Custom, Excise & Service Tax Tribunal
M/S Srivalli Shipping & Transport vs Cce, C & St, Visakhapatnam-I on 24 October, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Division Bench Court I Appeal No. ST/2004/2012 (Arising out of Order-in-Original No. VIZ-STX-001-COM-62-12 dt. 30.03.2012 passed by CC, CE & ST, Visakhapatnam) M/s Srivalli Shipping & Transport ..Appellant(s) Vs. CCE, C & ST, Visakhapatnam-I ..Respondent(s)
Appearance Sh. M.S. Nagaraja, Advocate for the Appellant.
Sh. R. Srinivas, Superintendent (AR) for the Respondent.
Coram:
Honble Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL) Honble Mr. MADHU MOHAN DAMODHAR, MEMBER(TECHNICAL) Date of Hearing: 07.09.2017 Date of Decision: _________ FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodar]
1. The facts of the case are that M/s Srivalli Shipping & Transport (appellant herein) were registered with the department for Service Tax under Custom House Agent (CHA) service and Cargo Handling Services (CHS). They were availing CENVAT credit on inputs/input services used for providing the output services. They were also claiming exemption from payment of service tax on the amount received towards providing the service on export cargo, service provided to SEZ units etc., during the course of audit it emerged that appellants were availing common input services like port service, CFS charges, survey fees, telephone services etc., which were utilised for both taxable output services as well as the exempted services. It appeared that appellants were not maintaining separate accounts for receipt, consumption and inventory of input/input services meant for used in output services as required in terms of Rule 6(2) of the CENVAT Credit Rules, 2004. Accordingly, a show cause notice dated 27.07.2011 was issued to the appellants inter alia proposing recovery of an amount of Rs. 91,16,244/- being allegedly excess CENVAT credit irregularly availed by appellant during the period October 2005 to March 2008 with interest thereon and an amount of Rs. 34,20,440/- with interest thereon for the period April 2008 to March 2010. Imposition of penalties under various provisions of law was also proposed. After due process of adjudication, adjudicating authority vide impugned order dated 30.03.2012 confirmed the proposed demands and also imposed equivalent penalties under Rule 15 (4) of the CCR, 2004 read with Section 78 of the Finance Act, 1994. Aggrieved appellants are before this forum.
2. On 07.09.2017, when the matter came up for hearing on behalf of appellants, Ld. Advocate Sh. M.S. Nagaraja made oral and as well as written submissions which can be summarised as under:
(i) Appellants have admittedly reversed the entire CENVAT credit taken on common input services amounting to Rs. 2,40,191/- for the period from 2005-06 to 2009-10 along with interest of Rs. 1,27,755/- and the same stand appropriated as recorded in Para 12 (c). The submission is also recorded under further submission under Para 10 of the order.
(ii) It is settled law that payment of CENVAT on input services with interest amounts to not taking the credit and the consequences of Rule 6(3) are not attracted.
(iii) The Commissioner relying on the decisions of the Tribunal referred to in Para 12 (f) has recorded in Para 12 (g) that the payment of the entire amount of CENVAT credit by the assessee has satisfied the compliance of Rule 6(3)(i). However, the Commissioner has confirmed both the demands in the impugned order by holding in Para 12(h) that it was not clear whether the payment was on all input services and that the assessee has not exercised clear option under Rule 6(3).
(iv) The reasoning of the Commissioner is not correct on facts. The Commissioner has recorded in Para 12 (c) that the assessee has paid the entire amount of common input services along with interest. Having recorded once again in Para 12 (g) that the payment of entire amount of CENVAT credit availed irregularly made by the assessee has satisfied.. there cannot be subsequent finding that it was not clear whether the payment made covered all the input services. The word entire credit denotes the entire amount irregularly taken and leaves no scope for doubt.
(v) Assessee has the option either to pay (i) an amount equal to 6% or 8% of the value of exempted service, or (ii) pay an amount equal to CENVAT credit attributable to input services in or in relation to provision of exempted services. The payment of CENVAT credit on common input services along with interest, which is acknowledged and appropriated, amounts to exercising the option and discharge of the obligations under Rule 6(3) of the CCR, 2004 for the entire period.
(vi) It is settled law that the assessee has the option and the Revenue cannot impose any option and extract amounts far beyond the CENVAT credit taken on common input services. The appellants rely on:
(a) Tata Technologies Ltd., Vs CCE, Pune [2016 (42) STR 290 (T-Mum)]
(b) Mercedez Benz (I) Ltd., Vs CCE, Pune [2015 (40) STR 381 (T)]
(c) J.B. Mangharam Foods Pvt Ltd., Vs CCE, Indore [2010 (258) ELT 575 (T-Del)]
(d) Sahyadri Starch & Industries Pvt Ltd., Vs CCE [2016-TIOL-615-CESTAT-MUM]
(vii) Appellants have been submitting half yearly ST-3 Returns showing the details of CENVAT credit taken on input services. The appellants submit that Table 5A specifies whether the assessee has provided exempted or non-taxable service in terms of Yes or No. Table 5AA of ST-3 Return provides for value of exempted service and the amounts payable under Rule 6(3) of the CENVAT Credit Rules, 2004. From the perusal of table it may be seen that the same provides for disclosure of the value of exempted services provided, amount paid under Rule 6(3) of CCR, 2004 in CENVAT & cash and total amount paid. However, there is no column for disclosure of the value of non-taxable service which are excluded from levy of service tax as in case of cargo handling service in relation to export cargo. When there is no provision for disclosure of the amount of non-taxable service provided by the assessee, the same cannot be said to be suppression of facts.
3. On the other hand, on behalf of Department Ld. DR Shri R.Srinivas supports the adjudication.
4. The core issues that come up for appellate decision concerns (i) legality of the demand to disallow and recover CENVAT credit on input services exclusively used for exempted output services to the tune of Rs. 91,16,244/-, (ii) legality of demand of Rs. 34,20,440/- for the period April 2008 to March 2010 under Rule 6(3) of CCR, 2004.
5. There is no dispute concerning the nature of the services provided by the appellant. There is also no dispute that appellant had taken input service credit and utilised them for providing both taxable as well as exempted output services.
6.1 The service providers providing both exempted as well as taxable output services, were either required to maintain separate accounts for input services or, prior to 01.04.2008, or utilise CENVAT credit only to the extent of 20% of the service tax payable on taxable output service.
6.2 As per the Annexure-I to the show cause notice, the service tax paid for the period 31.12.2005 to 31.12.2008 has been worked out as Rs. 177,03,348/-. Based on this figure the excess CENVAT credit availed has been worked out at Rs. 91,16,244/-.
6.3 Appellants are not disputing that CENVAT credit availment for the period up to 31.03.2008 as to be capped at 20% of service tax payable.
6.4 However, it emerges from para 12 of the impugned order that whereas appellants have claimed that they have made payment of entire amount of CENVAT credit availed irregularly and accordingly the violation of Rule 6(1) of the CCR, 2004 has been made good, the adjudicating authority has noted that there is no clarity whether the payment made by the assessee has covered all the input services which are used in exempted output services. The adjudicating authority has also found as follows:
The assesses, while giving reply to the SCN, made an effort to establish the usage of input services mentioned at (i) above in taxable output services. However, it is not clear as to whether the said input services are exclusively used for taxable output services from the statement or the reply. In case any input service credit as mentioned at (i) above is used in exempted/non-taxable services, again in rule 6(3) comes into play and attracts penal provisions for violation of Rule 6(2) of CCR. This aspect can be clarified only from the details of each transaction. 6.5 Even so, having observed that the details given by the appellants are not clear and each transaction is required to be verified, the adjudicating authority nonetheless goes ahead to confirm the disallowance of CENVAT credit of Rs. 91,16,244/- apparently taken in excess and irregularly, without any justification for that decision. In our view, such peremptory confirmation of demand without resolving the very evident confusion in the working thereof, cannot be sustained. It is not just and fair. We are therefore of the considered opinion that this matter relating to excess input service credit availed while providing both exempted and taxable output services, will require to be remanded for denovo consideration by adjudicating authority. Needless to say, in such denovo proceedings, the adjudicating authority will give suitable opportunities to the appellant to present their case including submission of additional document in support of their case. So ordered.
7.1 Coming to the demand of Rs. 34,20,440/- for the period April 2008 to March 2010 being the amount equal to 8% or 6% of the value of exempted services, along with interest liability thereon, it is seen that the proposed liability has been worked out in Annexure-II of the show cause notice. The total value of exempted service has been arrived at Rs. 46,205,740/-, based on which the amount payable as per Rule 6(3)(i) of CCR, 2004 at 8% for the period March 2008 to June 2009 and @ 6% from July 2009 has been worked out as Rs. 34,20,440/-
7.2 In this regard, we find that the manner of calculation of 6% or 8% on value of exempted services has not been disputed by the appellant. We also find that with effect from 01.04.2008, Rule 6(3) the CCR, 2004 was specifically amended to bring forth this method of calculation for purposes of Rule 6(3). This being the case, we do not find any infirmity in that portion of the impugned order upholding the demand of Rs. 34,20,440/-, along with interest liability thereon, for the period April 2008 to March 2010.
8. However, coming to the matter of penalty, it is noted that the entire issue has emanated out of a dispute between the appellant and the department on the method and manner of calculating the amount of CENVAT credit that can be availed in the situation where both exempted and taxable output services were provided. In these circumstances, we are of the considered opinion that imposition of penalty in this case would be a overkill. The penalties imposed by the adjudicating authority in the impugned order will therefore required to be set aside, which we hereby do.
9. Appeal is therefore partly allowed to the extent of setting aside of penalties and remanding the matter for the limited purpose of appraising the appellants contentions in respect of credit liability to be disallowed for the period prior to 01.04.2008 as per the directions given in para 6.5 above.
10. Appeal disposed of on above terms.
(Order pronounced on __________ in open court)
MADHU MOHAN DAMODHAR M.V. RAVINDRAN
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Jaya.
A.No. ST/2004/2012
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