Custom, Excise & Service Tax Tribunal
Adecco People One India Limited vs Cce, Bangalore(Adjn) on 10 February, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No.. Appeal Involved: ST/283/2007-SM ADECCO PEOPLE ONE INDIA LIMITED, REGENT COURT,1st AND 2nd FLOOR, PLOT NO 17, 80 FEET ROAD, KORAMANGALA, BANGALORE Appellant(s) Versus CCE, BANGALORE(ADJN) Respondent(s) Appearance: Shri B. Venugopal, Advocate SWAMY ASSOCIATES G-8, FORTUNA ICON APARTMENTS, JODIDHAR ASWATHAPPA FARM, BEHIND NAGARJUNA, SAHAKAR NAGAR, BANGALORE KARNATAKA 560092 For the Appellant Shri Ganesh Haavanur, Addl. Commissioner(AR) For the Respondent CORAM: HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER Date of Hearing: 30/01/2014 Date of Decision: Order Per : B.S.V.MURTHY The amount of service tax confirmed and penalties imposed in the impugned order by the Commissioner are as under:- (i) An amount of Rs.17,43,065/- has been worked out as service tax liability on the basis of income received for services provided and shown in the balance sheet of the appellants for the period from 2001-2002 to 2004-2005. (ii) An amount of Rs.1,20,000/- has been worked out as service tax liability on the franchise services rendered by the appellant. (iii) An amount of Rs.9,54,306/- has been demanded being the service tax utilised wrongly in terms of Rule 6 of CENVAT Creidt Rules 2004(CCR). (iv) An amount of Rs.60,712/- being the credit of service tax held as wrongly availed in respect of mobile phones provided to the employees. (v) Penalty of Rs.200/- per day under Section of the Finance Act, 1994(the Act). (vi) Penalty of Rs.1000/- under Section 77 of the Act. (vii) Penalty of Rs.28 lakhs under Section 78 of the Act. (viii) Penalty of Rs.10,000/- under Rule 15(3) of CCR. (ix) Penalty of Rs.15 lakhs imposed under Rule 15(4) of CCR. 2. Heard both sides. 3. Before proceeding to discuss the issues independently, it is necessary to state that the counsel for the appellants did not argue the point relating to limitation at all. Therefore the issues relating to limitation and the consequences thereof are being disposed and considered. 4.1. Issue (i): The amount has been demanded on the amount received by the appellant for manpower recruitment agency services provided to various customers. The appellants had claimed that these services were exempted since they were provided to service providers who had exported the service in their entirety. Learned counsel submitted that appellant had claimed that the services were to be treated as secondary services and having been utilised in their entirety for exports of services, in terms of instructions issued by the Board, they need not to pay service tax. However, he submits that since the investigation was taken up at later and the appellants despite their efforts could not produce any evidence to show the receipt of the income by their service receivers in the form of convertible foreign exchange. Therefore even though there was a Board circular No.ST/56/5/2003 dt. 24/05/2003, they could not get the benefit as a secondary service provider. They had not discharged the service tax on the services presuming that since the suppliers were exporting they did not have to pay any tax. During the process of adjudication, the appellants produced a list of service exporters to whom they were providing service. They could also produce a couple of letters issued by such service receivers stating that their services were being totally exported. In respect of remaining units, the assessee could not produce supporting documents. In the result, Revenue has treated the appellant as ineligible for the exemption and on the entire amount of service charges received, tax has been demanded. The claim of the appellant has also been rejected on the ground that the services of BPO, call centers, medical transcription centres etc. are rendered in India and therefore the services themselves cannot be called as export of service. However, the fact remains that appellants had produced a list of customers to whom they had provided service and who were exporting of their services and some of their customers had confirmed the same also. Moreover as mentioned in the statement of facts, the Boards circular clarifies that no service tax would be liable on secondary services if the secondary services are used by the exporter. The claims made by the appellant has not been considered and even in cases where letters have been received, no verification has been conducted. Nevertheless, the fact remains that the most important element required viz. the service receivers had exported service and received the consideration in convertible foreign currency has not been produced and this was admitted. Nevertheless while the demand for service tax with interest has to be sustained but in my opinion under these circumstances as discussed above, the benefit of provisions of Section 80 for waiver of penalty under Section 76, 78 of the Act is required to be extended. 4.2. Issue (ii): This liability on franchise services has not been disputed and the learned counsel submits that by mistake they failed to pay the tax on this service and there was no intention and having regard to the approach of cooperation adopted by the appellant, waiver of penalties may be considered leniently. I find that this request is reasonable. Accordingly, the demand for service tax with interest is upheld but penalties under Sections 76 and 78 are waived. 4.3. Issue (iii): An amount of Rs.9,54,306/- has been demanded as the credit wrongly utilised by the appellant. The learned counsel drew my attention to a table submitted by him which is reproduced as under:- Month Service Tax taken Cummulative balance Service Tax Payable Payment of Service Tax Date of payment Interest Late Fee PLA Cenvat O.B. 8,059 8,059 Apr 04 3,785 11,844 273,244 225,371 -
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May 04 8,712 20,556 313,957
-
-
Jun 04 69,218 89,774 591,446
-
-
Jul 04 24,625 114,399 400,417 1,354,000
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10/4/2004
-
-
Aug 04 38,483 152,882 367,887 367,887
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12/10/2004 50,525
-
Sep 04 45,658 198,540 616,225 616,225
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1/12/2005 20,259 1,000 Oct 04 68,794 267,334 424,347 424,347
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1/12/2005 8,545
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Nov 04 87,522 354,856 613,711 613,711
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1/12/2005 4,792
-
Dec 04 114,097 468,953 669,969 669,969
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1/20/2005
-
-
Jan 05 75,331 544,284 457,722
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457,722 3/23/2005
-
-
Feb 05 146,841 691,125 539,093 298,273 240,820 3/23/2005
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-
Mar 05 597,046 1,288,171 665,443 77,176 588,267 8/11/2005 3,859 1,000 5,933,461 4,421,588 1,286,809 87,980 2,000 1 Total Cenvat credit taken during the period 2004-05 1,288,171 2 20% Cenvat credit eligible as per Rule 6(3)(c) of CCR, 2004 1,186,692 3 Total Cenvat credit used for payment of Service tax during 2004-05 1,286,809 Excess Utilisation 100,117 It is his submission that the appellant instead of using credit to the extent of 20% only as required under Rule 6 of CCR by the appellant who was providing exempted as well as taxable services, the appellant did not utilize the CENVAT credit at all till December 2004 and in the balance 3 months utilised the accumulated credit. It is his submission that the 20% requirement if it is calculated on an early basis, the appellant has violated the requirement of the rule only in the month of March 2005 to the extent of Rs.1,00,117/-. However, on going through the relevant rule which is Rule 6(3)(c) reads as follows:-The provider of output service shall utilize credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output service. Learned AR submits that the rule is very clear and service tax is payable on a monthly basis and therefore the percentage mentioned in the rule has to be calculated on a monthly basis only. I find that no other interpretation is possible as far as this rule is concerned. Therefore the irregular utilization of the credit by the appellant has to be upheld. Nevertheless, there are certain factors which are required to be noted. The first factor is that the appellant has paid interest of about Rs.82,000/- even though they could have utilised 20% of the CENVAT credit towards payment of service tax and because they did not use and there was a default in payment of tax; they had to pay interest and also late fee. Apparently, it is quite clear that this was an omission on the part of the appellant. Otherwise, they could have definitely utilised the CENVAT credit and at least debited 20% of the service tax payable by utilizing CENVAT credit account which would have resulted in savings in interest for them and further would have resulted in an offence case only to the extent of Rs.1 lakh. If the amount is paid, the appellant would be entitled to recredit of the CENVAT credit and under these circumstances, penalties under Section 76 and 78 can be waived by invoking Section 80 of the Finance Act, 1994. As regards the demand for CENVAT credit, it has to be noted that the rule was amended subsequently and the requirement of utilization of CENVAT credit to a limited extent itself was taken away from the rule book. However, in accordance with the statutory provisions, the demand has to be upheld as mentioned above.
4.4. Issue (iv): As regards the amount of Rs.60,172/- being the CENVAT credit upheld as irregular in respect of mobile phones, I find that the amount involved is small and there is no finding or no verification as to whether company had paid the tax or not. The learned counsel submitted that mobile phones were in the name of company only and tax was also paid by the company only. Having regard to the facts and circumstances and the proceedings and investigation, I find that the credit cannot be denied. Accordingly, the appeal in respect of these amounts has to be allowed in this regard.
4.5. Issue (v) & (vii): In respect of the penalties under Sections 76 & 78 of Finance Act, all the three amounts mentioned above have been discussed and waived. Therefore there will be no penalty on the appellant under these sections.
4.6. Issue (vi): Penalty under Section 77 of the Finance Act is upheld.
4.7. Issue (viii): Penalty of Rs.10,000/- imposed under Rule 15(3) of CCR has to be upheld since the appellant did utilize the CENVAT credit wrongly as mentioned earlier.
4.8. Issue (ix): Since the issue of limitation has not bee pressed and the demand being confirmed as accepted, without contesting on the ground of limitation, penalty of Rs.15 lakhs imposed under Rule 15(4) of CCR is not sustained and set aside.
5. The appeal is decided in above terms. It is to be stated that the appellant shall be at liberty to seek appropriation of the amounts under various heads discussed above according to their convenience and accordingly payment of balance dues to the Revenue.
(Pronounced on ) B.S.V.MURTHY TECHNICAL MEMBER Raja.
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