Custom, Excise & Service Tax Tribunal
Bharat Sanchar Nigam Limited vs Cgst & Ce Kanpur on 30 September, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.50140 of 2015
(Arising out of Order-in-Original No.KNP-EXCUS-000-COM-008-14-15 dated
19/09/2014 passed by Commissioner of Customs, Central Excise & Service
Tax, Kanpur)
M/s Bharat Sanchar Nigam Limited, .....Appellant
(Shahzadi Mandi Taarghar, Agra)
VERSUS
Commissioner of Central Excise &
Service Tax, Kanpur ....Respondent
(117/7 Sarvodya Nagar, Kanpur)
APPEARANCE:
Shri Kartikeya Narain, Advocate for the Appellant
Shri Manish Raj, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70603/2024
DATE OF HEARING : 07 June, 2024
DATE OF PRONOUNCEMENT : 30 September, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order In Original No. KNP-
EXCUS-000-COM-008-14-15 dated 19.09.2014 of the
Commissioner Central Excise and Service Tax, Kanpur. By the
impugned order following has been held:
"ORDER
a. I order that the entire amount of Rs.21,96,300/- (Rupees
Twenty One Lakhs Ninty Six Thousand Three Hundred
only) received by M/s. Bharat Sanchar Nigam Limited,
Shahzadi Mandi, Taarghar, Agra for rendering the service
under the category of "Renting of Immovable Property
Service" (upto 30.06.2012) and under "Other than
Service Tax Appeal No.50140 of 2015
2
negative list" service (w.e.f. 01.07.2012) should be treated
as taxable value,
b. I confirm the demand of Service Tax (including Education
Cess and Secondary & Higher Education Cess) amounting
to Rs.2,42,596/- (Rupees Two Lakhs Forty. Two Thousand
Five Hundred Ninety Six only) and order for its recovery
under proviso to Section 73(1) of the Finance Act, 1994
(as amended from time to time) for the reasons detailed
here-in-above
c. I confirm the demand of wrongly availed Cenvat Credit on
capital goods amounting to Rs.3,67,17,711/- (Rupees
Three Crores Sixty Seven Lakhs Seventeen Thousand
Seven Hundred Eleven only) availed by the party and
order for its recovery under the provisions of Rule 14 of
the Cenvat Credit Rules, 2004 read with Section 73(1) of
the Finance Act, 1994.
d. I disallow the input service credit availed on rent-a-cab
operator services by the party amounting to
Rs.5,36,967/- (Rupees Five Lakhs Thirty Six Thousand
Nine Hundred Sixty Seven only) and order for its recovery
under the provisions of Rule 14 of the Cenvat Credit
Rules, 2004 read with Section 73(1) of the Finance Act,
1994.
e. I also confirm the demand of interest due on the aforesaid
amounts and order for recovery of the same from the
aforesaid party under the provisions of Section 75 of the
Finance Act, 1994 read with Rule 14 of the Cenvat Credit
Rules, 2004.
f. I impose a penalty of Rs.10,000/- (Rupees ten thousand
only) upon the party under the provisions of Section 77(2)
of the Finance Act, 1994 for the aforementioned reasons
g. I also impose a penalty of Rs.3,74,97,274/- (Rs Three
Crores, Seventy Four Lakhs Ninety Seven Thousand, Two
Hundred & Seventy Four only) under the provisions of
Section 78 of the Finance Act, 1994, read with Rule 15(3)
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3
of the Cenvat Credit Rules 2004 for the aforementioned
reasons."
2.1 Appellant is registered with the Service Tax Department
for providing the taxable services i.e., Telecommunication
Service"' as classifiable under Sub Clause (zzzx) of Section
65(105) of the Finance Act, 1994, as inserted vide the Finance
Act, 2007 w.e.f. 01.06.2007. They are also availing the facility of
CENVAT Credit as admissible to them.
2.2 As per the observations communicated by the AGUP vide
CERA No.ST-89/2012-13 dated 30.05.2013, the AGUP raised
the following objections:
(a) Incorrect availment of 100% CENVAT Credit amounting
to Rs.3.01 crore on capital goods and interest liability
of Rs.18.29 lakhs.
(b) Non-payment of Service Tax on renting of immovable
property (Rs.2.02 lakh).
(c) Irregular availing of Cenvat Credit on rent-a-cab (taxi)
Services
2.3 After making the enquiries and investigations in the matter
in light of the above audit objections a show cause notice dated
21.04.2014 invoking extended period of limitation was issued to
the appellant asking them to show cause as to why:-
a. The amount of Rs.21,96,300/- (Rupees Twenty One Lakhs
Ninty Six Thousand Three Hundred only) charged and
received by them should not be treated as taxable value
under the category of "Renting of Immovable Property
Service" (upto 30.06.2012) and under "Other than
negative list" service (w.e.f. 01.07.2012) and accordingly
Service Tax (including Education Cess and Higher
Education Cess) amounting to Rs.2,42,596/- (Rupees Two
Lakhs Forty Two Thousand-ive Hundred Ninety Six only)
should not be demanded and recovered from them under
proviso to Section 73(1) of the Finance Act, 1994 (as
amended from time to time).
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4
b. The inadmissible Cenvat Credit on Capital Goods
amounting to Rs.3,67,17,711/- (Rupees Three Crores
Sixty Seven Lakhs Seventeen Thousand Seven Hundred
Eleven only) availed during the period from September,
2009 to November, 2013, in contravention to Rule 4(2)
and 9(1) of the Cenvat Credit Rules should not be
recovered under the provisions of Rule 14 of the Cenvat
Credit Rules, 2004 read with Section 73(1) of the Finance
Act, 1994.
c. The Cenvat Credit availed on rent-a-cab operator (taxi)
services during the year 2009-10, 2010-11 and 2011-12
total amounting to Rs.5,36,967/- (Rupees Five Lakhs
Thirty Six Thousand Nine Hundred Sixty Seven only) in
contravention to Rule 2(l) of Cenvat Credit Rules, 2004
should not be recovered under the provisions of Rule 14 of
the Cenvat Credit Rules, 2004 read with Section 73(1) of
the Finance Act, 1994.
d. Interest should not be demanded & recovered from them
on the amounts demanded above under the provisions of
Section 75 of chapter V of the Finance Act, 1994 read
with Rule 14 of the Cenvat Credit Rules, 2004.
e. Penalty should not be imposed upon them under Section
76 of the Finance Act 1994, for the failure to make the
payment of Service Tax on the income earned from
Renting of Immovable Property in prescribed time limit.
f. Penalty should not be imposed upon them under Section
77(2) of the Finance Act, 1994 for the failure to self-
assess the correct taxable value.
g. Penalty should not be imposed upon them under Section
78 of the Finance Act, 1994, read with Rule 15(3) of the
Cenvat Credit Rules, 2004 for suppressing the value of
taxable services rendered by them in the statutory ST-3
returns- and wrongly availing the Cenvat Credit on Capital
Goods and Input services which was not admissible to
them with intent to evade payment of Service Tax.
Service Tax Appeal No.50140 of 2015
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2.4 Show cause notice has been adjudicated as per the
impugned order. Aggrieved appellant has filed this appeal. In the
appeal filed appellant has not challenged the confirmation of
demand made against them on the "Renting of Immovable
Property Services". Their appeal is only limited to denial of
CENVAT Credit.
3.1 We have heard Shri Kartikeya Narain, Advocate for the
appellant and Shri Maninsh Raj, Authorized Representative for
the revenue.
3.2 Arguing for the appellant learned counsel submits that
they are challenging the denial of CENVAT Credit availed
by them on the basis of Advice of Transfer Debit (ATD).
The issue in this respect is no longer res-integra and has
been decided by the Chennai Bench in respect of other unit
of the appellant as reported at [2014 (34) STR 378 (T-
Chennai).
They do not challenge the demands made under the other
categories.
3.3 Authorized Representative reiterates the findings recorded
in the impugned order.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 In respect of the issue under challenge in the present
appeal, the impugned order records finding as follows:
"43a. Now, I take up the aforementioned issues one by one.
The first issue to be decided is whether the demand of
Service Tax of Rs.3,67,17,711.00 towards availment of
Cenvat Credit on capital goods on the strength of 'Advice to
Transfer Debiť i.e. ATDs is sustainable or not, and whether
Interest is payable on 100% availment of Cenvat Credit on
capital goods in the first year itself. The department was of
the view that such ATDs were not proper and valid
documents for availment of Cenvat Credit on Capital goods,
as per provisions contained in Rule 9(1) of the Cenvat
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Credit Rules, 2004. As such, since such Cenvat Credit was
availed on the strength of improper and invalid documents
in contravention of Rule 9(1) of the Cenvat Credit Rules,
2004, the same was liable for recovery/reversal. Further,
the department was also of the view that Interest was
demandable from M/s BSNL for the excess availed Cenvat
Credit in violation-of the provisions of Rule 4(2) of the
Cenvat Credit Rules, 2004
43b. The party, while denying such allegations has
submitted that the department has not considered the fact
that aforesaid capital goods were purchased by the CTSD,
Meerut for SSA, Agra and these capital goods were used for
providing telecommunication service. During that period,
CTSD was not registered as First/ Second stage dealer with
the Central Excise department. It should be noted that
Cenvat Credit cannot be denied for procedural lapses once
the receipt of goods and its use in providing the taxable
services is not in dispute. In the instant case, department
had denied the benefit of Cenvat Credit to them only on
procedural & technical apse (unable to produce the original
invoices at the time of inspection). There is no dispute that
the party had not procured the aforesaid capital goods on
payment of excise duty and these capital goods were not
used for providing the telecommunication services. The
entire endeavour of revenue should be to make the scheme
effective and not to deny the beneficial provisions on the
basis of technical breaches. In their support, they placed
reliance on a few judicial pronouncements, and stressed
that Hon'ble Tribunal allowed the CENVAT Credit on the
ground that goods are duty paid & they are utilized in
providing the output services. On the basis of above
submissions, they requested to allow the CENVAT Credit on
the strength of ATD's
43c. As per the facts of the case, the party has availed
credit on the capital goods on the basis of the ATD
documents issued by their different offices. I find that such
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ATD's are neither specified documents under Rule 9(1) of
Cenvat Credit Rules 2004 on which Credit can be availed nor
does it contain details prescribed under Rule 4A of Service
Tax Rules, 1994. I observe that the Party has itself admitted
that the aforesaid capital goods were purchased by the
CTSD, Meerut for SSA, Agra and these capital goods were
used for providing telecommunication service. It has
further been admitted that during that period, CTSD was
not registered as First/ Second stage dealer with the Central
Excise department. I further observe that while defending
their case, the party have failed to provide documents /
bills/ invoices based on which the ATD's were issued & on
the strength of which the Cenvat Credit has been taken by
them. Further, I also observe, that the party did not bother
to produce any documentary evidence in the form of
Invoices which could establish some co-relation of ATD's
with duty paying invoices/ bills.
43d. The Rule 9(1) of the Cenvat Credit Rules, 2004 states
that :
"The CENVAT credit shall be taken by the manufacturer or
the provider of output service or input service distributor,
as the case may be, on the basis of any of the following
documents namely :-
(a) an invoice issued by -
(i) a manufacturer for clearance of-
(I) Inputs or capital goods from his factory
or depot or from the premises of the
consignment agent of the said
manufacturer or from any other premises
from where the goods are sold by or on
behalf of the said manufacture
(II) Inputs or capital goods as such;
(ii) an importer,
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(iii) an importer from his depot or from the
premises of the consignment agent of the said
importer if the said depot or the premises, as
the case may be, is registered in terms of the
provisions of Central Excise Rules, 2002;
(iv) a first stage dealer or a second stage dealer,
as the case may be, in terms of the provisions
of Central Excise Rules, 2002; or
(b) a supplementary invoice, issued by a manufacturer or
importer of inputs or capital goods in terms of the
provisions of Central Excise Rules, 2002 from his factory
or depot or from the premises of the consignment
agent of the said manufacture or importer or-from any
other premises form where the goods are sold by, or on
behalf of, the said manufacturer or importer, in case
additional amount of excise duties or additional duty
leviable under Section 3 of the Customs Tariff Act, has
been paid, except where the additional amount of duty
became recoverable from the manufacture or importer
of inputs or capital goods on account of any non-levy
or short-levy by reason of fraud, collusion or any willful
misstatement or suppression of facts or contravention
of any provisions of the Excise Act, or of the Customs
Act, 1962 (52 of 1962) or the Rules made there under
with intent to evade payment of duty.
Explanation - For removal of doubts, it is clarified that
supplementary invoice shall also include Challan or any
other similar document evidencing payment of
additional amount of additional duty leviable under
section 3 of the Customs Tariff Act, or
(c) a bill of entry; or
(d) a certificate issued by an appraiser of customs in
respect of goods imported through a Foreign Post
Office or
Service Tax Appeal No.50140 of 2015
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(e) a Challan evidencing payment of service tax by the
person liable to pay service tax under sub - clauses
(iii), (iv), (v) and (vil)] of clause (d) of sub-rule' (1) of
rule 2 of the Service Tax Rules, 1994; or
(f) an invoice, a bill or Challan issued by a provider of input
service on or after the 10h day of September, 2004;
or
(g) an invoice, bill or Challan issued by an input service
distributor under Rule 4A of the Service Tax Rules,
1994."
43e. Thus as per the aforesaid provisions of the Cenvat
Credit Rules, 2004, any of the above mentioned documents
are required for availment of Cenvat Credit. These
documents should either be in the name of the party
claiming the Cenvat Credit or should be endorsed in his
name. But in the present case, I observe that the Cenvat
Credit was availed on the strength of ATD's i.e. he internal
documents in respect of the capital goods which were
purchased by the CTSD, Meerut for SSA, Agra, which are
not specified for availing the Cenvat as per Cenvat Credit
Rules, 2004. In these circumstances, I am of the opinion
that Cenvat Credit availed on the strength of such
documents is not admissible.
43f. I further observe that the party had contended that
credit cannot be denied to them merely for technical breach
of rules or procedural lapses. They have cited the following
case laws in support of their contention. Regarding reliance
upon the various case laws cited by the party in their
support, I would not like to discuss each and every case-
law, because the fact in one case is not completely same or
identical with the facts in the other case. The Hon'ble
Supreme Court of India, in the case of CCE, Bangalore Vs
Srikumar Agencies [2008(232)ELT 0577(S.C.)], has stated
in para 5 that, one additional or different fact may make a
world of difference between conclusions in two cases.
Service Tax Appeal No.50140 of 2015
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Disposal of cases by blindly placing reliance on a decision is
not proper. They have also quoted the words of Lord
Denning in this, which is as follows: "Each case depends on
its own facts and a close similarity between one case and
another is not enough because even a single significant
detail may alter the entire aspect in deciding such cases,
one should avoid the temptation to decide cases (as said by
Cordozo) by matching the colour of one case against the
colour of another. To decide therefore, on which side of the
line a case falls, the broad resemblance to another case is
not at all decisive."
Therefore, keeping the above observation in mind while
deciding the case, I reiterate that the cases relied on by the
party cannot be applied in their entirety to this case, as the
facts are different from case to case.
43g Since the documents against which the Cenvat
Credit has been availed by M/s BSNL are not the valid
documents, as such, I am of the view that it is not merely a
procedural lapse, but a gross of violation of the provisions
as prescribed under Rule 9(1) of the Cenvat Credit Rules,
2004. Thus, I find that in absence of specified documents
under Rule 9(1) of the Cenvat Credit Rules, 2004 and
party's failure to produce supporting documents / records to
substantiate their claim, there is no option left but to hold
that the Cenvat Credit| availed by the party is not
admissible and same is recoverable as per provisions of
Rule 14 of Cenvat Credit Rules, 2004 read with proviso to
Section 73(1) of the Finance Act, 1994.
43h. Now, coming to the issue of availment of 100% of
Cenvat Credit on Capital Goods in the first year itself, the
department has demanded Interest for the excess availed
Cenvat Credit on the grounds that that as per Rule 4(2) of
the Cenvat Credit Rules, 2004, the Cenvat Credit in respect
of capital goods received in the factory or in the premises of
the provider of output service at any point of time in a
given financial year shall be taken only for an amount not
Service Tax Appeal No.50140 of 2015
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exceeding fifty percent of the duty paid on such capital
goods in the same financial year. Further, as per provisions,
the balance of Cenvat Credit may be taken in any financial
year subsequent to the financial year in which the capital
goods were received.
43i. The-party, on the other hand, while denying such
allegations have mainly submitted that the department
have raised the demand of interest for 100% availment of
CENVAT Credit on Capital goods in the first year itself,
without verifying the fact that the excess 50% credit was
never utilized for payment of Service Tax. The party
stressed that they have not derived any pecuniary benefit,
by crediting the 100% credit in the ST-3 returns. There is
no dispute on duty paying documents, their admissibility or
nature. Not only this, there was always sufficient balance in
Cenvat Credit register. The party stressed that as per
Cenvat Credit Rules, 2004, the legislative intention was to
impose interest when the assessee wrongly availed CENVAT
credit which means inadmissible credit, which cannot be
availed as per Cenvat Credit Rules, 2004. But in the instant
case, the party had only credited the ST-3 returns by 100%
instead of 50%. There is no dispute about the admissibility
of credit so availed. In their support, they placed reliance on
a few judicial pronouncements. On the basis of above facts,
they requested to drop the demand of interest for wrong
availment of Cenvat, which was not utilized for payment of
tax 43j.
43j. In this matter, I observe that there is no dispute that
Cenvat Credit to the extent of only 50% was permissible in
the Cenvat Credit Rules, 2004. Further, the party has also
accepted that they had availed 100% Cenvat Credit of
capital goods in the first year itself, but had not utilized the
same for payment of Service Tax. Further, the admissibility
of such credit to them was also undisputed. The sole issue
here is that Interest has been demanded from the party for
the excess availed Cenvat Credit in violation of the
Service Tax Appeal No.50140 of 2015
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provisions of Rule 4(2) of the Cenvat Credit Rules, 2004. I
am of the opinion that it is a settled law that Interest is
payable for the period during which excess of 50% was
availed, as held in a plethora of citations.
43k. In the case of CCE Vs Vijay Tanks (2009)235 ELT 107
CESTAT], it was held that Interest if assessee takes full
credit - If assessee takes entire credit in an year (instead of
50%), Interest is payable for wrongly availed credit.
Further, in the case of Guardian Plasticote Vs CCE
[(2009)241ELT 149 CESTAT), it was held that even if 100%
credit is taken, demand can only be for Interest for the
period during which excess of 50% was availed. The same
view was observed in the case of India Gateway Terminal
(P) Ltd. Versus CCE, Cochin [2010(06)LCX0141 CESTAT].
43l. view of the aforementioned discussions, I hold that
Interest was payable by M/s BSNL for the excess availed
Cenvat Credit in violation of the provisions of Rule 4(2) of
the Cenvat Credit Rules, 2004, under the provisions of Rule
14 of the Cenvat Credit Rules, 2004 read with Section 75 of
the Finance Act, 1994."
4.3 Appellant is a Government of India Undertaking providing
the same services from different locations across the country.
The same issue for denial of the credit availed by the appellant
on the basis of Advice of Transfer Debit (ADT) was raised in the
jurisdiction of the Salem Commissionerate. Matter was finally
decided by the Chennai Bench vide order reported at [2014 (34)
STR 378 (T-Chennai) holding as follows:
"2. The relevant facts of the case are that the assessee
namely Bharat Sanchar Nigam Limited (BSNL),
appellant/respondent in these appeals as indicated against
each appeal, are engaged in the business of providing
telephone services. They had a system of procuring capital
goods necessary for providing their services centrally by a
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Designated Authority at Madurai for all the Secondary
Switching Areas (SSA). The Designated Authority was
Controller of Telecom Stores Depot, Madurai. After
procuring the goods and making payments, the said
authority delivered the equipments at the respective SSAs
along with Advice of Transfer Debit (ATD). The different
offices of the assessee took Cenvat credit based on such
ATDs supported by Xerox copies of original invoices under
which the goods were received by Controller of Stores.
Revenue took objection that ATD is not a specified
document under Rule 9 of CCR, 2004 against which the
Cenvat credit could be taken. Therefore, proceedings were
initiated for denying Cenvat credit and also for imposing
penalty. On adjudication, the Cenvat credit was denied in all
the cases and penalties were imposed under Rule 15(1) and
15(2) of CCR, 2004. On appeal filed by assessee, the
Commissioner (Appeals), in one case that is in the case of
BSNL Erode confirmed the demand but set aside the
penalty. In the other two cases, the Commissioner
(Appeals), completely set aside the impugned order allowing
credit based on precedent decision of the Tribunal in Final
Order No. 1221/2008, dated 28-10-2008 [2009 (14) S.T.R.,
699 (T)].
4. Arguing for the assessee, the advocate submits that the
assessee was having very many secondary switching areas.
It was only natural that procurement was done centrally to
get competitive bids and also for arranging logistics
Service Tax Appeal No.50140 of 2015
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efficiently. From a commercial point of view, such an
operational approach had to be followed and cannot be
faulted as a method to take any unauthorized credit. The
only procedural lapse was that procuring office did not get
registered as dealer as per Rule 9 of Central Excise Rules,
2002 which is made applicable for the purpose of CCR,
2004. However, necessary documentation has been done
inasmuch as the all the invoices against which procurements
were made are available and also Transfer Advice has been
communicated to the concerned office where credits were
taken. He submits that this procedural lapse continued only
till the year 2005 and once the department started raising
objection on this count, they took registration and started
following proper procedures. He submits that since the fact
of procurement of capital goods is not disputed and the duty
paid thereon also is not disputed and the use of the capital
goods in providing taxable service is also not disputed, the
Deputy Commissioner concerned having powers vested on
him under proviso to Rule 9 of CCR, 2004, he should have
condoned the procedural lapse by exercising such power.
Since there is no revenue loss to the department, it is his
prayer that credit may be allowed and the prayer for
imposing penalty may be rejected. He relies on the decision
of the Tribunal which has already been relied upon by
Commissioner (Appeal) in two cases.
5. Opposing the prayer, ld. AR for Revenue submits that
Transfer Advice is not a document specified under Rule 9(1)
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of the CCR, 2004 against which credit could have been
taken. Further transfer advice was backed only by
photocopy of invoice and not actual invoice. Further, he
submits that these invoices were addressed to the Divisional
Engineer, Central Stores, Madurai but credits were taken at
other locations. For these reasons, the orders of the
Commissioner (Appeals) are not proper. He submits that but
for the verification conducted by the department, this
irregularity would not have come to the notice of the
department and therefore penalty should be imposed.
6. Considered submissions on both sides. It is true that
assessee has not complied with provisions of CCR, 2004
read with Central Excise Rules, 2002 strictly. However, I
find that existence of original invoice and its genuineness is
not disputed by Revenue. In fact, such documents were
produced before lower authorities. Therefore, the duty
involved has been paid and there is no dispute that the
equipment in question has been used at the sites where
credits were taken. In such circumstances, considering the
commercial practice which was necessary for efficient
procuring the equipment in question, this procedural lapse
cannot be considered as a reason to deny Cenvat credit
involved. Therefore, following the precedent decisions of the
Tribunal I allow Cenvat credit and consequently there is no
question of imposing any penalty. Therefore the appeal filed
by the assessee is allowed and the appeals filed by Revenue
are rejected. All the appeals are disposed of accordingly."
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4.4 This decision was affirmed by Hon'ble Madras High Court
as reported at [2016 (44) STR J162 (Mad)]. Allahabad bench
followed this decision in the case of appellant as reported at
[2017 (6) G.S.T.L. 345 (Tri. - All.)] holding as follows:
5. At this stage, the ld. AR for Revenue, points out that
the issue relates to taking of Cenvat credit of Rs.
21,93,606/- and the appellants before the authorities below,
have shown the documentary evidences only in part and
thus there remained discrepancy to be explained.
6. From the above, it is clear that the re-conciliation is
not done before the Court below. Accordingly, I allow the
appeal by way of remand setting aside the penalties and
direct the adjudicating authority to pass a fresh order by
following the decision of this Tribunal in the case of M/s.
B.S.N.L. v. CCE : 2014 (34) S.T.R. 378 (Tri.-Chennai) (cited
supra). I further direct the appellant to appear before the
adjudicating authority within a period of 60 days from the
date of receipt of a copy of this order along with supporting
[documents] in their favour and seek opportunity of
hearing.
4.5 This order was challenged by the revenue before Hon'ble
High Court of Allahabad. Hon'ble High Court as reported at [2019
(366) E.L.T. 619 (All.)] decided the matter holding as follows:
"7. The aforesaid Rule clearly lays down that the Cenvat
credit shall be taken by the manufacturer or the service
provider on the basis of the documents specified
thereunder.
8. In view of the above provision the production of the
above documents is necessary for availing the Cenvat
credit. The Assessing Officer has found that the respondent-
assessee has availed the Cenvat credit but on the strength
of Advice of Transfer Debit (ATD) issued by BSNL Telecom
Electrical District Meerut and BSNL Civil Wings, Meerut and
no other document.
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9. The CESTAT in the impugned order has also mentioned
that the Cenvat credit was availed by the assessee on the
basis of Advice of Transfer Debit (ATD) issued by the
Central Telephone Store Department supported by Xerox of
the original invoices.
10. The Assessing Officer has not recorded any finding that
the original invoices were ever supplied or produced to
claim the Cenvat credit.
11. No material has been placed before us to indicate that
the original invoices or the copies thereafter were placed on
record before the Assessing Officer.
12. The Tribunal has further recorded that for availing the
Cenvat credit documentary evidence only in part were
shown meaning thereby that not all documents as
contemplated by Rule 9 of the Rules were produced. At
least, there is no finding by the CESTAT that the assessee
had furnished documents as prescribed under Rule 9 of the
Cenvat Credit Rules, 2004 for availing the Cenvat Credit.
13. In view of above, we find that the CESTAT is justified
in remanding the matter with regard to the admissibility of
the Cenvat credit to the assessee to be reconsidered and
decided by the Assessing Officer on the verification of the
documents.
14. The next question is in respect of penalty imposed
under Rule 15(2) of the Rules read with Section 11AC of the
Central Excise Act, 1944.
15. The imposition of penalty depends upon the outcome
of the question No. 1 on re-adjudication by the Assessing
Officer.
16. In view of above, the CESTAT has manifestly erred in
setting aside the order of penalty which infact ought to have
been left open for decision of the adjudicating authority
while deciding question No. 1 afresh.
Service Tax Appeal No.50140 of 2015
18
17. Accordingly, we allow the appeal in part by modifying
the order of the CESTAT dated 8-3-2016 with the direction
to the adjudicating authority to decide about the
admissibility of the Cenvat Credit available to the assessee
in terms of Rule 9 of the Rules after due verification of the
documents produced before it and to pass a penalty order if
necessary in accordance with law."
4.6 In para 43c of impugned order, specific finding to the
effect that appellant had not produced the supporting documents
which would evidence payment of duty. In view of the decision
of Hon'ble High Court of Allahabad on the same issue in the case
of Appellant's unit, we remand matter back on this issue to the
original authority to re-determine the admissibility of CENVAT
Credit on the strength of ATD in terms of this decision of Hon'ble
High Court.
4.7 Adjudicating authority has referred to various decisions holding
that the demand of interest in respect of the excess credit availed in
first year itself in respect of the Capital Goods is justifiable. This
finding has not been challenged by the appellant/ appellant counsel at
any time before us. Thus we uphold the said finding recorded.
However as the demand of the interest is completely linked with the
admissibility of CENVAT Credit on the basis of the ATD, for which the
matter is being remanded back to the original this issue should be
decided by the adjudicating authority on the basis of the findings
arrived at by in respect of admissibility of CENVAT Credit.
4.8 Further adjudicating authority should re-determine the
issue of penalty on these credits after determining the
admissibility of CENVAT Credit in remand proceedings as has
been directed by the Hon'ble High Court.
4.9 As we have earlier observed that appellant has not challenged
the demands made in respect of the "Renting of Immovable Property".
As there is no challenge to these demands we are upholding the said
demands without recording any findings on the same. However we
reproduce the findings recorded in the impugned order below:
44a Now, coming to the issue of non-payment of Service
Tax by the party on the service of Renting of Immovable
Service Tax Appeal No.50140 of 2015
19
Property, I observe that it was pointed out that M/s BSNL
had not paid the Service Tax on letting out the field of their
compound for furtherance of commerce. The party charged
the amount for such letting out of their premises for
commercial consideration, and thus such activity on their
part comes under the definition of taxable services i.e.
'Renting of Immovable Property' classifiable under Section
65(105) (zzzz) of the Finance Act, 1994. As per the details
provided by M/s BSNL, the amount received as rent from
13.03.2009 to 31.12.2013 was Rs.21,96,300/- and Service
Tax payable thereon was Rs.2,42,596/- (incl Cess). Thus,
the department was of the view that as per the provisions
of the Finance Act, 1994, (as amended from time to time)
M/s BSNL were liable to pay Service Tax on income earned
from 'Renting of Immovable Property.
44b. I observe that the party in its defence has not
disputed the issue, and has stated that they accept
the liability of Service Tax on 'Renting of Immovable
Property' amounting to Rs 2,42,596/- and pay the
same through the reversal of CENVAT of equivalent
amount. However, I find that the party has not given any
documentary evidence of having discharged such liability of
payment of Service Tax on the service of 'Renting of
Immovable Property." In these circumstances, I hold that
the Service Tax of Rs.2,42,596/- (incl Cess) was payable by
the party on the income earned from 'Renting of
Immovable Property.
4.10 To disallow the CENVAT Credit in respect of Rent-a-Cab
services, availed by the appellant, Impugned order holds as
follows:
45a. Now, coming to the issue of availment of Cenvat Credit
by M/s BSNL, I observe the coming contention of the audit
team was that as per Rule 2(l) of Cenvat Credit Rules,
2004, input service excludes services specified in sub-
Service Tax Appeal No.50140 of 2015
20
clauses (d), (o), (zo), (kzzzz) of clause (105) of Section 65
of the Finance Act, in so far as they relate to motor
vehicles, except when used for the provisions of taxable
services for which the credit on motor vehicle is available as
capital goods. In view of the above provisions, it was
apparent that the hiring of the motor vehicles by the output
service provider M/s BSNL is not construed as Input
service, as the same has been excluded from the definition
of Input service, and thus, such Cenvat credit availed for
services of rent-a-cab were not covered under definition of
input service under Rule 2(l) of the Rules, ibid. Since, the
activity of hiring of motor vehicles has been excluded from
the definition of the Input services as such. the department
was of the view that M/s BSNL were not entitled to avail the
credit of Service Tax paid on the rented vehicles engaged
for the taxi purposes. During the course of enquiries, M/s
BSNL submitted the details of Cenvat Credit availed on rent-
a-cab (taxi) services during the years 2009-10, 2010-11
and 2011-12, giving the details of bills on which the Cenvat
Credit was availed. From the details submitted, it appears
that M/s BSNL have availed and utilized the inadmissible
Cenvat Credit on input services amounting to
Rs.5,36,967.00 in contravention to Rule 2() of Cenvat
Credit Rules, 2004 which appears to be liable for recovery
45b. The party on the other hand contended that credit has
been denied without understanding the nature of service
and its utilization in providing the output taxable service.
The party submitted that these cabs were used to provide
the necessary software & hardware, and other mechanical
parts to the telephone exchanges which were situated at
remote area; and for providing repair & maintenance
services to telephone exchanges in case of breakdown, in
the shortest possible time. These vehicles were not utilized
to carry officials. These vehicles were used as goods
transport services for transportation of goods from main
telephone exchange to other telephone exchanges and GTA
Service Tax Appeal No.50140 of 2015
21
services are covered under the ambit of "Input services"
Cenvat Credit cannot be denied merely on the basis of
nomenclature of service without understanding the nature
of service and its utilization in providing he output taxable
service. Inwards transportation of inputs & capital goods
are specially included in the definition of input . services.
Here cabs were not used for its original work, these cabs
were used for transportation of inputs & capital goods for
providing the taxable service. They stressed that rent a cab
services are integral part of telecom services and thus it
should be treated as input services.
45c. At the outset, I find that party has claimed that credit
availed on said input service namely Rent-A-Cab services is
towards "activity relating to business" and therefore Cenvat
Credit taken on above input services is correctly availed,
and utilized in terms of Rule 2(l) (i) of CENVAT Credit
Rules, 2004. To understand the issue in a more subtle
manner, let us go through the definition of the 'input
service', which as per Rule 2 (l) of the Cenvat Credit Rules,
2004 is as under-
Definition of "input service" as per Rule 2(1) ibid -
"input service" means any service, -
(i) used by a provider of taxable service for providing an
output service; or
(ii) used by the manufacturer, whether directly or
indirectly, in or in relation to the manufacture of final
`products and clearance of final products from the
place of removal,
and includes services used in relation to setting up,
modernization, 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
Service Tax Appeal No.50140 of 2015
22
control, coaching and training, computer networking, credit
rating, share registry, and security, inward transportation
of inputs or capital goods and outward transportation upto
the place of removal;
But excludes services
(A) specified in sub-clauses (p)(Architect Services),
(zn)(Port Services), (zzI)(Port Services by other
port), (zzm)(Services by Airport Authority etc.),
(zzq) (Commercial and Industrial Construction
Services), (zzzh) (Construction of Complex) and
(zzzza)(Works Contract Services) 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) (General Insurance Services), (o)(Rent-a-Cab Services), (zo) (Authorised Service Station) and(zzzzi) (Forward Contract etc.) of clause(105)of Section 65 of the Finance Act, in so 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 Service Tax Appeal No.50140 of 2015 23 Concession, when such services are used primarily for personal use or consumption of any employee 45d,. I observe that the afore-mentioned definition of input service` under Rule 2(l), as stipulated in Cenvat Credit Rules, 2004, should be interpreted in the widest possible manner. For the sake of convenience, the applicability of 'Rent-A-Cab services' to be covered under all the parts of the above stated definition of 'input service' is discussed henceforth 45e. From the plain reading of the first leg of the said definition, it is clear that the Rent-A-Cab services' are evidently not being used by the party for providing any output service, hence, not covered under the first part of the said definition of the 'input service'. The first part of the definition is restrictive in scope as it covers input services used for providing taxable output service, or used by manufacturer, directly or indirectly, in relation to manufacture or clearance of final product upto the place of removal. Though, the definition of input service' is- very wide, yet it only includes the services used in the manufacture and clearance of final products. 'In or in relation to the manufacture' means, the input has been used during a process while manufacturing the product. Thus the term in or in relation to manufacture is a very wide term and covers all service inputs which have direct or indirect nexus with the manufacturing process.
45f. Further, on analyzing the second leg of the definition, which is commonly called 'includes portion, it is clear that services, which are specifically enumerated, are the activities which qualify as 'activities relating to manufacture and clearance of the finished goods' would fall within the purview of the definition of 'input service' provided it is received by the manufacturer of final products. Distinction between the services used in manufacture and service used in relation to' manufacture is too thin. However, it is to be seen from the above, whether 'Rent-A-Cab services' is in Service Tax Appeal No.50140 of 2015 24 any way covered in the second part of the definition of the 'input service'; and for that we have to confirm if it relates either "directly or indirectly in or in relation to manufacture and clearance of final products. As per inclusive definition of 'input service', all services used for activities relating to various stages of manufacturing and clearances of finished articles such as rocurement of raw materials, transportation, advertisement and sales promotion, etc, are 'input services'. The definition specifically stipulates that 'activities pertaining to manufacture and clearance of goods or provision of output service are eligible to be classifiable as 'input service' Thus, all input services used in activities relating to manufacture and clearance of the final product are 'input service', whatever may be the purpose. The case of M/s BSNL does not fall in the inclusion portion of the definition.
45g. I observe that the third part of the aforesaid definition refers to the specific exclusion of certain services. On going through the said provisions, I observe that the service of 'rent-a-cab' covered under Section 65(105)(o) of the Finance Act, 1994 is specifically excluded from the definition of input services, as given in Rule 2(l) of Cenvat Credit Rules, 2004. Accordingly, I hold that the service of rent-a-cab availed by the party does not merit to be classifiable as "input service" as per requirements of the Rule 2(l) of Cenvat Credit Rules 2004. As such, the party is not eligible to take the credit of Rs.5,36,967.00 on the basis of said services during the period and the wrong credit taken by the party in contravention of the provisions of the Finance Act, 1994 is liable to be disallowed."
4.11 The issue of admissibility of CENVAT credit in respect of the "Rent a cab" service has also been decided by the Hon'ble Bombay High Court in case of Solar Industries India Ltd [2022 (60) G.S.T.L. 216 (Bom)] holding as follows:
Service Tax Appeal No.50140 of 2015 25 "3. Shri Gopal Sawal, Learned Counsel for the appellant submitted that the Authorities erred in holding that the appellant was not entitled to Cenvat credit after 1-4-2011.
Rule 2(1) of the said Rules had been misinterpreted ignoring the fact that the provision of transportation facilities to the employees from the designated place at Nagpur to the factory premises had a direct nexus with the manufacturing activity of the appellant. The services were not for any personal use or consumption of any employee but was on account of the need of the manufacturing activity of the appellant. If such facility was not provided, the manufacturing activity would have been hampered and was thus a basic necessity for the appellant. He further submitted that even if the expression "activities relating to business" had been deleted from the definition of "input service" from 1-4-2011 as the transportation of the employees was in relation to the manufacture of final product, such service was eligible for Cenvat credit. In support of his submissions the Learned Counsel for the appellant has placed reliance on the decisions in Tax Appeal No. 939/2015, decided on 9-12-2015 (Principal Commissioner v. M/s. Essar Oil Limited) [2016 (41) S.T.R. 389 (Guj.)], C.M.A. No. 157/2010 with connected matters (Commissioner of Central Excise and Service Tax v. M/s. Turbo Energy Ltd.) decided on 26-2-2015, C.C.E. and S.T., Mangalore v. Mangalore Refinery and Petrochemicals Ltd. - 2016 (42) S.T.R. 6. and Commissioner of Central Excise v. M/s. Stanzen Toyotetsu India (P) Ltd. - 2011 (23) S.T.R. 444 and submitted that on proper interpretation of the definition of the term "input service" it was clear that the appellant was entitled to seek Cenvat credit even after 1-4- 2011.
4. Shri S.N. Bhattad, Learned Counsel for the respondent on the other hand submitted that the Authorities were justified in disallowing the Cenvat credit from 1-4-2011 onwards. According to him, input service was restricted to Service Tax Appeal No.50140 of 2015 26 activities or movement within the factory premises and transportation of employees from a distance of 40 kms. for reaching the factory premises had no relation with the manufacturing activity. Inviting attention to Clause (B) in Rule 2(1) of the said Rules it was submitted that the provision of service of transportation of employees from their residence to the factory premises was not covered by the term "input service". He referred to the reply submitted by the appellant to the show cause notices and submitted that the appellant had relied upon the definition of the said term prior to its amendment. After the amendment from 1- 4-2011 such transportation was not a part of "input service". In that regard, the Learned Counsel placed reliance on the decisions in CEA No. 36/2018 with CEA No. 7/2019 (Toyota Kirloskar Motor Private Limited v. Commissioner of Central Tax) decided on 21-4-2021 [2021 (50) G.S.T.L. 286 (Kar.)] by the Karnataka High Court as upheld by the Supreme Court in SLP (C) No. 17903/2021 on 18-11-2021 [2021 (55) G.S.T.L. 129 (S.C.)] and Kalyani Maxion Wheels Ltd. v. Commissioner of Central Excise, Pune-II, 2019 (366) E.L.T. 918 decided by the Tribunal.
5. We have heard the Learned Counsel for the parties at length and we have perused the order passed by the Tribunal disallowing the claim for Cenvat credit. It was found by the Tribunal that by virtue of the amendment dated 1-4-2011 rent-a-cab service had been excluded from the definition of the term "input service". The same was in three limbs and the material basis for denying such Cenvat credit was in view of Clause (B) to Rule 2(1) of the said Rules. We find that the Tribunal was justified in disallowing Cenvat credit for the reasons mentioned in the impugned order. This is also clear from a reading of Section 65(105) of the Finance Act which excludes rent-a-cab scheme. The transportation of employees from distance of about 40 kms. for reaching factory is not an activity which could be said to be a part of manufacturing activity. It is merely for personal Service Tax Appeal No.50140 of 2015 27 convenience of the employees to enable them to reach the premises of the factory so as to thereafter participate in the manufacturing activity.
In this regard, the Learned Counsel for the respondent is justified in placing reliance on the judgment of the Karnataka High Court in Toyota Kirloskar Motor Private Limited (supra) wherein food and beverages were provided by the appellant therein to its employees by engaging the services of an outdoor caterer. This was sought to be treated as "input service" since there was a statutory duty on the appellant to establish a canteen for its employees. Considering the effect of definition of "input service" after 1- 4-2011 it was found that establishment of such canteen was primarily for personal use or consumption of the employees and after such amendment no Cenvat credit could be availed. This view has been upheld by the Hon'ble Supreme Court while dismissing the Special Leave Petition on 18-11- 2021 preferred by the said appellant. The facts of the present case also indicate that the facility of transportation provided by the appellant to its employees was merely in the nature of service for personal use or consumption of its employees.
6. The decisions relied upon by the Learned Counsel for the appellant are clearly distinguishable. In M/s. Essar Oil Limited (supra) there was no dispute by the Department in that case that the services consumed by an assessee were related to various stages of its manufacturing and business activities. The same is not the case herein. The other decision in Mangalore Refinery & Petrochemicals Ltd. (supra) pertains to availing of service tax credit prior to 1-4- 2011.
7. Thus considering the material on record, we find that the Tribunal did not commit any error whatsoever in disallowing Cenvat credit to the appellant after 1-4-2011 in view of the amended provisions. The service provided was Service Tax Appeal No.50140 of 2015 28 mere in the nature of personal service to its employees which is not permitted to be treated as "input service"."
This decision of Hon'ble Bombay High Court has been affirmed by Hon'ble Supreme Court as reported at [2022 (64) GSTL 257 (SC)] holding as follows:
"2. Providing transportation service to the employees cannot be said to be "input service" as it has nothing to do with the manufacture of the goods.
3. In that view of the matter, it cannot be said that the High Court has committed any error in denying the Input Tax Credit and holding that such a service is excluded from the input service.
4. We are in complete agreement with the view taken by the High Court."
4.12 Thus in view of the above decision of Hon'ble Bombay High Court, affirmed by Hon'ble Supreme Court we uphold the findings recorded in the impugned order upholding the denial of this credit. We also put on record that appellant had not pressed this issue before us at the time of hearing.
4.13 Appellant has not challenged the findings recoded in the impugned order on the issue of limitation and penalties imposed. However as we have remanded the matter to the original authority in respect of the demand made in respect of admissibility of CENVAT credit on the basis of ATD, we are not recording any findings on these aspect in respect of the demand made invoking extended period and the penalty imposed in respect of this demand.
4.14 Thus summarizing the findings:
Matter in respect of demand made for denial of CENVAT Credit availed by the Appellant on the basis of ATD, the matter is remanded back to the original authority for reconsideration of all the issues on the basis of the documents that appellant will submit as per the decision of the Hon'ble High Court of Service Tax Appeal No.50140 of 2015 29 Allahabad as reported at [2019 (366) E.L.T. 619 (All.)] Demand in respect of "renting of Immovable Property" and for disallowance of CENVAT Credit availed on "Rent a cab" services along with interest and penalty are upheld.
5.1 Appeal partly allowed and matter is remanded back to the original authority as indicated in para 4.14 above.
5.2 Appellant is directed to produce all the documents which it intends to rely in its support before the adjudicating authority within sixty days of the receipt of this order as had been directed by this bench in its order reported at [2017 (6) G.S.T.L. 345 (Tri.
- All.)]. All the documents produced by appellant within the above time frame should be considered by the adjudicating authority while deciding the matter in remand proceedings.
5.3 As the matter is quite old adjudicating authority to decide the matter within three months of the receipt of this order.
(Pronounced in open court on-30 September, 2024) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp