty", etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforce by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty -- which is penal in character."
5.7.2 Thus we uphold the demand of interest on the amounts that would be determined by the Commissioner in remand proceedings.
41 ST/85742/2014 5.7.3 Appellants have contested the penalty imposed on them under Section 78 of the Finance Act, 1994. In view of the decision of the Apex Court in case of Dhiren Chemicals [2008 (231) ELT 3 (SC)] and Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] we do not find any merits in these submissions of the Appellants. Commissioner has in para 27 of his order recorded as follows:
"27. Now of penalty. The above determination has occurred in satisfaction of ingredients prescribed in the proviso to Section 73(1) of Chapter V of the Finance Act, 1994. They are in pari materia with those provided in Section 78 thereof. The noticee has claimed inadmissible benefits, which remained privy to them, until unearthed by the audit officers of the service tax Commissionerate. The penalty proposed and mandated under Section 78 of Chapter V of the Finance Act, 1994 in reading of Rule 15(3) and Rule 15(4) of the CENVAT Credit Rules would, thus become imposable on the noticee. In view thereof, no penalty would be imposable under Section 76 of Chapter V of the Finance Act, 1994."
5.8 In view of our discussions and findings as above we respond to the questions framed in para 5.3 as follows:
I. CENVAT Credit claimed by the Appellants on Furniture and Fixtures is inadmissible as they do not qualify either as Capital Goods or Inputs. The demand in respect of these is upheld.
II. CENVAT Credit claimed by the Appellants on various services meant for consumption of their employees under the employment contract, is admissible upto 01.04.2011, provided no part of service has been received by the employee after that date. However CENVAT Credit in respect of these services meant for personal consumption of the employees is inadmissible post 01.04.2011. Matter is remanded back to Commissioner for redetermination of the amount of inadmissible credit.
42 ST/85742/2014 III. CENVAT Credit in respect of the Forex Broker Services needs to be reconsidered by the Commissioner after considering the claim of the Appellants that these services have been used by them not only for providing the exempted services (exemption Notification No 19/2009-ST), but also for providing taxable services.
Appellants should produce all the records and documents before the Commissioner in support of their claim. After considering the claim made along with the records and documents produced by the appellants Commissioner should re-determine the amount of inadmissible credit. IV. Extended period of limitation as provided for by proviso to Section 73(1) of the Finance Act, 1994 is invokable in the facts of this case.
V. Demand of interest under Rule 14 CENVAT Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 and Penalty under Rule 15(3)/ 15(4) of CENVAT Credit Rules, 2004 read with Section 78 of Finance Act, 1994 is justified and imposable on the appellants. However the quantum of interest and penalty needs to be redetermined after determination of the amount of inadmissible credit.
6.1 Thus we dispose of this appeal by remanding the matters as indicated in para 5.8 above.
(Order pronounced in the open court on 04.06.2019) (S.K. Mohanty) Member (Judicial) (Sanjiv Srivastava) Member (Technical) tvu