Custom, Excise & Service Tax Tribunal
Halcrow Consulting India Pvt Ltd vs Delhi-Ii on 29 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi
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PRINCIPAL BENCH - COURT NO. 4
Service Tax Appeal No.51211 Of 2017
[Arising out of Order-in-Original No. DLI-SVTAX-002-COM-069-16-17 dated
30.03.2017 passed by the Commissioner of Service Tax, New Delhi]
M/s Halcrow Consulting India Private Limited : Appellant (s)
R-27, 2nd Floor, Pratap Market
Jangpura-B, New Delhi
Vs
Commissioner of Service Tax, Delhi-II : Respondent (s)
Office of Commissioner of Service Tax, 5th Floor, 14-15 Farm bhawan, Nehru Place New Delhi-110019 Appearance:
Ms. Priyanka Rathi & Ms. Shubangi Gupta, Advocates for the Appellant Shri S. K. Meena, Authorized Representative for the Respondent CORAM :
HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) FINAL ORDER No. 55660/2024 Date of Hearing:07.02.2024 Date of Decision:29.04.2024 HEMAMBIKA R. PRIYA M/s Halcrow Consulting India Private Limited have filed the present appeal against the Order-in-Original No. DLI/SV- TAX/002/COM/069/1617 dated 30.03.2017 passed by the Commissioner of Service Tax, Delhi, wherein service tax demand of Rs. 2,69,51,716/- was confirmed on account of the following issues:
(a) Rs. 21,16,914/- for wrong availment of CENVAT credit on input services (accommodation of staff, meal vouchers, tour and 2 Service Tax Appeal No. 51211 Of 2017 travel service) and inadmissible documents (invoice not having serial numbers)
(b). Rs 1,17,15,461/- for non-reversal of CENVAT credit under rule 6(3)(i) of CENAVT Credit Rules, 2004 for provision of both taxable and exempt services, and
(c). Rs 1,31,19,301/- for non-payment of service tax on manpower service received from their overseas entity
2. The brief facts are that the appellant (Indian subsidiary of M/s Halcrow International Limited, United Kingdom)is engaged in the provision of 'Consulting Engineering Services' for various projects and is registered with the Service tax department vide Registration No. AABCH3579BST001. The appellant also provides services in different parts of India including Jammu & Kashmir. Services provided in the state of Jammu and Kashmir are exempt from service tax and therefore the Appellant is not paying any service tax on provision of such services., and reversed the CENVAT credit as per rule 6(3)(ii) read with rule 6(3)(A) of Credit Rules. During the period 2008-09 to 2013-14, the appellant also hired foreign employees for provision of services related to the domestic projects. These foreign employees were working on the payroll of the appellant and all the statutory requirements were fulfilled by the Appellant in this regard. During the audit of the records of the appellant, the department expressed reservations on the issue of availment of CENVAT credit on J&K services, and the appellant reversed the CENVAT credit pertaining to J&K services treating it as exempt services. Thereafter, SCN No. 26/Audit/2014-15 dated 23.04.2014 (SCN1') was issued. Thereafter, the department issued another SCN No. 02/DIV-V111/2015-16 dated 3 Service Tax Appeal No. 51211 Of 2017 17.04.2015 ('SCN 2) for the period 2013-14. Pursuant to the said Show Cause Notices, the Commissioner has confirmed the demand alongwith interest and penalties vide the impugned order.
3. At the outset the Learned Counsel submitted that the demand confirmed in the Impugned Order on the basis of service tax audit of the records of the appellant conducted by the Service Tax Department, was incorrect. In this regard, he submitted that the decision of the Delhi High Court of Mega Cabs Pvt. Ltd. v. Union of India and Ors. [2016- TIOL-1061-HC-DEL-ST], the High Court had held that Rule 5A(2) of the Service Tax Rules, 1994 as amended by Notification No.23/2014-Service Tax dated 05.12.2014 and which empowers deputing departmental officers or officers from the Comptroller and Auditor General of India ('CAG') to 'demand documents mentioned therein, is ultra vires the Finance Act, 1994. Consequently, in light of this judgment, since the audit resulted into the initiation of the present proceedings were not performed by the Audit Party headed by the Chartered Accountant or Cost Accountant, the said proceedings were bad in law and therefore the impugned notice resulting from such proceedings being based on such illegal proceedings is without any authority of law and accordingly deserves to be set aside.Learned Counsel for the appellant submitted that the impugned order has wrongly alleged that the Appellant has availed CENVAT credit of certain services that do not fall within the definition of input service' under Section 2 (1) of the Credit Rules. Section 2(1) of the Credit Rules includes within its definition any service which is used in the provision of an output service. The definition of 'input service' had undergone amendments from time to time, and despite 4 Service Tax Appeal No. 51211 Of 2017 their amendments to the definition of input service, the basic criteria of assessing whether a service is an input service or not remained the same, i.e.,such service should be used in the provision of output service by the provider of such output service.Further, the definition of input service for the period prior to 1.04.2011 included the phrase 'the activities relating to business' which means that, any service used for providing the output service or used in relation to activities relating to business, would fall within the definition of Input service. In support of his submission, he relied upon the decision of Hon'ble Bombay High Court in the case of Commissioner of Central Excise v. Ultratech Cement Ltd., 2010 (20) S.T.R 577 (Bom.). 3.1 Consequently, the Accommodation services provided to staff of Rs. 1,61,209/-, the ld counsel submitted that the service of accommodation used by the employees of the Appellant, was in their official capacity, and was not used in relation to personal use of the employees. The service of accommodation was necessary for the purposes of providing the service of Consulting Engineer Services and is integrally connected with the same. This input service was being used by foreign delegates/ employees of other companies/consultants who visited India in connection with requirement of the Appellant's projects. Accordingly, these were essential for providing the output services. In this regard, the Learned Counsel placed reliance on the following case laws:-
Idea Cellular v. Commissioner of Central Excise, 2011 (22) S.T.R. 450 (Tri. Del.) 5 Service Tax Appeal No. 51211 Of 2017 Sree Rayalaseema Alkalies and Allied Chemical Ltd v. Commissioner of Central Excise, 2010 (18) S.T.R. 153 (Tri. Bang.) Andhra Pradesh Paper Mills v. Commissioner of Central Excise, 2008 (12) S.T.R. 138 (Tri. - Bang.).
3.2 Learned Counsel further submitted that the service on which input credit is sought to be taken should be proximately connected with the output service which is rendered by the assessee. This position has been reaffirmed by the Tribunal in Semco Electric Pvt Ltd.
v. Commissioner of Central Excise, 2012 (25) S.T.R 73 (Tribunal) and Commissioner of Central Excise v. Hotel Sun-n-Sand, 2011 (22) S.T.R. 180 (Tri. Mumbai), Oudh Sugar Mills v. Commissioner of Central Excise, 2012 (282) E.L.T. 541 (Tri. - Del.). Hence, the service of accommodation used by the employees for the period post 01.04.2011 (2011-12 to 2013-14) for providing Consulting Engineering Service would qualify as input service. However, the Ld Commissioner has held that these services were used by the employees for their personal use and not in the official capacity. The Learned Counsel relied on the decision of the Tribunal reported as 2016-TIOL-1913-CESTAT-DEL and 2016-TIOL-2223-CESTAT-Hyd. 3.3. Learned Counsel further submitted that the meal vouchers, were offered to employees of the appellant who were required to provide the service of Consulting Engineering Services. Therefore, such vouchers are proximately connected with the provision of Consulting Engineer Services and hence fall within the definition of 'input service'. In this regard, he relied on the decision of the Tribunal in the case of BNY Mellon International Operations Pvt. Ltd. v. CCE, 2013 (30) S.T.R. 6 Service Tax Appeal No. 51211 Of 2017 567 (Tri. - Mumbai).The CENVAT Credit on Tour and Travel Expenses (Rs. 3,134/-), the Learned Counsel also contended that, Tour and Travel services involves the provision of rent a cab services. Such services are used by the employees of the Appellant in the course of providing Consulting Engineering Services. The services are only used for official purposes. Therefore, such services would also be classified as 'input service' for the period prior to 1.04.2011. In support of his submission, the Learned Counsel placed reliance in the case of Commissioner of Central Excise v. Tata Auto Comp Systems Ltd., 2012 (277) Ε.Ε.Τ. 315 (Kar.), Commissioner of Central Excise v. Bell Ceramics Ltd, 2012 (25) S.T.R. 428 (Kar.)and Commissioner of Customs and Central Excise v. H.E.G Ltd., 2012 (277) E.L.T. 204 (Tri.
- Del.).
3.4 The Learned Counsel further contended that as regards the demand for having availed CENVAT credit on the basis of documents which were not valid documents for availing CENVAT credit as they did not contain the serial number/invoice number, the Appellant in accordance with Rule 9(1)(f) of the Credit Rules, had rightly taken the CENVAT credit on the basis of invoices issued by the input service provider. Rule 9 (2) of the Credit Rules provides that all the particulars as prescribed in the Service Tax Rules should be present in the document. Though, as per Rule 4(A) of the Service Tax Rules, the serial number of the person receiving the taxable service have to be provided, however, non-compliance of these conditions does not make a document invalid for taking CENVAT credit. He further submitted that, while Rule 9(2) mandates the following of the Service Tax Rules, the proviso to Rule 9 (2) creates an exception to this provision. He 7 Service Tax Appeal No. 51211 Of 2017 placed reliance on the case of M/s. Pepsico India Holding P. Ltd. Vs. Commissioner of Central Excise, Mumbai- II (2017-TIOL-26-CESTAT- MUM). Hefurther submitted that the appellant has rightly reversed the CENVAT credit under rule 6(3)(ii) of Credit Rules read with Rule 6(3)(A), but had failed to intimate the department of their option. This can at best be considered as a procedural lapse on the part of the appellant. He submitted that this issue has already been decided in the case of M/s Cranes & Structural Engineers vs Commissioner of Central Excise, Bangalore-I and in case of Aster Pvt. Ltd. Vs. Commissioner of Customs & Central Excise, HYDERABAD III, 2016 (43) S.T.R. 411 (Tri. - - Hyd.).Further, in the case of Rathi Daga v. CCE, Nashik [2015 (38) S.T.R. 213 (Tri.-Mum.)] and Foods, Fats & Fertilisers Ltd. v. CСЕ, Guntur [2009 (247) E.L.T. 209 (Tri.-Bang.), it was held that "the condition in Rule 6(3A) to intimate the department is only a procedural one and that such procedural lapse is condonable and denial of substantive right for such procedural failure is unjustified. Taking into account the facts, evidence and following the precedents cited above, I am of the view that the demand raised is not legal and proper."
3.5 The Learned Counsel submitted that the impugned order has held that the appellant had received the service of "Manpower Recruitment and Supply Agency Service from the Halcrow Company Limited ('parent company') without appreciating the fact that the appellant had already submitted the documents in relation to the employee-employer relationship between the appellant and the foreign expatriates. As per the definition of the Manpower service, a commercial concern engaged in providing any services, directly or 8 Service Tax Appeal No. 51211 Of 2017 indirectly, in any manner, for recruitment and supply of manpower, temporarily or otherwise, to a client is covered within the ambit of service tax. Further if the services are rendered by an overseas entity, the Indian Company would be liable to pay service tax under the reverse charge mechanism. In the present case, the employer- employee relation exists between the appellant and the expatriate employees. Further, no consideration is paid by the appellant to the parent company for sending the employees. The reimbursement is only towards payment of salary. Therefore, in the present case Manpower Recruitment and Supply Service cannot be said to be received by the appellant. In support of his submission, the Learned Counsel relied upon the following decisions:-
Commr. of Central Excise Vs. Computer Sciences Corpn. India P. Ltd - 2015 (37) S.T.R 62(AII.) Commissioner of Service tax Versus Arvind Mills Limited 2014(35) S.T.R 496 (Guj) Airbus Group India Pvt. Ltd. versus Commissioner of Service tax, Delhi 2016(45) S.T.R 120 (Tri Del.)., I.T.C v. Commissioner of Service Tax, 2013 (29) S.T.R. 387 (Tri. Del.);
Paramount Communication v. CCE, 2013 TIOL-37-CESTAT-DEL BMW India Pvt Ltd. v. Commissioner of Service Tax, 2013- TIOL-1407-CESTAT- DEL 3.6 The Learned Counsel further submitted that the demand was barred by limitation. The SCN has been issued under the provisions of Section 73 of the Act by invoking extended period of limitation of five 9 Service Tax Appeal No. 51211 Of 2017 years. He submitted that the demand confirmed in the impugned Order for SCN 1 is time barred for the period from 2008-09 to 2012-
13, as none of the ingredients that are required for invoking the extended period for five years are present. As per the conditions provided under the Proviso to Section 73(1) of the Act, a 'mala fide' intention to evade duty, fraud, suppression or misstatement of fact in pursuance thereof, is an express condition precedent for invocation of the larger period of limitation. In interpreting the above provisions, various Tribunals and Higher Appellate courts have consistently held that it is the onus of the revenue to prove that there was an intention to evade duty evident from the facts of the case and a mere vague assertion of willful suppression to evade duty is not sufficient. The ld counsel placed reliance on the case of Stag Software private Limited v. Commissioner of Service tax [2008 (10) STR 329 (Tri - Bang)] wherein the Tribunal had held that there can be no valid grounds invoking the longer period in demanding service tax, as the allegation of suppression with intention to evade payment of tax has not been clearly established and the decision of Hon‟ble Supreme Court in the case of Nestle India limited v. Commissioner of Central Excise [2009 TIOL 26], wherein it has been held that extended period is applicable only when there is some positive act other than mere inaction or failure on the part of the assessee. The Supreme Court had followed the decision in the case of Padmini Products vs. Collector of Central Excise, 2002 TIOL 289 and Collector of Central Excise vs. Chemphar Drugs and Liniments 1898 (40) ELT 276 (S.C.).
3.7 Learned Counsel further submitted that the impugned order has confirmed that the appellant is liable to pay interest leviable under 10 Service Tax Appeal No. 51211 Of 2017 Section 75 on account of delayed payment of service tax. As the appellant was not liable to pay any service tax, thus, there was no short payment/ delayed payment of Service tax. Hence, the question of payment of interest on account of delayed payment of Service tax does not arise. It is therefore submitted that the appellant has not contravened the provisions of Section 75 of the Act. 3.8 Learned Counsel also contended that the impugned order as regards to SCN 2 has alleged that since the appellant has not paid service tax on the corporate guarantee furnished by Hatch Australia to HSBC Australia, a penalty under Section 76 of the Act is leviable. It was submitted that under the terms of Section 76, a penalty for failure to pay tax arises only if the service provider was liable to pay the tax and has failed to do so. He submitted that the activity of providing corporate guarantee for an associated enterprise without consideration does not qualify as a service hence, the appellant is not liable to pay service tax under reverse charge for import of service. Further, the conditions of the term loan along with the interest component are on prevalent base rate which are available to any of the applicants in the market. Thus, provision of corporate guarantee by Hatch Australia has not influenced the terms and conditions of the term loan provided by HSBC India to the Appellant. Hence, in the absence of any service tax liability for the relevant period, the question of the imposition of penalty for failure to pay service tax does not arise. He prayed for setting aside the confirmed demand, interest and penalties imposed under sections 76,77 and 78 of the Finance Act, 1994.
11
Service Tax Appeal No. 51211 Of 2017
4. The Learned Authorized Representative for the department submitted that since the employees of the Appellant were using the accommodation for residential purpose, it cannot be said that these were used for providing any output taxable services by the appellant. As regards the meal voucher provided by the appellant to their Employees, he stated that this was for personal consumption of these employees, and was a welfare activity. The definition under Rule 2(1) of the Service Tax Rules, 1994 cannot be stretched so far to categorise a welfare activity within the purview of 'input service'. The ld AR further submitted that Rule 4 A(1) of Service Tax rules, 1994 provides that the provider of output taxable service shall issue an invoice, a bill or as the case may be a challan which shall be serially numbered. The corollary of the impost of the word 'Shall' in the rule is that bearing of serial number on invoice/challan/bill is mandatory in nature and not discretionary. Not bearing serial number on the invoices is not a minor technical procedure defect capable of being cured. He further stated that the overseas entity had supplied the manpower to the Appellant for working in India under their supervision and control for which they were paying salary and other incentives to these expats partly in Indian Currency and partly in foreign currency. Further, the Appellantwas reimbursing the expenses(salary) in foreign currency directly in the account of the overseas entity, which in turn was being paid to the expats. Therefore, there is absolutely no doubt the Appellant has received the manpower service from their overseas entity.
4.1 Learned Authorized Representative further submitted that in the era of self-assessment, the statutory provisions of Service Tax casts 12 Service Tax Appeal No. 51211 Of 2017 an obligation upon the assessee to comply with provisions and Rules made thereunder to self-assessed their liability and pay it and to file periodical returns correctly. In the present case the Appellant had failed to do so. The said wrong availment of input services credit was unearthed during the course of Audit by the department. Had the Audit not conducted by the department, the Appellant would have escaped detection from wrong availment of CENVAT Credit /non- payment of service tax. They have wilfully suppressed the facts from the department with intention to evade wrong credit. Therefore, extended period and penalty under section 78 is invokable.
5. We have heard the learned counsel for the appellant and the learned authorised representative for the Department. The following issues emerge for our consideration:
(i) availment of CENVAT credit certain input services
(ii) availment of CENVAT credit on inadmissible documents
(iii) non-payment of amount under rule 6(3)(i) of CENVAT credit rules.
(iv) non-payment of service tax on manpower recruitment or supply agency services We take up for consideration each issue independently 5.1 Availment of credit on certain input services: In this regard, for ease of reference, the provisions of Credit Rules with respect to 'Input service' in the respective periods have been reproduced hereunder:-
Period prior to 01.04.2011 the definition of Input service read as under-
"(1) input service means any service-
(1) used by a provider of a taxable service for providing an output service, or....13
Service Tax Appeal No. 51211 Of 2017 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 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 rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto place of removal."
From 01.04.2011 to 01.07.2012 the definition of Input service read as under-
"(1) "input service" means any service, -
used by a provider of taxable service for providing an output service; or and includes services used in relation to modernisation, renovation orrepairs 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 purposes of one or more 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 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 on 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"
Period post 01.07.2012 the definition of Input service read as under
"(1) "input service" means any service, -
(i) used by a provider of [output service) for providing an output service, or 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, 14 Service Tax Appeal No. 51211 Of 2017 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], -
[(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for -
(a) construction or execution of works contract 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) (services provided by way of renting of a motor vehicle), in so far as they relate to a motor vehicle which is not a capital goods; or [(BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by -
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person, or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such person; 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;]"
5.2 We note that as per the definitions of what constitutes „input service‟, the essential ingredient is that such input services are those which are used by the service provider for providing the output service. The second part of the definition is inclusive part which expands the definition and specifically includes various services on which credit is admissible being input services. We note that the term input services is very wide and cannot be restricted to any specific type and nature of input services. However, with the introduction of exclusion clauses A to C, it is clear in no uncertain terms that CENVAT credit can be availed on all the input services which are used by the 15 Service Tax Appeal No. 51211 Of 2017 service provider for providing output services as well as services that are covered and defined in the inclusive part of the definition with the specific exclusions, as indicated above. In the above context, we examine the eligibility or other wise of the input services claimed by the appellant. We note that the meal vouchers being provided to the employees, prior to 1.4. 2011, the same is a welfare activity. We find that the Tribunal in the case of M/s Andritz Technologies Pvt Ltd Vs Commissioner, Bangalore [2019 (12) TMI 122 - CESTAT BANGALORE] has held that "........As far as Food coupons/sodexo coupons are concerned, I find that these services are in the nature of welfare service and purely for personal consumption of employees as these are perquisites allowed to the employees. Further, I find that Commissioner (Appeals) has given reasons for denying the Cenvat credit on sodexo coupon and I do not find any fault in that and uphold the same."
5.3 As regards the period post 1.4.2011, there is a specific exclusion provided under clause C to Rule 2(I) that outdoor catering service, if used for personal use or consumption of any employee is not considered to be input service. Therefore, we do not find any infirmity in the impugned order in this regard.
5.4 As regards the credit availed on the accommodation provided to staff, the learned counsel for the appellant argued that the employees use the accommodation in their official capacity purely for business purposes. The service of accommodation was necessary for the purposes of providing the service of consulting engineering services and is integrally connected with the same. Perquisites are generally meant for the comfort, convenience and welfare of the employees. 16
Service Tax Appeal No. 51211 Of 2017 Even though it has been argued that perquisites do fall within the scope of input service, the benefit of Cenvat credit still cannot be allowed, as any activity for the comfort, convenience and welfare of its employees cannot be treated as having been done in course of furtherance of business. We find that the Bombay High Court (Nagpur Bench), in its Order dated 11.10.2010 in the Central Excise Appeal No. 22 of 2008 in the case of Commissioner of Central Excise, Nagpur, vs. M/s Manikgarh Cement [2010 (20) S.T.R. 456 (Bom)], held as follows:
"8. In our opinion, establishing a residential colony for the employees and rendering taxable services in that residential colony may be a welfare activity undertaken while carrying on the business and such expenditure may be allowable under the Income Tax Act. However, to qualify as an input service, the activity must have nexus with the business of the assessee. The expression 'relating to business' in Rule 2 (l) of CENVAT Credit Rules, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee.
9. Applying the ratio laid down by the Hon'ble Apex Court in the case of Maruti Suzuki Limited V. Commissioner of Central Excise, Delhi (supra), we hold that unless the nexus is established between the services rendered and the business carried on by the assessee, the benefit of CENVAT credit is not allowable. In the present case, in our opinion, rendering taxable services at the residential colony established by the assessee for the benefit of the employees, is not an activity integrally connected with the business of the assessee and therefore, the tribunal was not 17 Service Tax Appeal No. 51211 Of 2017 justified in holding that the services such as repairs, maintenance and civil construction rendered at the residential colony constitutes 'input service' so as to claim credit of service tax paid on such services under Rule 2(1 ) of the CENVAT Credit Rules, 2004."
5.5 Accordingly, we hold that there is no infirmity the findings of the adjudicating authority in the impugned order in this regard.
6. We now move to the second issue of availment of credit on inadmissible documents. We find that the impugned order has denied credit on invoices which not bear serial numbers. For ease of reference, the relevant extract of Rule 9(2) is reproduced as under:-
"No CENVAT credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document:
Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise or Service tax Registration number of the person issuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit"
Therefore, notwithstanding that all the particulars mentioned in the Service Tax Rules are not mentioned, as long as all the particulars mentioned in the proviso to Rule 9(2) are mentioned, the invoice would be a valid document for taking CENVAT credit. A reading of 18 Service Tax Appeal No. 51211 Of 2017 Proviso to Rule 9(2) shows that following details have to be provided in the invoice:
Details of Service Tax payable Description of taxable service Assessable value Service Tax Registration number of input service provider Name and address of the provider of taxable service/output service 6.1 The Learned Counsel has submitted that there is no dispute that credit on input services which was availed by the appellant had actually been received by him. All the services for which input credit was taken had actually been received by the appellant and the incidence of Service Tax had been borne by the appellant. Not mentioning certain particulars in the invoice is only a procedural error, and the availment of CENVAT credit is a substantive benefit which cannot be denied on procedural grounds. The impugned order has held that bearing serial numbers of the invoices is not a minor technical procedural defect capable of being cured, therefore no credit can be availed by the appellant. We are persuaded by the argument that that as per the proviso to Rule 9(2) of the Credit Rules, as long as all the critical details mentioned therein are available on the invoice, the same would be a valid document for taking credit. No evidence has been brought forward by the Department to state that the inputs were not duty paid. We are of the view that merely for the said discrepancies, Cenvat credit cannot be denied as held in catena of judgments, some of which have been cited by the Learned Counsel, so 19 Service Tax Appeal No. 51211 Of 2017 long as it is not in dispute that the service tax was paid by the service provider. In fact the appellant has produced an affidavit from the seller of the goods that the duty tax had been paid. Accordingly, we hold that the Commissioner had erred in disallowing the credit on such invoices.
7. We now take up the issue of non-payment of an amount under Rule 6(3)(i) of the credit rules for providing consulting engineer service in Jammu and Kashmir for the period 2009-10 to 2012-13.
The learned counsel for the appellant has submitted that the appellant had reversed the proportionate credit amounting to Rs. 26,58,706/-, pertaining to services provided in Jammu and Kashmir, as per the relevant rules. It has also been submitted before us that the fact of reversal of Cenvat credit was brought to the notice of the Department vide letter dated 09.04.2014, which was well before the issuance of the show cause notice. We find that the impugned order has held that the credit reversed by the appellant for the period October 2013 to March 2014 does not pertain to the period in dispute. It has been argued before as that the detailed calculation was for the Cenvat credit reversal for the period 2008-09 to 2012-13. We note that in several decisions, it has been consistently held that when proportionate credit has been reversed the department cannot fasten liability under Rule 6(3)(i) of the Credit rules. We also find that our above views have been duly supported by the Coordinate Bench of this Tribunal who had examined the issue of the admissibility of Cenvat credit in similar cases where the inputs and/or input services were used in manufacture/provision of dutiable as well as exempted products/services. The Tribunal in its Final Order No.A/85696- 20 Service Tax Appeal No. 51211 Of 2017 85698/2022 dated 12.08.2022 in the case of M/s Responsive Industries Ltd. and Axiom Cordages Ltd. (supra) had examined the above issue in respect of the appellant who had reversed the Cenvat credit in respect of exempt services, by holding that inasmuch as the quantum or method adopted by the appellant was not questioned by the department, the demand of Cenvat credit cannot be sustained. The relevant paragraph of the case is given below:
"22. We find, on-going through the records of the case and rival contentions, that the appellants claim that they have maintained separate records; they have not availed credit on common inputs or services; Rule 6 is applicable only in the case where the Appellants had availed Cenvat credit on the inputs and input services pertaining to the exempted and dutiable goods/services; Rule 6(3) is not applicable to the present case; demand of duty at the rate of 5% or 6% was incorrect; they had made reversal of this availed Cenvat credit of the common inputs and/or services, used in the manufacture of both dutiable and the exempted excisable goods; reversal of Cenvat credit would mean nonavailment of such credit in the ratio of the decision of the Supreme Court in Bombay Dyeing & Manufacturing Company, 2007 (8) SCC 177 and the decision of the Bombay High Court in Steelco Gujarat Limited, 2012 (285) ELT 161. These decisions enunciated the proposition that reversal, made prior to its utilization, would mean non-availment of such credit; Rule 6(3)(1) of the Cenvat Credit Rules, 2004 would come into play only when a manufacturer did not wish to comply with Rule 6(1) thereof by not making reversal of the availed Cenvat credit." 21
Service Tax Appeal No. 51211 Of 2017 7.1 It is not the intention of the legislature to demand huge amount of credit disproportionate to the credit availed on exempted goods/service. We note that Courts and Tribunals have been consistently following the principle as discussed above. We find that the appellants have reversed the credit attributable to the inputs/inputs services alleged to have been used in the provision of exempted service. Accordingly, we hold that the demand on account of the said issue is liable to be set aside.
8. We now address the issue of taxability of services under "manpower recruitment of supply agency services". We note that the demand has been confirmed under reverse charge on Manpower services which the appellant has received from their holding company. During the period 2008-09 to 2012-14, the appellant had hired foreign employees for provision of services related to domestic projects. These foreign employees were working on the payroll of the appellant and all the statutory requirements were being fulfilled by the appellant in this regard. It has been pleaded before us that there was a bonafide belief that there stood and employer-employee relationship and no service tax was payable. It has been conceded by the learned counsel that such secondment arrangements are liable service tax. However, he has also submitted that until the Supreme Court‟s decision in the case of CCE vs. Northern Operating System [2022 61 GSTL 129 (SC)], most Tribunal decisions in this regard were in favour of the appellant. Therefore, no malafide intention/ suppression could be attributed to the appellant. We find that on the invocation of extended period secondment arrangements, the Tribunal in the case of Dell 22 Service Tax Appeal No. 51211 Of 2017 International Services Pvt Ltd., vs CCE [2023-TIOL-295-CESTAT- BANG], relying on the Supreme Court‟s decision held as follows:
"12. In so far as the invocation of the extended period of limitation in the show cause notice, the Supreme Court in Northern Operating System did not agree with the contention of the Department that it was correctly invoked and it was held that the Department was not justified in invoking the extended period of limitation. The relevant paragraphs of the judgment are as follows:-
"62. The revenue's argument that the assessee had indulged in wilful suppression, in this court's considered view, is insubstantial. The view of a previous three judge ruling, in Cosmic Dye Chemical v. Collector of Central Excise (1995) 6 SCC 117 = 2002-TIOL-236-SC-CX-LB- in the context of section 11A of the Central Excise Act, 1944, which is in identical terms with section 73 of the Finance Act, 1994 was that: "Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitute a permissible 23 Service Tax Appeal No. 51211 Of 2017 ground for the purpose of the proviso to section 11-A. Misstatement or suppression of fact must be wilful."
63. This decision was followed in Uniworth Textiles v. Commissioner of Central Excise (2013) 9 SCC 753 = 2013- TIOL-13-SC-CUS where it was observed that "(t)he conclusion that mere non- payment of duties is equivalent to collusion or willful misstatement or suppression of facts" is "untenable". This view was also followed in Escorts v. Commissioner of Central Excise (2015) 9 SCC 109, Commissioner of Customs v. Magus Metals (2017) 16 SCC 491 = 2017-TIOL-475-SC- CUS and other judgments.
64. The fact that the CESTAT in the present case, relied upon two of its previous orders, which were pressed into service, and also that in the present case itself, the revenue discharged the later two show cause notices, evidences that the view held by the assessee about its liability was neither untenable, nor mala fide. This is sufficient to turn down the revenue's contention about the existence of "wilful suppression" of facts, or deliberate misstatement. For these reasons, the revenue was not justified in invoking the extended period of limitation to fasten liability on the assessee. "
13. It is only in respect of two appeals that the issue of the extended period of limitation arises. It can be seen from the chart contained in paragraph 7 of this order that in Service Tax Appeal No. 26058 of 2013 the entire demand has been confirmed for the extended period of limitation, whereas in Service Tax Appeal No. 3195 of 2011 part of the demand has been confirmed for the 24 Service Tax Appeal No. 51211 Of 2017 normal period and part of the demand has been confirmed for the extended period."
8.1 In view of the aforesaid decision of the Supreme Court in Northern Operating Systems, it has to be held that the demand can be confirmed for the normal period only and the demand for the extended period cannot be sustained.
9. We now come to the interest and penalty provisions. We uphold the demand for interest relying on Supreme Court judgment, in the case of M/s Pratibha Processors vs Union of India [1996 11SCC 101], wherein the Hon‟ble Supreme Court held that the levy of interest is compensatory and automatic.
10. As regards the penalties imposed under Sections 76,77, & 78, we are of the view that the department has not been able to establish the ingredients of malafide intention of the appellant to evade payment of service tax. Hence, we set aside the penalties imposed on the appellant.
11. In view of the discussions above, the impugned order is modified to the extent indicated in previous paragraphs. Thus, the impugned order confirming the following demands is hereby set- aside:-
(i) CENVAT Credit availed on inadmissible documents
(ii) Proportionate Credit under Rule 6 (3) (i) of CENVAT Credit Rules being already reversed even prior the issuance of show cause notice.
(iii) Demand for the extended period
(iv) Penalties are set-aside
25
Service Tax Appeal No. 51211 Of 2017
The remaining findings of the impugned order under challenge are upheld. Consequent thereto, the appeal is allowed partially.
(Order pronounced in the open Court on 29.04.2024) (DR. RACHNA GUPTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) G.Y.