Custom, Excise & Service Tax Tribunal
Royal Sundaram General Insurance ... vs Commissioner Of Gst & Ce - Chennai ... on 29 July, 2024
Service Tax Ane No. 40810 of 2047 Service Tay Appeal No 40198 of 2020 IN THE CUSTOMS, EXCISE AND SERVICE TAM APPELLATE TRIBUNAL, SOUTH ZONAL BENCH, CHENNAI COHIRT HALL No. Tit SERVICE TAX APPEAL No. 46810 OF 2017 fArising out af Order-in-GQriginal No. LTUC/7G5/2016-0 dated 23.12.7016 passed by oe commissioner, Large. Taxpayer Unit, i775, oye Nehru inner Ring Road, Anna Nagar Western Extension, Chennai 600 101) ie M/s. Royal Sundaram General Insurance Campary Ltd. os APSSlant No. Vishranthi Melaram Towers, Bo. 2/315, Rajiv Garhi Salai, Karapakkam Chennal 206 097, Versus The Commissioner of GST & Central Excise, oo mesgondent Chennai South. Commissionan ate we fomplex, No. 692, Anna Saini, Nandansm, c Chennal ooo O35. AND SERVICE TAX APPEAL No. 40198 OF 2020 fArising out of Order-in-Griginal No. 32/2019 dated 25,11. 2019 pass pad Cammissioner of GST & Central Excise, Chennal South, No.692, M.HLU. Comp Finor, Anna Saiai, Nandanam, Chennai 600 035.) ea BY iex, 5 M/s. Royal Sundaram General Insurance Campany Ltd. «ze Appellant No. Vishranth! Melaram Towers, Bo. 2/319, Rajiv Gandhi Salal, Karapakkarn Chednal 660 O97, The Commissioner of GST & Central Excise, Respondent Chennai South Commissionerate MHU Campiex, No.692, Anna Salai, chennai BO0 035. 3 oe Ae Service Tax Appeal No 40810 of 2077 Service Tax Appeal No 40198 of 2086 APPEARANCE: Mr Raghavan Ramahbadran, Advocate For the Appellant Mr S. Subramanian, Special Counsel Far the Respondent Hon'ble Ms. SULEKHA BEEVT C.S., Member (Chudiciall Hon'ble Mr. M. AJIT KUMAR, Member (Technical) RATE OF HEARING : 14.06.2023 DATE OF DECISION 2:25 -os: 2025 FINAL ORDER No. ange . " wh ce SB en. ORDER :
Per Ms. SULEKHA BEEVS, C.S. The issues involved in both these appeals being analogous they were heard together and are dispased by this cormmoan order i. Brief facts are that, the appellant, M/s. Royal Sundaram Allianz Insurance Company Ltc., public limited company, having Head office af Karappakkam, Chennai is engaged in providing General Insurances In a the nature of Motor, Health, Personal Accident and Fire and Burglary imsurance services and Miscellaneous policies. They have centralized registration, and are registered for payrnent of service tax under reverse charge mechanism on commissions paid to insurance agents, ete.
4g tho Service Tax Sopeal No.d0810 af 2017 Service Tax Appeal No.40198 of 2020
2. Intelligence was gathered by DGCEI, Chennai-zonal unit that the appellant is availing cenval credit wrongly on the basis of invoices issued by dealers of Motor Vehicles containing description of services which were never actually provided by the automobile dealers to the appellant. Accordingly, Investigation was initiated and documenits recovered, statements recorded. The investigations was done as tinder ;
O)} Investigation into the alleged irregular avaiiment of cenvat credit by appellant on the basis of invoices issued by the automobile dealers fexcluding the dealer, M/s. TVS Sundaram Motors) and manufacturers fexcluding the manufacturer, M/s. Honda Cars India Ltd.) Cf} Investigation on the frrequiar avaliment of credit an the basis of invoices issued by the manufacturer, M/s Handa Cars India Ltd.
dH) Investigation into the alleged irregular availment of credit on the basis of invoices issued by the dealer, M/s. TVS Sundaram Motors.
sd if is noted that the dealers of motor vehicies not being Agents / grokers / Intermediaries of the Insurance companies are neither permitted to do insurance business nor are they permitted to receive commission. The investigations revealed that the motor vehicie dealers have been soliciting business of insurance of the appellant while selling the vehicles to customers. The appellant actually pays commission to the dealers for soliciting their insurance business. As the dealers / manufacturers are not permitted to do insurance business {as per Insurance Act and IRDA Regulations) and not permitted to TGereer Service Tax Appeal No.d08t0 of 2077 Service Tax Appeal No ADISS of 2020 receive commission, the invoices are raised describing the services as 'Data processing, and Policy servicing related activities' It was thus concluded from the investigations that dealers have actually nat provided any services to the appellant, such less the service described in the invoices and these Invoices are raised only to sass over the insurance commission to the dealers in the quise of providing services, The dealers pay service tax on the amount collected from the appellant as per the invoices. The appellant has availed cenvat credit of the service tax pald by them. According to department the availment of such credit is irrequiar for the reason that no Services as described in the invoices has been provided by the dealer to the sopellant.
3.1 was also noted that some of the computer generated invoices did not have all particulars as required under Rule 4A of Service Tax Rules, L994 as these did not bear the signature of the dealer to evidence as to wha has issued the invoice. For this reason also, the credit is ineligible, 3.2 "Further the credit availed on Invoices issued by M/s.Sundaram Motors shawed that there are two sets of Invoices. In the invoices issued to appellant, the services were described as 'data srocessing and policy servicing servic Whereas at the end of M/s.Sundaram Motors, the nature of service oravided was described as 'additional incentive' 4, From the above, jt appeared to the department that the aopneilan has wrongly availed ceanvat credit. Show cause notice for the different periods 2010-2011 to 2014 to 2015 and SOD for the period Apri 2015 & Service Tax Appeal No.40810 of 2017 Service Tax Appeal No 40198 of 2020 to June 201/ was issued to the appellant proposing to disallaw the credit and to recover the sare aiong with interest. After due process af law, the adjudicating authority disallowed the credit, and confirmed the demands along with Interest and Imposed penalties. Aggrieved, the appellants are now before the Tribunal,
5. The Ld. Counsel Shri Raghavan Ramabadran appeared and argued forthe appellant. It is submitted! that the appellant Is engaged in providing general insurance services pertaining to motor insurance, health insurance, property insurance, engineering insurance, lability imsurance and other miscellaneous insurances.
5.2 At the time of sale of the automobiles, the automobile manufacturers through their established dealer network assist the vehicle buyers fo obtain the insurance. Frorn the view point of the insurance companies, including the Appellant, the dealers of automoole manufacturers are usually the first paint of contact with the buyers of rotor vehicie and hence for rotor Insurance too. Accordingly in order to increase its customer base, the Apnellant enters into agreement with various sutomablle manufacturers and their authorized dealers in order to get access to their customers through various dealerships.
5.2 The case of the Department is as follows :
a. Firstly, that the Invoices on which credit is taken da not reflect the true description of the services provided by the dealers to the appellant.
Popecssee (e3) Service Tax Appeal No40870 of 2047 Service Tax Appeal No.d0198 of 2020 b. Secondly, in respect of M/s.Honda Motors Indla Ltd., that the appellant has availed cenvat credit based oan unsigned invoices issued 5 c. Thirdly, that the anpellant has availed cenvat credit on inveices issued by one of their car dealers namely, M/s. TVS Sundaram Motors, who had maintained two sets of invoice documents.
5.3 The undisputed facts are that, the automobile dealers have paid service tax ta the government on such invoices. The dealers / service providers have stated the description of service to be in the nature of infrastructure support services and have pald service tax accordingly. The department has not issued any show cause notice against these dealers / service providers disputing the nature of service provided by them or disputing the descristion of services mentioned in the invoices raised by them. So also, there are not even any penalty proceedings. inflated against the dealers / service providers for incorrect issuance of invoices, In other words, the department is not disputing the fact of providing the service or the nature of service orovided or the remittance of service tax at the dealers' end.
St The dealers / service sroviders have always stated the description of service in their tax invoice as per Rule 4A of Service Tax Rules, 1994. The description given is in the nature of infrastructure support services and the dealers / service providers have accordingly remitted service taw. This fact has never been disputed by the Department. No show cause notice was ever issued against the dealers Service Tax Appeal No 40810 of 2017 Service Tax Appeal No. 40158 of 2020 / service providers for non-compliance of Rule 44 of Service Tax Rules, i894 and imposing penalty under Section 77 (1) (&) of the Act for any discrepancy in issuing invoice. In other words, at the service provider's end, the Department has all along acceded to the fact that the description of service in the tax Invaice is in accardance with Rule 44 of the Service Tax Rules. Once the nature and description of services as mentioned in the invoice is not disputed at the service providers' end, the same cannat be questioned at the service recipient's end. This is far the reason that the assessment based on the returns in the hands of the service provider has become final and the Department has accepted those returns based on the declarations made by the service provider. Having accepted and nat disputed i, the Department cannot be allowed to raise the issue at the service recipient's end.
3.2 7o Support this argument Ld. Counsel relied on the judgment of the Hon'bie High Court of Madras in M/s. Modular Auto Ltd. CCE Chennai ~ 2008-VIL-541-MAD-ST. The ratio laid in this case was followed by the Tribunal in the case of M/s. ford India Pvt. Ltd. vs Commr. of GST & CCE ~ 2019-VIL-182 CESTAT CHE-ST.
5.6 The very same issue in this appeal on identical set of facts was considered by the Tribunal in the case of Cholamandalam MS Genera! insurance Co. Ltd. ¥s CCE ~ 2021 (3) TMI 24 CESTAT CHENNAI [2021 (47) GSTL 263 (Tri-Chennall. The Tribunal in the said case followed the judgment of the Hon'ble jurisdictional High Court in the case of M/s. Modular Auto Ltd. (supra) to hald that when it is not disputed that the dealer has paid service tax on the services described in the Servic Tax Appeal No.40810 of 2047 Service Tax Appeal No 40198 af 2020 invoices, the denial of credit at the recipient's end cannot be justiied without reopening the assessment at the dealer's end.
5.f In regard to the second issue of denial of cenvat credit on unsigned computer generated invoices issued by M/s.Honda Motors India Utd. to the appellant, the Ld. Counsel! submitted that there is no dispute that the service provider is registered with the service tax department and that the service tax as mentioned in the invoices is deposited with government. The credit cannot be denied only because there was no sianature in the invoices. There is no allegation that the invoices are fake or bogus. When the tax paid is not in dispute, the credit cannat be denied on such technical grounds. To support this argument, the Ld. Counsel relied an the decisions in the case of Poona info Vision Vs CCE Cochin -- 2019 (365) ELT 592 (Tri.-Bang.) and CCE Cachin Vs A.8. Maruthi India Pvt. Ltd. - 2018 (8) GSTL 209 Or.- Bang.). The decision in the case of Automax Vs CCF Delhi - 2018 (363) ELT Ti2tl (ini-Chan.) was relied to argue that when the duty paid mature of the goods and the actual receipt of the goods in the recipients' factory is not disputed, the credit cannot be denied on the mere ground that description of goocis in the Invoice is incorrect. It was aiso held therein that as no investigation was initiated at the hancis of the transporter or supplier, and therefore credit cannot be denied at the recipients' end.
S.8 The third issue is the denial of credit for the reasan that the invoices issued by M/s. TVS Sundaram Motors reflects the existence of two sets of Invoices. The allegation |s that in the invoices issued to the Service Tax Appeal No. angio af 2007 Service Tax Appeal No.40198 af 2020 appelant, the services are described as 'Data processing and Policy Servicing Services. The invoices at the dealer's end shows 'additional incentive' The Ld. Counsel explained that only one invoice describing the service as 'data processing and policy servicing services' was issued to the appellant. They are not aware of a secand set maintained by the dealer The appellant cannot be penalized by denying credit for the invoice maintained by the service provider, on their own volition.
5.9 The Ld. Counsel adverted to the allegations in appeal! NO.40198/2020 (for the period 2015-2017} and submitted that the demand along with interest has been confirmed on the very same grounds. It is alleged and concluded that no services as described in the invoices have been provided by the dealers to the appellant. Though there is no whisper in the Staternent of Demand {SOD} No. 14/2018 dated 13.04.2018 issued for the period April 2015 to 2017, that the service provided by the dealer is Hable for payment of service tax under Reverse Charge Mechanism (RCM) in terms of notification 30/2012-S7, the adjudicating authority in para 13 of the O10 has made discussions in this regard. So also, there is no mention in the SOD that the activities cover reimbursable expenditure, However, in para 14.2 the adjudicating authority has held that the amounts paid by appellant to dealer are reimbursements and therefore no service tax is payable oy dealer on such amounts, and therefore appellant is not eligible for credit, The Ld. Counsel argued hat by considering the notfn no.g0/2012 and the amount as reimbursements, the adjudicating authority has travelled beyond the SCN.
Service Tax Appeal No.40810 of 2047 Service Tax Appeal No.40198 of 2020 6 The Ld. Counsel adverted to the decision of the Tribunal in the case of Karur Vysya Sank Ltd. VS CCE Trichy - 2019 (23) GSTL 63 (Tri- Chennai). [tis pointed out that in the said case, the department had issued SCN demanding service tax under "Business Support Service"
(BS5} on infrastructure support services provided to insurance campanies by the bank. The Tribunal upheld the canfirmation of demand. it was thus argued that when service tax is nat paid by an assessee (Bank) for Business Support Services, damand has been raised for providing infrastructure facilities and supports to the insurance company, That therefore the dealers have rightly paid the tax for {he services provided to the appellant. The credit availed by the appellant on such tax is eligible.
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7, The Ld. Counsel has put forward argurnents on the ground of limitation also. It is prayed that the appeals may be allowed.
8, The Ld. Special Representative appointed by the department Sri R. Subramanian appeared and arqued for the department. The Ld. Special Counsel has submitted lenathy written submissions. ereft of the unnecessary details, repetitions, the crux of the arguments are as under :
th is submitted by the Ld. Special Representative of the department that the investigations brought to light that the issuance of Invoice is a tool employed by the dealer / manufacturer to claim thelr undue payment {commission} under the garb of providing services. It was detected that actually there is no receipt of any service by the appellant so as to avail the credit. The Ld. Special Representative adverted to 4 .4
N ii Defvice Tax Appdéal No.d0810 of 2097 Service Tax Appeal No.40198 of 2020 the relevant provisions of Insurance Act, 1938 and IRDA Regulations to argue that dealers / manufactures of motor vehicles not being insurance agents / brokers / intermediaries of the Insurance companies, dare not perrniitted to do insurance business. So they are not allowed to receive Insurance commission, However, the dealers / manufacturers have been soliciting Insurance business of the appellant. AS they cannot receive commission from the insurance cornpany {appellant}, the dealers and manufactures raise invoice on the instructions given by the appellant describing that they have provided 'Data processing & policy servicing related activities' to the appellant. These invoices are raised in the guise of providing services ta the appellant so that the commission for promoting insurance business can be paid to the dealers / manufacturers.
8.1 Section 40 (1) of Insurance Act, 1938 reads as under:
'3.2 As per Section 40 (7) of the insurance Act, 1938, No person shall after the expiry of six months from the commencernent of this Act, pay or construct fo pay any remuneration or reward whether by way of commission or otherwise for soliciting or procuring insurance business in india to any person except an insurance agent or an intermediary or insurance intermediary."
8.1.2 As per IRDA Circular Ref: OLL/IRDA/Brok-Com/August/2008 dated 25/08-2008 issued under Section 14 of IRDA Act, 1999, which limits the payment of Commission or brokerage to 10%. The circular specifically state, "Ajo payment of any kind including "administrative ar servicing charges" is permitted to be made to the agent. or broker in respect of the business of which he is paid agency commission or brokerage."
roe we Sawer Service Tax Appeal No.40810 of 2017 Service Tax Appeal No.40198 of 2026 8.2. The appellant maintains business connection with automobile dealers for procuring insurance palicy From the vehicie buyers. The tle up with manufacturer Srings out the mechanism for rendering such insurance services and they inform the dealer the rate of commission for rendering such services. The appellant is not authorized to outsource such insurance services, As per Section 40 of Insurance Act, 1938, only licensed Brokers are permitted to do insurance business and entitied to receive commission. For the purpose of receiving the commission, the dealers have raised the invoices describing the services as 'data orocessing and policy servicing activities', In reality, the dealers do not provide any such service and only provide insurance services. The taxable value and the service tax is calculated as a percentage of own damage (O60) premium and intimated by appellant to the dealers through e-mail.
8.3 The Ld. Special Representative of the department relled upon the various statements recorded during investigation to arque that these facts have been brought out from such statements which have not been retracted. In para 39 of QIO, the adjudicating authority has considered the statement of Sri Venkatachalam sekar who is a representative of the appellant. itis stated by him that appellant has entered into service provider agreements for 'Data Processing and Policy servicing and related activites services', The rates for the services have not been specified in the agreement. 'the appetiant gives a specific percentage of value of the insurance policy as payout to the dealers. The is 'Service Tax Appeal No 40810 of 2017 Service Tax Appeal No.40198 of 2026 staternents of other persons are also on similar lines. It is argued that the adjudicating authority is correct in making the following findings <-
fi) the payment made by the appellant to the dealers of motor vehicles is a percentage of OD premium collected and the said payout detaiis are calculated by the Head office of the appellant and communicated to the dealers.
{]} Since, the appellant cannot term such payout as cornmission, which wil be violative of IRDA guidelines, the dealers were given prescribed format to raise invoices as if they provided "Data processing and policy servicing related activities' (ij the dealers accordingly raised invoices on the insurance companies in the format provided to them.
(iv} dealers have not provided the services as mentioned in the invoices.
8.3.1 The Ld. Spl. Counsel urged that the Invoices are issued to wherein, the entire web of activities was formulated by the appellant to capture the customers at the time of buying vehicles itself. The appellant therefore cannot avail credit of the service tax paid on these invoices and the adjudicating authority has rightly confirmed the dernand, i4 Service Tax Appeal No 40810 of 2G17 Service Tax Appeal No 40198 of 2020 B.3.2 The Ld. Special Representative submitted that the decisions in the case of Modular Auto Ltd, (supra) and Cholamandaiam MS General Insurance Co. (supra) are not applicable as the facts are different.
8.4 The arguments of the appellant on the second issue as to the credit disaliawed on cormputer generated unsigned invoices was countered by referring to the discussion made by adjudicating authority in para - 40 of GOTO dt. 23.12.2016. It is arqued that the Board vide F.No.224/44/2014-CxX.6 dt. 06.07.2015 had issued instructions for option to issue invoices in electronic forrn and authentication of digital siqnature. This came into effect only on &.7,2015. So the credit availed by appellant on unsigned invoices issued by e-mall from M/s.Honda Cars is not valid and the demand has been correctly confirmed by the impugned arder.
© 8.5 The third issue is regarding two sets of Invoices showing different description of services. The description of service In the Invoice of the account maintained by the dealer (TVS Sundararn Motears) is shown as 'additional Incentive'. The deseriotion of the service in the corresponding invaice of the appellant shows as 'Data processing and Policy related activities', The appellant has not been able to explain the discrepancy. The credit has been righty denied by the adjudicating authority.
Service Tax Apdeal No,408i0 of 2017 Service Tax Aggeal No. 40198 of 2020 g, it is asserted by the Ld. Counsel that the credit has been denied not because of Incorrect description of service in the invoice, but because the dealers and manufacturers did not provide any service to the appellant and the invoices have been raised to pay the commission on insurance services to the dealers. The Ld. Special Representative prayed that the appeal may be dismissedi.
10. Heard both sides, ii. The issue to be decided is whether the appellant is eligible to avall credit of the service tax paid by therm on the invoices issued by automobile dealers, i2. The main arqument advanced on behalf of the department is that the dealers have not provided any service to the appellant and that the imvoices are raised fer the purpose of paying the commission to the dealers by the appellant. It is thus the case of 'the department that the dealers have been providing insurance services to the appellants iNegally against the provisions of Insurance Act,1938 and IRDA ws 3 Regulations. To coverup this, and to facilitate the payment of commission for the Insurance services provided by dealers, the invoices have been issued. On his ground, the credit availed by the appellant of the service tax paid by them on these invoice is held to be not eligible, Let us proceed to examine the rival contentions.
4 tare 16 Service Tax Appeal No.40810 of 2017 Service Tax Appeal No. 40198 of 2020
13. it fs not disputed that the dealers have paid the service tax collected fram the appellant to the gavernment. So alsa, the payment of service tax by the dealers on these impugned invoices is nat objected to by the department. The department has issued shaw cause notice only to the appellant proposing to deny the credit availed af the tax paid by them.
id. The Ld. Special counsel has relled upon various statements recorded during the investigation to argue that it has been unearthed by the department that no services were provided by the dealers to the appellant. These witnesses have been subjected fo cross examination. The Ld. counsel appearing for the appellant has referred to the cross examinations and argued that it has been clarified during cross. examination that services were indeed provided. The allegation in the SCN that no services were provided is mainly based on the statements recorded during investigation. The cross exarninatian of sri. Venkatachalam Sekar, Financial controiler of appellant is as under:
Cross by representative of sppellant/assessee Gr: Oe you agres that Khivira] Motors ((M) was promoting Royal Sundaram Auiance General Insurance Co, Lid (RS) as one of the preferred insurers fo car buyers?
AL Yes @: Do you agree thal if a customer agreed fo take insurance fresh or renewal fram RS, that KM processed and issued the policy?
A: Yes Bowron Service Tax Appeal No. 40R10 of 2017 Service Tax Appeal No.40198 of 2020 Do you agree that for the above service KM was paid service charges ata % of fhe OD premium?
A: Yes @: Do you agree that KM rendered the services mentioned In Schedule A ofthe agreement of the service provider agreement dated 15.17.2013? A: Yes, they provided Policy servicing and Data processing services.
G Do you theretors agree that your answer to question ne. 18,79 20, 25 iquestions by department while recording statement) are incorrect?
A: Yes it ls Incorrect four separate questions and answers are made Into one here} Qc why were there such four incorrect replies?
A: i was forced fo give such answer.
G: In question no. 34, is the description in the invoices-data processing and policy servicing-absoluialy false?
A: No. They sre providing data srocessing and policy releted activities Services, @: De you sgree that you received from KM, Chennai Ford, Handa Cars indie Lid, SM etc, the service of promoting RS as one of the preferred insurers and wherever they are successful they processed and issued ihe insurance policies etc using data processing at thelr site?
A; Yes.
Gr HW you were forced to give reply, why did you not retract the staternent. A: { did not retract because | wes not aware of the process.
The cross examination of other witnesses is aiso an similar lines. The cross examination of Sri S. Shanmugam Sundaram, General Manager, Finance of Chennai Auto Agencies (dealer) ls as under: -18
Service Tax Anpeal No.dO810 af 2037 Service Tax Anoeal No 40198 of 2020 Q: Da you agree that Chennai Auto Agencies was promoting RS as one of the preferred insurers fo car buyers?
A: Yes GO: De you agree that ifa customer decided to take insurance from RS, you were processing and issuing the policy, remitting Msurance premium collected tao RS?
Ac Yes cy Do you agree for rendering the above services, you had employed staff, computers, other infrastructure etc?
Ac We are using our slaffand computer to generate the policies @: De you agree that for the above services you were paid charges ala % of fhe OB premium?
A Yes, we were getting the service charges.
Cr Do you agree that you rendered a service to RS and received payrnent for ther?
A: Yes of course, we are rendering services towards Insurance policies and getting payment for that.
During cross examination, the witnesses have denied the statement given before the officers. It can be seen that the evidence brought forth in cross examination is that the motor vehicle dealers have indeed orovided services to the appellants and collected charges for the same along with service tax from the appellant. The Ld. Special Representative of the Department has made efforts to argue that the statements recorded during investigations have not been retracted and therefore such statements recorded during investigation alone must be ig Service Tax Appeal No 4810 of 2077 Service Tax Appeal No4G195 of 2020 relied on, and that the deposition made during cross examination is after-thought and that has to be disregarded in tato. The argument is not tenable. It is the right of an assessee to cross examine witnesses whose statements the assessee would like to discredit. The intention of cross examination is to bring out clarity and truth of the statements given before the officers of the departrnent. The appellant has contested the truthfulness of these statements and requested for crass examination. The courts have always emphasized the importance and neec to permit cross-examination of witnesses.
16. Section SD of the Central Excise Act,1944 provides as to haw the statements recorded during investigation can be admitted in evidence.
The said Section has been adopted in Finance Act, 1994 as provided in Section 8&3 of the Finance Act, 1994.The Han'bie High Court of Punjab and Haryana in the case of G-Tech Industries Vs Union of India - 2016 (339) ELT 209 (P&H) had occasion to consider the compliance of the srovisions of Section 9D of the Central excise Act, 1944, It was held that the staterments recorded during an inquiry or investigation cannot be merely accepted In evidence. For admitting such statements summons has to be issued to the witness and examined. The witness can be cross examined by the assessee, The relevant para reads as under:
*1é. Clearly, therefore, the siage of relevance, In adjudication proceedings, of the statement, recorded before a Gazetted Central Excise officer during inquiry or investigation, would arise only afler the statement is admitted in evidence im accordance with tho procedure prescribed im clause (b) af Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the 20 Service Tax Appeal No.d0810 of 2017 Service Tax Appeal No.40198 of 2920 handicaps referred to in clause (a) af Section 9D¥1) of the Act would apply. In view of this éxpress siipulation in the Act, if is not open to any adjucioating authority ip straightaway rely on the statement recorded during invesiigation'inguiry before ihe Gazetted Central Excise officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all ather cases, ifhe wants to rely on the said statement as relevant, for proving the truth of the coments thercof, he has to first admit the statement in evidences in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before hire in the adpudication proceeding, and arrive at an opinion that, having regard to the cireumstances of the case, the statement should be admitted in the interests of pustice.
17. Intact, Section [34 ofthe Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has fo precede cross-
examination, and cross-examination has to precede re-examination.
20. Reliance may also usefilly be placed on Para 16 of the judgment of the Alishabad High Court in COLE. v. Parniarth dros Pw Ltd, 2010 260) BLT.
S16 CAGL), whieh, foo, unequivocally expound the law thus :
"If the Revenue choose (sic chose?) not to examine any witnesses in adjudication, their statements cannot be considered as evidence."
2i, Vhat adjudicating authorities are bound by the general principles of evidenee, stands affirmed in the judgment of the "epee Court im Cul y.
Busra Overseas Properties Lid, 2007 I6i ELT. 689 (S.C) which apheld x the decision of the Tribunal in Sussa Overseas Properties dtd. wv. CoC, 2001 22, His clear, [rom a reading of the Order-in-Original dated 4-4-2016 supra, that Respondents No. 2 has, in the said Onders-in-Onginal, placed extensive reliance on the siatements, recorded daring mvestization under Section 14 of the Act. He has not invoked clause (a) of sub-section (1) of Section 9D of the Act, by holding that attendance of the makers of the said statements could not be obtained for any of the reasons contemplated by the satd clause. That being 86, Hi was not open io Respondent No, 2 to rely on the said statements, without o oul Service Tax Appeal NoMO8id of 2017 Service Tax Appeal No.40198.of 2020 following the mandatory procedure contemplated by clause (b) of the said sub+ section. The Orders-in-Original, dated 4-4-2016, having been passed in blatant violation of the mandatory procedure prescribed by Section 9D of the Act, it has to be hefd that said Orders-in-Origmal stand vitlated thereby."
AY. The Hon'ble Jurisdictional High Court in the case of Sr' Bala Ganeshan Spinners - 2021 (377) ELT S10 (Mad.) has emphasised the requirement of cross examination. The Tribunal in the case of Swit flastitutes of Engineering Technology Vs Camvnissioner ~ 2020 (34) GSTL 502 (Tri-Chand) had occasion to consider the applicability of Section 9D of Central Excise Act 1944, to the Investigations conducted for short payment of service Tax.
18. Buring cross-examination the witnesses have categorically stated that the dealers provided services to the appellant in the nature of 'data processing and insurance related activities', The dealers have also collected charges from the appellant for such services along with service tax, In the SCN itis alleged that the cenvat credit is not eligible to the appellant as the description of services in the invoices {s incorrect. At times, in the SCN as wellas O10 it is alleged that the credit is inadmissible as no services at all were provided by the dealers to the appellants. For better appreciation a sarnple of the invoice fs moticed as under:
Service Tax Appeal No 40810 of 2017 Service Tax Appeal No AQTOR of 2020 oe Dyguramce-iiiiiparmy Lic pattah Ghee Phy ~ PAINE) S . ot det Waite rae Pak -s a Fao. Ny - AUS ET S$ eB a we Pa Servios Vax No. A AEST PS BSN OG Faurtioulars PrOUSssing and Foliny Servietus and related activities wes the saath of Fandary FOU S SPSL S MINT dieters Satic: Private byes ig. From the above document, it can be seen that the dealers have raised the invoice collecting charges for the services provided by them. There is nothing in these documents to indicate that no services were provided. At the cost of repetition, it needs to be stated that though department alleges that no services have been provided vide these invoices they de not dispute the payment of service tax made as per these invoices on the services provided. Further, the appellant has accounted such payments in their income tax returns and service tax returns. The oral evidence and documentary evidences in the nature of Pos > Service Tax Appeal No.a0816 of 2017 Service Tax Appeal No. 408868 of 2026 invoices and agreements establish that dealers have provided services to the appellant.
2G. It is seen that these services are provided as per the agreaments entered into by the appellant with the dealer' manufacturer The agreement dated 01.10.2013 entered between M/s.Honda Cars India Ltd. and the appellant reads as under
OBIECT WHEREAS a} HCIL is engaged in the business of manufacture of sutomobiles/Vehicles anc providing Incidental services to Customers through its network of Dealerships including servicing, repairs. and the Uke;
b) Insurer is engaged in n gene ral insurance business in India being duly licensed and authorized by IRDA ec} insurer has offered ta himself pravide to Custamers certain insurance Services wider brand Handa Assure which includes the facility af avail ing/renewing Policies and convenient handling of claims on a non-axclusive basis through Dealerships for convenience of customers or in such manner as contemplated heraunder;
Q) HCiL has agreed ta facilitate on non-exclusive basis the offer of Insurance Services by insufer to Customers at Oeslerships through utilizing the infrastructure established and provided by Dealership together with IT Support maintained and provided by HICIL in terms hereof;
NOW THIS AGREEMENT WITNESSETN AS FOLLOWS > ROLE OF HCI During the term of this agreement HCIL shall, Facilitate and provide te the extent feasible and deemed expedient :
a. Establish, maintain and make available the same ta Insurer the necessary IT Support to enable the insurer's provision of various Insurance Services at Dealershins to Customers.
b, Facilitate availability of Infrastructure of Dealers and also faclitate the relationshio between Oysurer and Dealerships fer insurer making available insurance Services to customers in terms of this MOU:
Service Tax Apdeal No.4d0810 of 2017 Service Tay Appeal Nn. 40198 of 2020 CONSIDERATION in consideration of the services provided in pursuance of this Agreement insurer agrees ¥O pay
a) HCIL, a fee, mutually agreed for utilization of the IT support established:
maintained and provided by HCIL that would be available to the Insurer for its providing the Insurance Services.
b) Dealerships a fee/service charge for utilization the infrastructure provided by Dealers at Dealerships.
cs} The nominated Brokers such reasonable brokerage (subject to IRDA norms} for the brokerage services to he orovided by them, B y The rates of the fee or charges may be mutually agreed upon from time to time in wring, 2i. Similar agreements have been entered with M/s.Tata Motors, M/s.Ford etc. Fram such agreements it can be seen that the dealers have provided services to the appellant. Further, the transactions are not hidden or suppressed in any manner The department alleges these are Hiegal and in contravention of Insurance Act and IRDA Regulations, The guide lines on outsourcing of activities by Insurance companies issued by IRDA produced by the appellant shows that the non-core activities and activities supporting core activities can be out sourced, It is net disputed that the dealers have paid the service tax to the government which was collected from the appellant.
22. The Ld. Counsel for appellant has referred to the decision in the case of Karur Vyshya Bank Vs Ltd Vs CCE, Trichy - 2019 (22) GSTL 63 (Tri Chennai). In the said case the SCN was raised demanding service tax on the bank on the amounts received from Insurance companies for providing infrastructural support In the nature of office space, 25 nervice Tax Appeal No.Ageio af 2077 Service Tax Appeal No. 40198 af 2020 slectricity, network etc. The decision makes it clear that such services when oravicded to Insurance Companies are indeed taxable, under 835,
23. In the case on hand, the department does mot dispute the payment of tax. The department has not initiated any proceedings against the dealers alleging that there are no services provided and that no tax has to be paid by therm. The SCN is issued to the appellant alleging that the credit availed on such services Is ineligible. The Cenvat Credit Rules,2004 provide for a mechanism to the service provider to avail and utlize credit of the tax paid on input services used for praviding output services. This credit scheme ensures smooth flow of duties , eliminating the cascading effect of duties /faxes.
24. The department has opted to retain the tax collected, but nas sought to deny the credit to the appellant without questioning or disturbing the assessment of the dealers. By alleging that no services have been provided, the department is actually denying the legality of the tax paid. However, no proceedings are initiated against the service provider who has collected the tax fram tne appellant and paid it to the government, The SCN is issued only to the appellant, who is the service recinient.
25, The very same issue came up for consideration before the Fripunal in the case of CAolamandalam MS General Insurance Company itd. €Supra}. The facts end allegations are identical. The Tribunal falowea the decision of the Jurisdictional High court in the case of Modular Auto Lid. (supra). The relevant para of the discussion of the Tribunai is as under :
: wet ee Pod Os Sarvice Tax Appeal No.40816 of 2077 Service Tax Appeal No Ati9s of 2020 "6. The allegation of the Department is thal ne services have been provided by the dealers to the appellant as per the Inveices and therefore, the appellant is net eligible ta avail credit of the Service Tax reflected in this mveoices. In paragraph 31 ef the Order-in-Original dated 3(+-1-2017, the crux of the allegations of the Department has been recorded by the Original Authority, as under :
"31. Om careful consideration of the statements of personnel af M/s. Chola and Dealers, | find that Gi) The payment made by M/s. oe lata M/s. Hyundai/Dealers of Motor Vehicles is only a pefcentage of OD prennien col lect and the said payout details are caltulated by the Head Ofc eof M/s. Chola and communicated to the Dealers;
GQ Mis, Chala could not term such payout as conmission (which would be | in viglation of IRDA guidelines} and hence the Dealers were given prescribed format to ralse Invoices as if they provided "computing network connectivity through oxtranel, interme? space, furniture and fixtures, consumables, salary of stall, computers, printers, clectronics and electriciiv';
va (312) the Dealers accordingly raised Invoices on the insuranes conipanies in ?
the format provided to them and (ey the Dealers have not provided the services as mentioned in the description of the invoices, In other words, the description of the services contained in the invoices used for availing Cenvat Credit do not reflect the trac 'deseription of the services."
6&2 rom the above, if can be seen that the case of the Department is that the payout paid by the appellant te the dealers on the OD premium collected by the dealers trom the customers is camouflaged as service provided by the dealers to the appellant; that therefore, the services contained in the invoices have actually not been provided by the deslers to the appellant and thus, Cenvat credit is not eligible.
7.1 Though in the Shaw Cause Notice the main allegation is that the description of services in the documents on which credit has been availed is not correct, at the time of adjudication, the main finding is that ne services have been provided by the dealers to the appellant and that therefore credit is not cligible, Ai this funeiure, H needs te be pointed out that the Department has no dispute with the Service Tex collected from the appellant by the dealer and remitted to the Government. The assesament of Service Tax paid at the dealer's end has not been disturbed /questioned yy the Departments only the eredit availed at the service recipient's end hax been questioned by issuing the present Show Cause Notice.
72 UPthe Department « contends that no service has been provided, the crucial question arises as to why Service Tax was collected from the dealer. The 'diseussion by the Original Anthority af paragraph 37 countering this argument is AS under "a7. Astegards their contention in Para N.1 to N.7 that if'no servies is proviied by the Dealer there is no requirement to pay service tax: that at the time of accepting Service Lax x from the dealer, ihe department chooses to look at the form of transaction and accept service tax, In this regard, 1 find thai the issue Involved tn, 4 pevernees % 4 Service Tan Apoeal No.40840 of 2077 Service Tax Appeal No 40398 of 2020 is not about the service tax pavable by the Dealer. It is about the mentioning of true description of services in the involee and the services mentioned in the mivoices in the instant case admittedly were not provided by the Dealers. Cnly after the in-depth investigation conducted with the Dealers, the fact of Deslers issuing invoice with the description suggested by the Taxpayer have come to light. Hene e their contention thet department cannot approbate and reprobate in the Same case iS not valk."
Teo His nat disonted that the dealer has paid Service Tax on the services described im the invoices. If that be so, fie denial af credit af the recipient's end cannot be pusiiiied by the Department without reopening the assessment af the dealer's end.
Be Oe oOo 8.1 A similar issue cam ne up for consideration in the case of Avs. Modular dave diéa@. Gupra). The substantial questions of law considered in the above case are 4:
as under :
"2. The above appeals are admitted on the following substantial questions of law:
(a) When the service provider was not before the Tribunal, whether the Tribunal AY can ge inte the question ag to whether the said service provider had provided service to the appellant or not, more so when the said servies provider has bee assessed td service tax under Business Support Service for the service rendered by ther to the appellant.
(oY is the Tribunal not im error in refusing credit to the appellant for service tax paid by them to service provider when payment of service tax by the appellant for the service rendered by service provider is net in dispute and that His acttled, the assessinient t5 tax at the hands of the service provider end cannot be questioned in the hand of service receiver (appellant in this case)?"
.
18. From, the foregoing, aller appreciation of the facts an ¢ following the ecision of the Hon'ble High Court in Ams te is. Modular Auto Lia. (supra), we hold 'that the impugned order cannot sustam and requires to be set aside, which we hereby do."
femohasis supplied} =
26. it needs to be stated that the allegations raised are the same as seen in para 39 of the order impugned in this appeal. Similar view was taken by the Tribunal in the case of iCicl Lombard General insurance Company Vs CCE, Mumbal Centraf- 2023 (2) TMI 2023, We therefore Sp beenceee + he OG Service Tax Appeal No.40210 of 2077 Servics Tax Appeal No.d0198 of 2026 hold that after appreciating the facts and evidence, and by applying the ratio in the above decisions the denial of edit cannot be justified.
27, The second ground for rejecting the credit is that computer generated invoices are not signed. In para 40 of the impugned O10 dt. 23.13.2016, the adiudicating authority has noted that In regard to the invoices raised by M/s. Honda Cars India Ltd., the credit to the tune of Rs.6,93,203/- is ineligible for the reason that the invoices do not ear signature. It is further stated that the Board has issued instructions only w.e.f 06.07.2015 that invoices in electronic forms and authentication with digital signature is permissible. Tt is cancluded by the original authority that the invoices are not In the orescribed format as required under Rule 44 of the Service Tax Rules, 1994. Rule $ of CCR 2004 deals with the documents on which credit can be availed. The second proviso to the Rule 9 states that if the dacument does not contain all the particulars, but contains the details of duty or service tax payable, the descrintion of goods or taxable service, service tax registration number, person issuing the invoice etc., the Deputy Commissioner or the Assistant Commissioner of Certtral Excise can verify the same and if satisied can allow the credit. This means, when the tax paid is in order, the credit has to be allowed even though the invoice may be technically deficient for want of some oarticulars. In the present case, it is not disputed that the tax has been paid by the appellant. Merely because the computer generated invoice does not contain the signature, it cannot be sald that the credit is ineligible.
es, a 4 29 Service Tax Anpeal No. 40810 of 2017 Service Tax Appeal No.40198 of 2026 Further, for the period after 2015, the Board Aas clarified that signatures are not required in the case of computer generated format.
38. The third issue is rejection of credit on the ground that the invoices Issued by M/s.TVS Sundaram Motors (service provider) contains a different description of the service. It is alleged in the SCN that invoice maintained by dealer mentions the description of service tax as 'additional Incentives' whereas the invoice with the same serial number maintained by the assessee has the description as 'data sracessing and policy related services' Again, i is not disputed that the tax has been oaid as per the invoices, Appellant who is the service recipient cannot be found fault far the description mentioned in the invoice maintained by the service provider Appellant has no contro! over the accounts maintained by the service provider {dealer}. The credit at the reciplent's end cannot be denied far this reasan. We hold that the denial of credit on this reason is not justified.
29. Appeal No.ST/40198/2020 covers the period from April 2O15 to June 201%. The facts and allegations are the same. Based on the very same investigation, the SOD dated 13.04.2018 has been issued pronasing to deny the credit availed on the invoices issued by dealers, proposing to recover the amount along with interest and for imposing penalties. Interestingly, In para 13.2 if Is hela by the adjudicating authority that the commission charges paid by appellant to the dealers will be Hable to service tex under Reverse Charge Mechanism in terms of notification 30/2012. Again, in para 14.1, it is concluded that there is no consideration received for the services provided by the dealers to Service Tax Apieal No.4Q810 of 2017 Service Tax Apaeal No.40198 of 2020 appellant and that the chares paid by appellant fo dealers along with service tax are nothing but reimbursable expenses. Para 14.2 of the OFO observes as under :
"tis vlaw of the ehove, | find that the reimbursements mane tc automobile manufacturers are not 'service' and no service tax is payable on the same. Hence such credit is not admissible as input service credit."
30, The Ld. Counsel has pointed out that there is ne whisper in the SOO that the appellant is lable to pay service tax on such charges under RCM. Again, there is no such allegation in the SCN that the charges are reimbursable expenses. The SOD is issued to consider the same set of facts of earlier SCN. Moreover, the reimbursable expenses have to be included In the taxable value after the amendment brought forth in Section 67 of Finance Act, 1994 w.e.f 14.05.2015. Se the said finding is legally incorrect. Being the same set of facts and issue, we find that the dermand for the period involved in Appeal St/40198/2020 is alsa covered by the decision in the case of Cholamandalam MS General Insurance Co. (supra),
31. Frorn the discussians made above, we find that denla! of credit is not justified. The lmpugned orders are set aside. The appeals are allowed with consequential relef, if any.
Carder pronounced In. courton So" SF Sey ey & 8 SS = § x Se. Se SS on a yal. See, me x wate Aa. See (BM. ASIT KUMAR} (SULEKHA B BEEVI C.8.3 Member (Technical) Member Cudicial} gS ST/408 10/2017 & S1/40198/2020 31
32. I have perused the order prepared by my learned Sister Ms, Sulekha Beevi €.S., Member (ludiclal), I find that the issues involved are important as there are allegations of blameworthy conduct by the appellant. If the findings in the impugned order are found incorrect and the appeal succeeds, it would be a rare Sut exemplary exertion of the right of @ taxpayer to pay taxes in the teeth of opposition by the department. If the findings of the irnpugned order are found to be correct and true, then:
fh) ii would be a case of fake invoicing with its attendant evils.
fi} i would involve defrauding the ultimate taxpayer on wham the incidence of tax rests, to the tune of Rs As.62,31,23,972/- during the impugned pericad alone, CH} i would be an ingenious and creative method of using tax laws for unjustly enriching particioants to the spectally devised scheme, at the cost of the ingenuous and hapless taxnayer,
(iv) it may possibly be a violation of IRDA circular which is mentioned in the impugned order.
Hence the issue deserves a deeper examination of facts and layered treatment of law, which I gropose to explore before coming to a cunclusion. Hence this separate order.
33. The brief facts of the case are that the appellant fs engaged in the business of providing general insurance service pertaining to motor insurance, health insurance, Property insurance, etc. They started the Insurance business in the year 2001 and are registered with the Insurance Regulatory Development Authority of India (IRDAT).
fOr .o ST/40810/2017 & St/4019/2020 32 During the course of business, the appellant has entered into agreements with automobile manufacturer such as Ford India Private Lid. (Ford), Tata Motors and others in terms of which the appellant and automobile manufacturer agreed to act in concert along with authorized dealers of the car to convenience car customers for the insurance coverage of cars. The appellant entered into a tripartite agreement on 24.24.2008 with the car manufacturer, M/s. Tata Motors Limited (TML} and service provider, M/s. Tata Business Supsort Services Limited (TBSS}, who reportedly provides IT support services for enabling issuance of Insurance policies to customers at the dealership location. Similar agreements have been made by the appellant with dealers of other car manufacturers, This agreement with ceslers is examined as a representative one for all dealers to avoid duplicity of discussions. Ib statedly allows the appellant to generate palicies at the dealership at the time of sale of the car to the customers. As per the agreement, the appellant offered to provide customers certain insurance services through dealers utilizing the infrastructure provided by TBSS, As per the agreement the salient role of the service provider TBSS, as culled fram the appellants written submission, was:
TBSS shall 8 Establish and maintain necessary infrastructure for the purpose -- oft-
} enabling the insurer to provide various moter insurance services from dealerships to customers i} putting in place required Management Information System (MIS) as desired by TML/ Insurer el Providing insurer with necessary support for intimating customers about renewals, interacting in matters of claims and such matters as may be mutually agreed upon.
ST/ADBLO/209 7 & ST/AOTSA/2020 33 I was further mentioned in the Agreement that, the insurer shal! neither treat TML or TBSS as its agent / broker nor construe them as soliciting or procuring insurance business for or on behalf of insurer, In consideration for the infrastructure established and maintained oy TBSS, the appellant-insurer agrees to pay TBSS service cha rges on the basis of policies issued by them and printed at the dealerships at such rates as may be mutually agreed upon from time to time. During the relevant period, the appellant had entered inte agreements styled as "Service Provider Agreement" and availed the services of various automobile dealers (hereinafter referred to as 'dealers'} for provision of certain services. In terms of these agreement, the dealers, as service providers shall provide the following services:-
i Policy & Data Processing :-
a. Arrange for physical collection of completed praposa! farms and organize them for quality check and data entry D. Conduct preliminary quality checks for the proposal form as per the Standards and instructions of the company Cs Identify and escalate any discrepancies found in the proposal forms and / or support dacuments and get them rectified, a. Enter the data in the application form with receipt details In an agreed application and general contral sheets, Q. Forwarding the data to the company.
i Policy Servicing:
a. Printing of policy pack as per the Standards and Instructions of the Company b. Ship the policy pack to the insured x ake Ay ST/408 10/2017 & ST/40198/2020 a4 c. In case of the returned policy, keep record of the details of the customer and send the details to the company a. Prepare detailied MIS as required by the company in the format provided by the Company e, Carry out data entry for the service request received from the customer for the policies processed by service provider ey Handie the refund request of the customer and forward the same to the cornpany for refund g. Handle the request received from the customer fo duplicate policy issuance for the policy processed by the service provider n. Collection of documents from the customer for complying with AML & KYC norms Printing and posting of reminders for short collections, Info pending etc. }. Assisting in the claims documentation and investigation processes Ql Pre-Inspection (Motor Vehicle} a. Doing the inspection of the vehicle fer motor proposals, wherever necessary, at the request of the company b. Freparing the pre-inspection report for the vehicle inspected and forwarding the same to the company to faciiitate the underwriting of the proposal c Preparing details MIS for all the vehicles inspected by the service provider in the format provided by the company Ivy. Risk Management / Risk Inspection :-
a. Inspection of the risk of project / manufacturing Facility / fixed asset / item to be Insured etc, b. Preparing of the Inspection report for the risk inspected and forwarding the same to the company Ve Training § Workshops / Survey:-
ipppagy pelle ra Gon ee a ST/AOSIO/2017 & ST/4O198/2020 35 a. Canducting training / workshops on behalf of the company b. Holding client awareness program on behalf of the company c. Managing campaign on behalf of the company a. Conducting specialized surveys to get the feedback oF the customer on behalf of the company.
€. Distribution of publicity material and advertising materials of the company.
34, The appellant as a provider of outout service, took CENVAT input credit on the Invoices generated by the car dealers during this process. DGCET took up investigation against the apneliant company an the ground that the invefce of dealers contained description of 'services' that were not provided to the appellant. It was an instrument used ta pass on renumeration to the dealers in circurmvention of IRDAT guidelines, for selling the appellants insurance policies. After due process the impugned order came to be passed wherein it was held that the appellant Is not eligible to take CENVAT credit on invoices issued by car dealers. The order held that dealers were raising invoices as per the Instructions of the appellant for receiving the payouts / commissions from the appellant, while no taxable service was provided by the dealers as mentioned in their invoices. Hence the irrequiarly availed credit needs to be reversed. Therefore, the payment of charges by the appellant te the dealer, on which the disputed 'service tax' was voluntarily discharged by the appellant and credit availed, is not duty as comtemplated under the Finance Act 1994. It was at best commission paid to the dealers for the business given to the insurance company. Additionally, in respect of the services provided by M/s.
agtsygnert ST/$0810/2017 & ST/AO1G8/2020 a6 Honda Cars India Ltd. {manufacturer} and TY Sundaram Motors (Dealer), it was found that the documents on which the credit was availed was mot proper The CENVAT credit wrongly availed by M/s. Honda Cars India Limited and TV Sundaram Motors (Dealer) and which was reversed by them to the tune of Rs.69,35,403/- and RS.1,/2,63,912/- respectively was demanded and confirmed. Hence in the impugned order, it has been held that the appellant has availed ineligible CENVAT credit of Rs.62,31,23,972/- (Rs.59,89,24 657/« + Rs,69,35,403/- + Rs.1,72,63,912/-), which has been demanded with interest and penalty Imposed. The period covered is from 2010-11 to 2014-15. The learned Cammissioner has divided the demand for irregular CENVAT credit, into three parts as under. Irrequiar avaliment of CENVAT credit;
A. on the basis of invoices issued by automobile dealers (excluding ed automobile dealer viz. M/s. TVS Sundaram Motors) & Automobile Manufacturers (excluding automobile manufacturer, Viz. M/s. Handa Cards India Ltd.} g. on the basis of invoices issued by the automobile manufacturer viz. Honda Cards India Ltd. and C. an the basis of invoices issued by the automobile dealer, viz. M/s. TVS Sundaram Motors,
35. Aggrieved by the impugned order the appellant has assailed the same before us in appeal. Since the written and oral submissions made by the rival parties and their representatives have already been mentioned in the order of the learned Member (lucicial), fam not repeating the same again. The averments shall be separately ST/AOBIO/ 2017 & ST/4O198/20 20 dad 3?
mentioned and considered in the relevant part of the discussion below.
The following issues have come up for consideration in the appeal:
a. issue for consideration Page No. | 7 ee i. Shaw Cause Notice is vague and based on incorrect | 38 orincipies of Jaw. Therefore, the impugned Show Cause Notice itself is lable to be dropped.
"Service" is intangible In nature 39 ts
3. Nomenclature accorded to the services provided is | 44 not relevant, but the provision of service is the determinative factor ee .
4, If the contention of the department is accepted no | 44 requirement to pay service tax at all and whatever CENVAT credit is taken should be treated as refund ofthe tax notrequired tobe paid
3. (Manner of payment of consideration is merely a | 49 measure for payment of consideration. Tr is not relevant to decide the nature of service provided by the appellant 8, Rellance placed on the statements recorded by the | 51 _Gepartment is wholly erroneous ran Uniess the assessment made by the jurisdictional | 73 officer of the dealer is revised, the credit at the recipient/ appellants end cannot be denied, tL
8. No penalty proceedings on car dealers hence | 80 department is not disputing the service rendered by _. car dealers _
9. | Appellant submits that they are eligible to avail and | 81 ulllize the CENVAT credit of the services in question ; because they qualify as input services. .
10.. | Substantive benefit of CENVAT credit cannot be | 81 denied on technical issues .
il, | Dealers are providing "Business Auxillary Services" | 82 and the appellant is entitled to the CENVAT creciit of __( the same ;
i2Z. | Contractual supply {s the essence of applicability of | 82 __ service tax. ee i
13. | Cost of input service is included in the assessable | 8? _value of the final services. . .
14, (M/s. Cholamandalarn MS General Insurance | $3 Company Umited and other judgments in favour of _. appellant ; ; __ iS. | Irregular availment of CENVAT credit on the basis | 93 _ Of irregular invoice without signature by apoeliant 16, | lrregular availment of CENVAT credit on the basis | 106 _ of duplicate Invoices by appellant . _ i?7. | Service tax department cannot act as a sunper- | 101 reguiater and hold the appellant responsible for widlation, if any, under other laws and requlations Mor 4, Mee %, ST/MOS 10/2017 & ST/A01 98/2020 3
18. | The extended period of Hmitation is not invecable in | 105 the presentcase, ss |
19. | Penalty under section 78 of the Finance Act, 1994 108 read with Rule 15 of Credit Rules is not attracted In the present case a
20. {Ne interest payable ide
21. | Summary of findings - 110 T now intend to examine the issnes as listed above.
36. At the outset, the appellant submits that the Shaw fod Therefore, the impugned Show Cause Notice itself is Hable to be dropped, 36.1 The appetiant is of the view that the department in the impugned order has wrongly denied the avaiiment and utilization of CENVAT credit by the appellant on invoices given by dealers of cars. While the order at places states that no services have been received by the appellant, in other places, it emphasizes that services received by the appellant are not what have been described in the Invoices, It does not discuss how the departrnent has the authority to collect and retain the service tax that has been dis ged by the dealers on such transactions if moa services were indeed provided. Further, the denial is on the basis of Invoices raised by the dealers. The impugned order fails to understand the basic transaction that the appellant has entered into, hence the order fs lable to be set aside on this ground alone.
36.2 -- I find that this Issue is a summation of more than one stand taken by the appellant which is repeated by them later in the points listed above and hence will be taken up when the individual issue arises.
SEO as gente Sete %, ST/AOBLG/2017 & ST/A0198/9020 38
37. Service" is intangible in nature 37.4 The appellant subrnits that the Finance Act 1994 does not fan define the term 'service' per se tl 17.2012. hence, one has to look at the ordinary meaning of service for the period prior fo 2012, The service rendered fs consumed by them as and when provided by the service provider. There is no end product of the service, uniike goods and the movement of service cannot be traced or tracked inasmuch as service cannot be transferred from person to another, Thus, once there is an understanding for provision of sé€rvice, the service recipient states that he has received the services from the service provider, the service provider states that service has been provided to the service receiver, the service provider raises an Inveice for provision of service on the service receiver, the service receiver honors the said invoice and most importantly these facts being undisputed and no contrary evidence being produced on record, it has to be cancluded that services have bean provided by the service provider to the service receiver Therefore, CENVAT credit cannot be denied to the appellant under any circumstances, B72 This proposition of the appellant that once the service provider and recipient agree on the provision of a service being done and received, credit cannot be denied is not legally sound, Tax liability does not arise due to consent of parties. There has to be a ledally valid levy. Secondly the appellants averments are based on a turn of phrase.
What needs to be discussed is the provision of 'taxable service' by the service provider and not any activity, if provided at all, that is merely a 'service' Firstly, prior to 01/07/2012, the levy is on "taxable service", hence an activity needs to be understood in the said terms, For if there fp rveartt tbe it, 4 ie % ST/408 10/2017 & S1/40198/2020 4a is ambiguity in understanding the scope of the subject of levy, and one nas to take the ald of external sources to arrive at the meaning, then there is ma tax at all. The Hon'ble Supreme Court In Mathurarn Agrawal Vs. State of Madhya Pradesh [(1999} 8 SCC 667] held: "The statute should clearly and unambiguously convey the three components of the fax law i.e. the subject of the tax, the person who is Hable to pay the tax and the rate at which the tax is to be paid. ff there is any ambiguity regarding any of these ingredients in a taxation Statute then there is no tax inlaw... .. .
Again in Suresh Kumar Sharma Vs. Union of India [2007 5 STR 254 (Kar)] the Hon'ble High Court held as under;
.. ere are three components af a laxing statute viz, subject of the fax, person keble fo pay the tas and ihe rate al which the tax is levied.
if there is any real ambiguity in resnect of any of these componenis which is not removable by reasonable construction, here would be no fax in faw fi the defect is removed by the statute. There are three Stages in the imposition of tax namely (1) declaration of Habliftv in respect of persons or property, (2) assessment of tax that quantifies the sum which the person fable has to pay, and (3) methods of recovery if ihe person taxed does not voluniarily pay. The taxing statute has fo be stictly consinied.. ."
{emphasis added) 37.3 Service tex was introduced through Chapter V of the Finance Bil, 1994 during the presentation of the Union budget and implemented as an Act fromm 01/07/1994. Section 65(105} defined "taxable service". Only an activity which was a specified service and defined as a "taxable service", under the statute, was Hable to tax, Initially it was limited to three services. These were 'Telephone services', "Non-Ufe Insurance Services' and 'Stock Brokers Services', slowly over the years mew services were added to the "taxable services" list and only those specific activities which were covered by definition under the statute were brought under the levy. The rate at which such a service had to be taxed came to be imposed through section 66 on the value of taxable services. The Hon'ble Supreme Court O8IOs/2O1F7 & ST/4nigs 2020 al in Union of India v. Intercontinental Consultants and Technocrats Private Limited reported In 2018 (10) G.S.T L. 401 {SC}, examined section 6% regarding the valuation of taxable service. Relevant paragraphs are extracted below:
"21}.... As noted above, prior fo April 18, 2006, |.e., in the absence of any such Rule, the valuation wes to be done as at the provisions of Section 67 of the Act.
22) Section 66 of the Act is the charging Section which reads as under: "there shall be levy of tax (hereinafter referred to as the service tax) G@ 12%. of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed,"
#3} Obviously, this Section refers to service tax, i.e, in resnect a those services which are taxable and specifica thy referred to various subclauses of Section 85. Further, ft also specifical iy mentions that the service tax willbe @ 12% of the 'value of taxable services'. Thus, service tex is reference to the value of service, As @ necessary corollary, f is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupen.
24) In this hue, the expression 'such' occurring In Section 87 of the Act assures importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As @ fortiorl, any other amount which is calculated not for oroviding such taxable Service cannot a part. af that vatuat on as that amount to us re a plain meaning which | is to be 'attached to Section 67 funamended, Le. prior to May Of, 20068) or after ts amendment, with effect fram, | May 01, 2008...
femphasis added) Hence there was a clear mandate in section 67 that the value of taxable services for charging service tax has to be in consonance with Section BS BO which levies a tax only on the 'taxable service' and nothing else. As @ result of this inbull€ check mechanism, only 'taxable service' and not 'any service' were subjected to levy under the provisions of section 87, prior to changes made in the statute effective from 01/07/2012. While the authority for levy of service tax on specified services from 01/07/1994 was contained In Section 66 of the Finance Act, 1994, with ny N N ST/SO8 10/2007 & ST/ANTIB 2080 a2 effect fromm 01.07.2012, the authority for levy of service tax was contained in Section 668 of the Finance Act, 1994. The section stipulated a rate of 14 per cent on the value of all services, other than these services specified in the negative list, provided or agreed to be provided In the taxable territory by one person to another and collected in any as may be prescribed. As per Section 66BA, reference to section 6& was to be construed as reference to section 668. Ib still required that an activity should be performed and not be in the negative list before it fell uncer the subject of service tax levy, Levy has to be distinguished from collection, Duty needs to be collected or paid only if there is a valid levy on a subject of tax, 37,4 Thus @ plain reading of the Act shows that each activity that has been brought under the net of a taxable service was defined under Section 65 of the Finance Act 1994. The position in law changed fram 01/07/2012 In that all activities which did not form part of the negative list was per se included and brough under the service tax levy. However, a reading of both the sections, prior and post the change, show that there is absolutely no confusion in understanding the meaning of an activity and whether it is a service leviable ta tax during either of the periods. The declaration of ability for each activity is unambiguous before and after the definition underwent a change. Hence there is no gain In saying that there is difficulty in identifying tne subject of the levy without reference to the Britannica Encyclopedia or Black's Law Dictionary etc. In Pyarall K. Tejani Vs. Mahadeo Ramchandra Dange & Ors [[1973] INSC 196 / 1973 Latest Caselaw 196 SC] the Apex Court held:
ST/408 10/2017 & ST/A0198/2020 43 ita .1f the field of legal interpretation, cictlonary scholarship and precedentbased connotations cannot become a universal quide. or semaniic tyrant, oblivious of the social context, subject of legislation and object of the law..."
The point as canvassed by the appellant is thus not the correct way forward, The constitutlonality of the levy is not under challenge here.
The appellants contention that service has been provided by the dealer and received by them and that these facts are undisputed and na contrary evidence is produced on record is not factually correct as seen fram the SCN and the impugned order The whole dispute is based on @ challenge by the department, to the events culminating in the appellant taking credit on the invoices orovided by the dealers. Hence we need to examine the evidence on record before coming to a 37.5 itis seen that the appellant has put forward their argurnent in furtherance of their view that the dealers are providing "Business Auxillary Services" which is being received by them and js eligible as input credit, We shall cross that bridge when we come to it.
38. Without prejudice, the appellant submits that the nomenclature accorded to the services provided is not relevant, but the provision of service is the determinative factor my 38.1 The appellant submits that according to them they have received the services as mentioned in the contract. However, even if the contention of the department was to be accepted, that the cescription of services mentioned in the invoices is Incorrect, it would be an error on part of the departrnent to hald that no services have been provided at all. Nomenclature mentioned in the Invoices, or even at accounting stage does not take away the substance of provision of wer -
ty, a4 ST/408 10/2017 & ST/40198/2020 aa the service itself. It is a settled principle of law that the substance of the transaction fas to be seen in order to tax the same. The romenciature alone would not determine the ature of transaction.
38.2 This submission of the appellant encapsulates the whole gispute. Both parties to the dispute hald the same view on the principle of law involved, but apply it te their perception of events, arriving at different results. Ib is the answer to this riddle which will resolve this dispute and which f have set out to discover by the end of these discussions.
39, Without prejudice te the above submission, if the contention of the department is to be accepted that there is ne services being provided by the dealers to the appellant, then CENVAT cr itis taken should be treated as refund of the tax not required to be paid.
35.1 The appellant has raised bwo issues of law here;
() When there Is no service being provided by the dealer to the appellant, then why was 'service tax' pald on such transactions accepted by the department?
G2) When there is no requirement to pay service tax at all then whatever CENVAT credit is taken should be treated as refund of the tax not required to be paid.
39.2 The answer to query (/) above is that in the self. assessment regime the taxpayer assesses his tax liability and pays the same to the exchequer as provided for in law. It js not the appellants case thet the amount was forcefully exacted by the department. In such a situation, it has been pointed out by Revenue in. their sesnsgteaippe ttt.
ee Gf 4 ST/408 10/2007 & ST/AD19 8/2020 AS submissions, that if the dealer had collected monies from the taxpayer as a tax, even if it was wrongly done, it has to be deposited to Government as per Section 73A(2) of the FA, 1994. This does not mean that department has accepted the taxnayer's assessrnent and that the actions of the taxcayer have been ratified. There is considerable force in the averments of Revenue. Section 73A of the FA 1994, which was inserted by Finance Act, 2006 w.e.f, 18-4-2006 (much earlier than the period in dispute), is reproduced below:
f3A, Service Tax Collected from any person to be deposited with Cental Government (1) Any person who Js lable to pay service tax under the orovisions of this Chapter or the rules made thereunder, and has callected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chanter ar the rules made thereunder fram the recipient of taxable service In any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government.
yapresaniing service tax, such person shall forthwith pay the amount So collected to the credit. of the Central Government. (amphasis added} The wording of section 73A(2) are clear and unambiquous and should not have left any room for doubt in the mind of the appellant. However, the appellant having sought clarity, it is further stated that any tax collected, retained or not refunded by the department in accordance with the provisions of a statute must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Hence any excess money collected as tax and paid to government is seen to have been retained under the authority of law. The issue has been dealt with in the lanamark nine Judge verdict of the Hon'ble Supreme Court in Mafatial industries Ltd Ws Union of India [1997 (89) E.L.T. "oppo tt, ST/S08 10/2017 & ST/40198/2020 &G 247 (S.C.)] decided by a majority of 8:1. The relevant portion is reproduced below:
"99. . The said enactments including Section 11B of Central Excises and Salt Act and Section. 27 of the Custorns Act do constitute law" within the meaning of Anicie 265 of the Constitution of india and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained ar nat refunded, as the case may be, under the authority of law. ."
femphasis added} Further the Apex Court in Union of India & Ors. Vs VEC Footsteps India Pyt Ltd. [Civil Appeal No 4810 of 2021] dated: 13/09/2021 stated:
"D.1.3. Part {+ Legal Propositions 0 Aricie 265 af ine Constitution provices that no ai shall be levied either '6 the lowy or col ection of taxes in these c Cases. taxes paid ine the coffers of the Union Government or the States become the vroperty of the Union/States:
(#) The refund of taxes is neither @ fundamental dght nora constitutional right. The Constitution only guarantees that the levy should be legal and thal the collection should be in accordance with law. There is no constitutional right to refund. Refund is always a matter of a statutory prescription and can be reguiated by the statute sublect lo conditions and imitations:
(8) Even in the case of an Regal levy or a levy which is unconstitutional, the decision of the nine judges Bench in Mafatlal industries Limited ¥. Union of India held that the right of refund is not automatic. The burcien of proof fles on the claimant to establish that would not cause unjust enrichment."
femphasis added) 39.3 Now to the second {ssue raised by the appellant, when there fs no requirement to pay service tax at all then whatever CENVAT credit is taken should be treated as refund of the tax. Revenue in their submissions have stated that there is no provision in the law which mandates the department to reassess the self-assessment made by the appellant and refund the tax suo moto, even if the tax is not Pree § 5 ae ST/408 10/2017 & ST/4O198/2020 ay leviable at all. If the tax paid is not payable or leviable, the appellant or anyone else claiming refund must on his own should make an application for a refund in terms of Section 11B of the Central Excise Act,1944 as made applicable to the Finance Act,1994 by virtue of Section 83 of the Act. There is again considerable force in the averments of Revenue. The Finance Act, 1994, is a self-contained enactment, Tf contains provisions for collecting the taxes which are due according to Jaw Out have not been collected and also for refunding the taxes which have been collected contrary to law. It, therefore, follows that any and every claim for a refund of service tax can be made only under and in accordance with the provisions of the Act and in the forums provided by the Act. Hence in this case it is for the person who remitted tax to government to claim any eligible refund, If he feels sa, only in Lerms of Section LLB of the Central Excise Act,194¢4 (CEA 1944}, The Apex Court in its judgment in "Mafatlal Industries" {supra} has ceclared the law on the subject. Relevant portion is extracted below:
"68. ... To repeat - and itis necessary fo do so - so jong as Section 1B Js constitutionally valid, it has to be followed and given affect fo. We van see no reason on which the constitutionally of the said provision - ar a similar provision - can be doubted. it must alse be remembered that Central Excises and Salt Act is a special enactment creating new and special obligations and rights, which at the same lime prescribes the proceciure for levy, assessment, collection, refund and all other incidental and ancillary pravisions. As pointed out in the Statement of Objects and Reasons appended to the Bil which became the Act, the Act along with the Rules was intended to "form a complete central excise code". The idea was "to consolidate in a single enactment all the laws relating to central duties of excise', The Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and alse for refunding the taxes which have besn collected contrary to law, viz., Sections 174 and 118 and its allied provisions. . where 4 Statute creaies a special right or a labiity and alsa provides the procedure for the determination of the right or lability by the Tribunais constituted In that behalf and provides further that all questions ahout the said right and lability shall be determined by the Tribunals so constituted, the resort to civil court is not available - except to the limited extent pointed out therein. Central Excise. Act specifically "yg ered eee re te ST/4O81 0/2017 & ST/AO198/2020 48 provides for refund. iLexpressly declares that no refund shall be made except in accordance therewith. The Jurisdiction of a civil court is expressly barrec .... (Emphasis supplied) Hence it is clear fram the judgment that it is for the person who is aggrieved to initiate the process of refund in terms of Section 118, if ne feels that he has paid tax not due and it's not for the department to so Sua moto refund the amount or allow CENVAT credit of the sarne.
33.4 Based on the discussions I do not find any substance in the appellants averments on this settled point.
4Q, Manner of payment of consideration is merely a decide the nature of service provided by the appellant.
40.4. It is subrnitted by the appellant that the agreement between the appellant and the dealers mentions that the payment would be mutually decided, (it will be seen later In the discussion that the officials of the appellants Co and car dealers agree that there was no mutuality in the decision and the payments were made by the appellant on their own reconning to the dealers) Further the fact that the consideration is calculated in sync with the quantum of business paid ta the dealers is merely a payout / commission. This is only 2 measure / manner of computation of consideration for service provided by the dealers to the appellant. It Is wholly irrelevant to decide the nature of services provided by the appellant as would be clear from the judgment of the Hon'ble Supreme Court in Senairam Doongarmall VW. CYT ~ 1961 42 ITR 392 (SC). It was subrnitted by them that the nature of the services rendered cannot be assumed from the terms of the payment or mariner of determination of consideration, They further ST/G0810/2017 & ST/AO1TIS/ 2020 49 rat submit that under the Service Tax (Determination of Value} Rules, 2006 even consideration in kind is being considered as value of taxable service under section 6Y of the Finance Act, 1994, Hence, the impugned notice is Hable te dropped on this ground.
40.2 I agree with the principle stated by the apsellant on this issue, The predicament with labels is that they tend to discourage the examination of facts at the very threshold. Nence, I too agree that just because the dealers label the payment in the Invoice as being for 'Data Processing and Policy Servicing and related activities' it will not become representative of its true character. A principle of interoretation of an nature. The fact that the payments made by the appellant to the dealer is calculated in syne with the quantum of business procured by the dealers cannot be the lone determinative factor that the amount paid to the dealers is merely a payout / commission. One has to look at the activity performed, the bellef, knowledge and intention of the parties signing the agreement. One can also examine the commensurate nature of the payments mace for the service involved ete especially in the case of suspect agreements. It should satisfy the test of what a reasonable person of ordinary prudence would do. Ss, it is a combination of factors that have to be examined. This is however not the same as saying, 'it Is wholly irrelevant to decide the nature of Services provided by the appellant'. Being a part of the agreement, it is relevant to understanding the nature of the contract but is not the sie factor. Moreover, valuation of a service and payrnent of duty come secondary after satisfactorily determining whether an activity which is performed is a taxable activity. The measure adopted to pay 4 ST/M0810/2017 & ST/AO1EB/3020 50 consideration alone is not determinative of the taxability of a service, As discussed at para 37.3 above, there is a clear mandate that the value of taxable services for charging service tax has to be In consonance with Section 66 which levies a tax only on the tarabie service and nothing else. Hence the appellant needs to explore the exact activity being performed by the dealer and received by him along with other factors and come to a conclusion as to whether it is a legitimate taxable service. Then accordingly test the declared description in the invoice with the proper classification of the service received by him, to meet the requirements of Rule 9 of CCR 2004.
Al. Reliance placed on the statements recorded by the csepartment is wholly erroneous 41.4 The appellant states that the impugned order has relied an the statements recorded from officials of the appellant's company and car dealers. That in all the statements which are relied upon, the element of provision of various services have been brought out despite the misleading questions and the intimidating tactics employed curing the investigation. However, their lament is that these facts have not been considered in the impugned order in its proper perspective. That the fact is all the dealers have received payments from the appellant and remitted the same to the government on or before the due date. and reliable until the procedure prescribed under section 9D of the Central Excise Act 1944 {s satisfied, 43.2 Response of Revenue: (RSAICL refers to the appellant). It's stated by Revenue In their submissions that the learned Acjudicating Authority CAA) found that the statements were corroborated by £ ST/S0810/2017 & ST/40198/2020 51 circumstantial evidences lke payout workings prepared in excel sheets communicated by the personne! of the Branch / Head Office of the appellant; that personnel of Branch / Head Office of RSAICL had issued instructions through their official ernail id's to prepare invoices in the formats devised by them to be issued by the car dealers to claim the payouts etc. The adjudicating authority had not felt fhe need for summoning the officers of OGCEI who recorded the statements as nao 'clarification was to be obtained fram the DGCEI officers in view of the fact that all the witnesses replied during cross-examination that no rétractions were made by them. The contention of the agpellant is that curing the cross-examination of various persons, it was clearly adrnitted by all the dealers that they were providing the services of cata processing and policy servicing to the appellant that during examination Shri B. Balaji stated in answer to Question No. 5 that he was forced to give the statement; that in his cross-examination Shri Jenkatachaiam Sekar stated in answer to Question No. 9 that he was forced to give the reply; that that in such circumstances, the statement given by the said persons loses its relevancy and evidentiary value. With regard to Shri 8. Balaji's assertion in respect of reply to Question No. 2, Revenue has referred to the question asked and the reply given by Him, the text of which fs reproduced below:-
"Q5. Please see Bil No. 007-A1/14-18/Chn dt. 27.41.15 raised by Mis. TVS Sundaram Motors, Chennai to RSAICL tawards the reimbursement of expenses viz. pollcy processing expenses, policy servicing expenses, training expenses involving total service for the month of December 2014 for a value of Rs.16,83,197/- and service fax of Re.2,08,043/- totalling to Rs.18.91,240/-. In this connentian, } am showing you an invoice No SM/BAS/2014-15/1670 dt. 2.1.18 raised by M/s. TVS Sundaram Motors (Legal Document filed with al Ware pet ty 4, ST/A08 10/2037 & $T/40198/2020 bo S authorities} subrnitted by them to OGCE! CHZU for the same amount with description as "Additional Incentive (HA) for December 2074" for the same amount with service tax. Please explain whether the services mentioned in the BAl No. OO7-AT/'14-18/Chn dt. 27.71.15 had been rendered by SM To RSAICL and also explain for what purpose these invoices were raised by SN.
Ans: Hawng seen ihe above documents, / Aave appended mi signaiure in il, The payout ta de car dealers are made based an ihe bayout sialermant caiculsied as a percentage an OD premium collected Dy ihe dealer (SM) from the customer, which is prepared by ABSAICL and ihe same wes communicated to us for furnishing the aveice to ihe car deaiar. Accordingly. M/s. TVS Sundaram Motors fad issued 84! No. O07-A1/14-15/Chn at. 27.74.95 for having claimed and received the payout, However, the payout does not represent he Service charges jor ihe description mentioned in ihe Bil No. GO?- AUT IRCHA dt 27 1 IS"
The query put farth was to bring out two types of bills Issued by M/s. F¥S Sundaram Motors, Chennai one showing reimbursement of expenses Viz. "policy processing expenses, policy servicing expenses, training expenses" for the month of December 2014 and another as shawing "Additional Incentive (HA}" for December 2014 wherein both the biis were issued for the same amount. Shri Balail explained that the amount mentioned in one of the bills Is prepared by the appellant towards 'payout' calculated as a percentage of the OD premium and another Gil was issued as 'incentive' for having claimed the payout. He also stated that the payout does not represent the service enarges meaning that the amount claimed is not for rendering of services. The question and answer mentioned above were put forth and replied based on documents available on record and contained a wealth of facts, for which the officer cannot exert any pressure or force any one to explain the contents of. During the cross-examination of witness tes rape res Oo 4, % ST/40810/2097 & ST/A0198/2020 s tad namely Shri Balaji, the genuineness of the documents was not questioned and the appellant in the instant appeal filed also have not disputed the veracity of the docurnents. Shri Balasi had all the time to explain ta the AA, the necessity for M/s. TVS Sundaram Motors to raise two sets of invoices / bls for the same amount and for the same month calculated as a % of OD premium. As Shri Balaji had failed to clarify his explanation for query No. 5 even during cross-examination by the AA and thus stating that the answer te the query was taken by force does not hold water and it is an afterthought. Secondly, the apnellant's contention is that the statement from Shri Venkatachalarn Sekar, Financial Controller of RSAICL In respect of Question No. 18, 19, 20 and 25 was taken by force In his statement recorded by DGCET. For ease of understanding, all the 4 queries and answers are reproduced beiow-
[email protected] Yhe email dated 12.615 encloses the proforma invoice and the payout details regarding the insurance policies dane by M/s. Khivral Motors Pyt. Lid. The dealer has got orders for the insurance policies for your company far the month of May 2015, The total payout fo them is exacily same as the Data processing and Policy servicing services which the dealers have supposed to be provided to you. How is it possible? ig it mere coincidence or that you have actually given them commission only for the Insurance policies sold, in the name cf services which they had never provided?
Ans.. | have seen the print out shown to me and signed on i an foken of seeing i. As already stated &y me, the payouts given to ihe car dealers are arrived an ihe OD premium received. Hance there afe no actual services as Claimed in the invoices of the dealers. We follow the practice of sending such mails atong with the payout sigtemenis and subsequently receiving hardcopies of corresponciing Hivoices fram the Geaieys and sand them to our Corporate Office as instructed by the Finance Dept of our Corporate Office.
ior ge:
% ST/408 10/2017 & 87/40198/2620 54 Q.1S Pisase see and sign the statement of Mr. S. Chandrasekhar, General Manager (Finance), KMPL dated 26.86.15. He has stated in the answer f> questions | that "KMPL have not provided any data processing, policy servicing etc. te the said insurance company. The invoices have been raised by KMPL only to receive the payouts / commission (for customer referral-new and renewal policies} on the insurance amount collected by KMPL frorn the custamers.". if means that KMPL have not provided any service to you but prepared the invoice on the basis of instructions sent by you vide email dated 12.6.2015. Why dealers are asked to raise such invoices?
Ans, / heve seen the statement of Mr 3. Chandrasekhar, General idanager (Fi and | have endorsed my signature on # for having seen it / agree wih ihe answer stated by Mr. S. Chandrasekhar, General Manager (Finance), AMPL te Question No. 1 except in respect of invoice Ne. O04 74000407 af 86.18 mentioned therein whereas the actual invoice No. is 12O08/14/00040T at. 9.6.75 for the same Bill amount of AS.28, 954%. And in respect of ihe agreemant with KMMPL, | Aave aiready fanished 2 copy of the agreement. The dealers were asked 10 1ei8@ SUCH INVOICES Of US $0 as fo Facilitate payment of payout.
[email protected] Kindly see and sign the Invoice No. 39004503 dated 20.4.2015 issued by M/s. Chennai Auto Agencies Pvt. Ltd. (also called as Chennai Ford) 423, Ponnamailee High Road, Chennai (ST Ragn. No. AAACC4158L STO03). According to the invoice, they have provided "Data Processing and Policy Servicing and related activities for the month of April 2015" and you have paid Rs.1,99,443/- as the service charge and Rs.24.651/- as service tax. Please answer the following questions relating to each service mentioned in the invoice.
3} What are the Date Processing and Policy servicing and related activities provided by Chennai Auto Agencies P Lid. to you?
b) Who uses these Date Processing and Policy servicing services? Please pravide name. address and contact no. of your :
employee / manpower who have been using the services to provided?
c} Have you taken CENVAT credit on this invoice?
Ans. Having seen the above-mentioned invoices, { had appended iny signature in if RSAICL Aas received the above-mentioned invoices from Chennai Ford. The particulars mentioned in the Stage) pdt.
yu "BE ad SVADSLOL2URF & ST/SOTSS (ORG 55 4 invoices es "Dale Processing. Policy servicing ana' related activities"
are fowards insurance pavouts that RSAICL had paid to the dealers which are actually @ percentage fixed on the OD premium collected by feam locaied af the Comorate Office and the same is communicated them. Fhe payout details are calculated by our Central Payout io the car dealers for raising ivoices an us.
Q25. This email encloses the profarma invoice and the gayout details regarding the insurance policies done by M/s. Chennai Auto Agencies Pyi. Li, As per the statement enclosed to the email, the dealer has goi orders for the Insurance policies for your company for the month of April 2078. The total payout to them is Rs.2,24,004/- (inclusive of service tax of Rs.34,651/-) which is exactly same as the. Data Processing and policy servicing and related activities services which the dealers have supposed to be provided fo you. How is i possible? fs if mere coincidence or that you have actually given them commission only for the insurance policies sald, in the name of services which they had never provided?
Ans. / have seen the print out shown to me end signed an # on ioken of seeing i. As already stated by me, the payouts given to the lolow ihe practce of sending such mails afong with the payout Sstalemenis and subsequently receiving hardcopies of corresponding invoices from the dealers and send them oul Corporate Office as instructed by ihe Finance Dept af our Corporsie Office."
(emphasis added} Shri Venkatachalam Seker is the Financial Controller holding a responsible post in the appellant-company and is also aware of the legal position of the statutes with which he Is having his day-to-day work, He has not recanted his statement so fan The submission regarding the statements being taken using "Intimidating tactics' was an afterthought which was rightfully dismissed by the adjudicating authority in his order dated 23.12.2018.
Ler * Ge ST/AUSLO/ZO1F & ST/AOLGB/ 2020 55 41.3 After going through the averments of the appellant and the response by the department, I find that the appellant has challenged the admission of the statements recorded from the official of the appellants company and dealers as evidence.
44.4 -- i shall first deal with the legal issue of the admissibility of the statements in evidence and only if found valid, discuss whether they support the stand of Revenue or not.
41.5 The Finance act 1994, is a special and self-contained enactment creating sew and special obligations and rights, which at the same time prescribes the procedure for levy, assessment, collection, refund, investigation and all other incidental and ancillary provisions, To aveid repetition certain sections of the Central Excise Act 1944 (CEA 1944), has been mace applicable in relation to service tax as they apply in relation to a duty of Centra! Excise. These are Found in section 83 of the Finance Act, 1944 (FA 1944}. One such section made applicable is section 14 of the CEA 1944, which is SY reproduced below.
14. Power to summon persons to give evidence and produce docu- ments in inquiries under this Act~ (1) Any Central Excise Officer duly empowered by the Central Government in this behalf shall have power to summon any persan whose attendance he considers necessary either to give evidence or to produce @ document or any other thing in any inquiry which such officer is making for any of the purposes of this Act. A summons to produce decuments or other things may be for the production of cerain specified documents or things or for the production of all documaenis or things of a certain description in the passession or under the control of the person summoned.
(2) All persons so summoned shall be bound fo attend, either in person or by an authorised agent, as such officar may direct: and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and fo produce such documents and other things as may be required:
Pravided that the exemptions under sections 152 and 133 of the ae ST/4O810/200 7 & ST/A0798 2020 5?
Cade of Civil Procedure (5 of 1908) shall be applicable to requisitions for attendance under this section, (3) Every such Inguiry as aforesaid shall be deemed to be a "ludicia! proceeding" within the meaning of section 193 and section 228 of the indian Penal Code (45 of 1860), {emphasis added} The section makes it clear that the Investigating officers in the impugned case were empowered to record a statement from the company officiais and dealers, which shall be deamed to be recorded curing @ "Judicial proceeding" within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860), That staternents given before Custorns Officers and by implication Central Excise Officers, investigating an offence is admissible as evidence has been stated by the Apex Court in Surjeet Singh Chhabra Vs Union of india [1997 (89) E.L.T. 646 ($.C.)] and many other judaments of Constitutlonal Courts. Even in the case of criminal proceedings, iet aione departmental proceedings, it is for the person making a claim that a statement has been obtained by officials from fim USING 'intimidating tactics' etc to establish the same. Section 24 of the The Endian Evidence Act, 1872, which deals with matter relating fo criminal proceedings and has more stringent safequards, can be taken as & guide, runs as follows "Section 24 : Confession caused by inducement, threat, or promise, when irrelevant in criminal! proceeding :
A confession made by an accused person is irrelevant in a criminal proceeding, if the making of the confession appears to the Court to have been caused by any inducement, threat or promise Having reference to, the charge against the accused person, proceeding from a persan in authority and sufficient, In the opinion of the Court, to dive the accused person grounds which would appear ta him reasonable for Supposing that by making it he would gain any advantage or s wal ST/AORLO/20L7 & ST/A0198/2020 58 avoid any evil of & temporal nature in reference to the proceedings against him."
To attract the provisions of this sectian, the following facts have to be established:
(a) that the confession has been made by an accused, person to a person in authority:
(b) that it must appear to the Court that the confession, has been obtained by reason of any inducement, threat or promise proceeding from @ person in authority:
{c) that the inducement, threat or promise must have reference {a} the inducement, threat or promise, must, in the opinion of the Court, be such that the accused in making the confession believed or supposed that by making it he would pin any advantage or avoid any evil of temporal nature in reference te the proceedings against him, it is noted that in this case the statements by the officials are not by accused persons nor against themselves but only explain the functioning of the appellants company in a certain context, Further neither the officials nor the appellants counsel during the cross examination or otherwise til the issue of the impugned order or befare us, have been able to establish that the actions of the investigative officers attract the provisions mentioned in the section above, 41.6 A question arises as to how much weightage can be given to these replies recorded In the form of a statement. Before examining this issue, it may help to know the officials who were examined and have given their statements. They are listed belaw;
a} shri LS. Swaminathan, State Head, Chennai Branch office of the appellant's company
b) Shri Venkatachalam Sekar, Financial Controller of the appellant's N company Ay ST/40810/2017 & ST/40198/2020 c} shri 7.5. Rangarajan, Head ~ Taxation of the appellant's company G} Shri Jethmall Chordia, Partner M/s. Khivraj Motors
e) Shri S. Chandrasekar General Manager (Finance) of M/s. Khivraj Mators #} Shri S. Suresh, General Manager Finance, M/s. Sundaram Motors {Division of TV Sundaram Iyengar & Sons} gq) Shri S. Shanmugasundaram, General Manager Finance, M/s. Chennal Auto Agencies
a) Shri Shailendra Kurnar, staff, Business Development, M/s Handa Cars India Utd.
p Shri 8. Balaji, Area Manager, M/s. Sundaram Motors It ig seen that all the officials held middie and senior level positions in their respective organizations. They were not bereft of legal advice that such companies generally have, To say that they did not know the procedure to retract a statement appears incredulous, Being put under a recorded cross examination by legal representatives hired by the company, in a case involving a blare worthy act attributable to the company itself while being its ernployee, would be stressful, ai.? Most of the answers of officials related to. explaining the purpose ofthe documents and the nature of activity performed by them. Hence the statements could not have been dictated by the officials as they coulg mot know the implication of details contained in the documents etc. What is also noted Is that in spite of a large list of 25 activities that were fo be serformed by the automobile dealers as per the "Service Provider Aareement" listed at para 33 above, the officials when questioned were unable to list out the activities that were actually erformed. In fact, they admitted that no service at all was nerforrned., perrormed. y ees pp PLELE:
wre ae eb, %, ST/AOBLG/2017 & SY/40198/2020 &G But to that a little ater. In contrast during the cross examination no specific dacumant or staternent came up for reference. Not even the documents. on the basis of which testimonials fram the officials were recorded so that they could be re-explained by the officiais concerned in case any misunderstanding had crept into the recording of the same. The answers of officials were In monosyllables or very short, as seen at para 14 above. It was an opportunity lost by the appellant. Factual proof of the activity / service rendered as per the agreement could have been presented by the officials being examined by the appellant's counsel. In fact, apart from making a reference to the agreement with dealers or stray words or sentences In the impugned order, the appellant in the present case has shown remarkable shyness in showing physical / decumentary proof that would dernonstrate that the activity In the agreements with dealers were actually performed. The stand of the learned AA hence cannot be faulted in accepting the legally valid statements after rejecting the claim of threat / duress by the officials and satisfying himself of thelr evidentiary value in understanding the issue and deciding the matter. The appellant has further contended that the statements would not automatically be binging and reliable until the procedure prescribed under section 9D of the Central Excise Act 1944 is satisfied as held by the Hon'ble High Court in G-Tech Industries Vs Union of India [2016 (339) E.L.T. 208 (P & Hj]. It would hence be appropriate to reproduce the said provision:
"OD. Relevancy of statements under certain circumstances.-
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry ST/ANS 10/2017 & ST/AO198/2020 61 or proveeding under this Act shall be relevant, for the purpose of proving, IN any prosecution for an offence under this Act, the truth of the facts which it contains,-
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtamed without an amount of aay or expense which, under the circumstances of the case, the Court considers unreasonable: or (bo) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of "thee case, the statement should be admitted in evidence j in the interests of justice, (2)1 Phe provision of sub-section (1) shall, so far as may be, apply in relation fo any proceading under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court,"
It is seen that section 9D is relevant for the purpose of proving the truth of a fact, in any prosecution launched for an offence under the Central Excise act, 1944, The impugned order does not emanate fram @ proceeding of prosecution. A five judge Bench of the Apex Court by a majority decision in Thamas Dana vs The State Of Punjab, [19598 @IR 375] held that there is no escape from the conclusion that the proceedings before the Sea Customs Authorities under s. 157(8) (which was a pre-cursor to the Customs Act, 1962, a sister Act to the FA 1994 and CEA, 1944), were not "prosecution" within the meaning of Art. 20 (2) of the Canstitution. Action by quasi-judicial officers under CEA 1944 / FA 1994 js not done as per the provisions of criminal law. Prosecution of offenders under these Act, are launched separately under the CrPC in a criminal court. It is in these prosecution cases that section 9D ibid becomes relevant. ft is relevant to note that standards of evidentiary requirement differ greatly between civil and criminal "ys Oy Peed yy ST/A0810/2017 & ST/40198/2020 2 laws. It is mot disputed that, in this case, crass examination of officials whe gave the statements as sought by the appellant was allowed and done. In a similar situation it was held by the Hon'ble Supreme Court in M/s Telestar Travels Pvt. Lid. & Ors Vs Special Director of Enforcement (2013 (289) ELT (3) SC], as under;
"8. ... is only when @ deposition goes through the fire af cross- examination that a Court or Statutory Authority may be able to determine and assess its probative value. Using a deposition that is nof so tested, may therefore amount to using evidence, which the party coricerned has had no opportunity fo question. Such refusal may in turn amount to violaiion of the rule of a fair hearing and opportunity implicit in any acjudicatary process, affecting the right of the citizen. The question, however, is whether failure to permit the party to cross examine has resulted in any prejudice so 4s to call far reversal of the orders and a de navo enquiry into the matter. The answer fo thaf question would depend upon the facts and circumstances of gach case. Far instance, @ similar plea raised in Surjeat Singh Chhabra v. Union of india and Ors. (1997) 1 SCC 508 before this Court did mot cut much ice, as this Court felt that cross examination of the wiiness would make no material difference in the facts and circumstances of that case. The Court observed "3. Rois frue that the petitioner had confessed that he purchased the gald and had brought it. He admitted that he purchased the gold and converted it as a kara, In this situation, bringing the gold wkhout permission of the authority is in contravention of the Customs Duty Act and aiso FERA. When the petitioner seeks for cross-examination of the witnesses who have said that the recovery was rnade from the petitioner, necessarily an opportunity requires to be given for the crass- examination of the witnesses as regards the place at which recovery was made. Since the dispute concerns the confiscation of the jewellery, whether al conveyor belt or at the green channel, perhaps the witnesses were required te be called. But in Wiew of confession made by him, it binds him and, therefore, in the facts and clrcumstances of this case the failure to give him the opportunity fo cross-examine the witnesses is not violative of principle of natural justice, It is contended {hat ihe petitioner had retracted within six days from the confession. Therefore, he is sntitled to cross- examine the panch witnesses before the authority takas a decision on proof of the offence. We find no foree in this examination and cross-examination by the petitioner."
(emphasis added} rippptds outed:
44, ST/AQSLO/2017 & ST/ 40198 /9520 83 Further the Apex Court in °Bishnu Prasad Sinha v. State of Assam"
(AIR 2007 SUPREME COURT 848] held as under;
"oi, A confessional statement, as is well known, is acmissible in evidence. iLis a relevant fact. The Court may rely thereupon If tis voluntarily given. i may also form the basis of the conviction, wherefor the Court may only have to satisfy self in regard to voluntariness and truthfulness thereef and in given cases, some corroboration thereof... . ° in Commissioner of Customs, Calcutta Vs South India Television {P) Ltd [2007-TIOL~126-SC-CUS] it was stated: . We may clanfy that strict rules of evidence do not apply te adjudication proceedings. They apply strictly to the courts' proceedings. .
Hence the learned AA has on his satisfaction, correctly relied upon the statements and cannot be faulted. This Tribunal cannot go into the merits of the AA's satisfaction, {fit is reasonable. As held by the Hon'ble Apex Court in Gazi Sadudcin v. State of Maharashtra and Another P(2003) 7 SCO 330):
"Primarily, the satisfaction has to be of the authority passing the order. ff the satisfaction recorded by the authority is objective and is based on the material an record then the courts would not interfere with the order passed by the authority only because another view possibly can be taken. Such satisfaction of the authority can be interfered with only # the satisfaction recorded is either demonstratively perverse based on no evidence, misreading of evidenoe or which a reasonable person could not form or that the person concermed was not given due opportunity resulting in orejudicing his rights under the Act."
Tre statements which clarified/ explained the Information contained in documents from the personal knowledge of official dealing with i, cannot be said to be perverse or not based on evidence, Voluntary staternents, iF clearly proved and found acceptable are the mast effective proofs of law and can't be ignored. The legal issue of the admissibility of the statements in evidence is hence found valid.
"agence 3 4, "Ee bg ST/408 10/2017 & ST/A0198/2020 84 431.8 I next propose to discuss whether these statements suoport the stand of Revenue or not.
Aig The main charges against the appellant regarding taking ineligible CENVAT credit Is set out at para 34 above. One of the conclusions in the impugned order is that the dealers are. raising invoices as per the instructions of the appellant for receiving the payouts / cammmissions from the appellant and no taxable service is provided by the dealers as mentioned in their invoices. Therefore, the payment of charges by the sppellant to the dealer, on which the disputed 'service tax' was voluntarily discharged by the appellant and credit availed, is not duly as contemplated under the Finance Act 1964 {FA 1994), In accordance with section 106 of the Indian Evidence, the Fact within the knowledge of a person must be praved as the burden of proof is cast upon him. Moreso, when he is canfronted with documents and manner of working which are within his special knowledge. Section 106 of the Indian Evidence Act., 1872 gives statutory recognition to this universally accepted rule of evidence
106. Burden of praving fact especially within knowledge --When any fact is especially within the knowledge of any person, the burden of proving that factis upon him.
White collar omissions and commissions can only be proved by cocuments and correspondence which has to be explained and decoded officials who are in the know about it, When the appellant was required to cischarge certain obligations as per an agreement, company officials wil be in the best position to disclase and demonstrate that it was done in the manner agreed. This Information hes necessarily to be reduced to writing to help the Investigators and ern oA SYAO8 10/2017 & ST/401 98/2020 65 later the proper officer to come to a conclusion on the happening or non-happening of an event.
43,10 I find from the statement given in questlon-and-answer farm by the representatives of M/s. Khivral Motors Pvt. Lid, Chennai (AMPL), M/s. Sundaram Motors, M/s. Khivral Pearl and M/s. Chennal Auto Agencies Pyt. Ltd. that they all carry a common thread. All the dealers have stated that they have not provided any 'data processing and policy servicing and related activities' te the apoellant. No proof of any of the 25 activities as sted in the agreement with the car dealers and mentioned at para 33 above, was shown to have been performed by the dealers during the questioning of the dealers or by the appellants, right fram the stage of investigation til the passing of the impugned order, except to state that the activities were mentioned in the agreements with the car dealers or to paint out some stray words ar sentences in the impugned order. The activity to be performed remained on paper in the form of an agreement but was nat acted upon by the dealers at the behest and with the knowledge of the recipient of the activity which is the appellant. It was mentioned in the impugned order that car dealers have admitted raising invoices towards charges of 'data processing and policy servicing and related activities' as required of them by the confidential email communication received by them from the appellant. The amount of payout was decided by the insurance company i.é appellant. No regresentative from the insurance company assisted the dealers and no separate expenses is specifically incurred on behalf of the appellant or any other preferred insurance company. They do mot provide any space to the employees of any insurance company and they have not rented any portion of the :
N N Ay 3 ST/40840/2027 & ST/40198/2020 66 oremises to the insurance companies, {nsurance agents, brokers / intermediaries for praviding them in infrastructure, manpower etc. The amounts received from the appellant are fixed as a percentage on the basis of the premium amount booked for the insurance policies for new vehicles and for the renewal of cid palicles. The Invoices are prepared on the basis of the standard format given by the appellant through thelr emails, The invoices prepared by the car dealers were as given ta them by the appellant-company and the amounts reflected therein were @ percentage of the insurance premium and had nothing to do with the service provided by the sald dealers. Qne of the dealers mentioned that the 'commission' received from the appellant ts recognized as income anc accounted under the head 'Insurance Income', 4444 Secondly, In the statement recorded fram [the car manufacturer M/s. Ford India CFIPL) reveal that they have the following insurance companies as 'Preferred Insurance Companies' viz. The New India Assurance Company Limited, Bajaj Allanz General Insurance Company Limited, Royal Sundaram Alliance General Insurance Campany Lirdted (appellant) and IFFCO Tokyo General Insurance Company Limited; thet since they want uniformity of insurance services to thelr customers across the country, they have entered into am agreement with the insurance companies to mutually deliver the services mentioned in Annexure A of the agreement lke Issue / Renewal of insurance Policies, Claim processing etc. They only faciiitate Insurance companies toa have business through their dealer network and apart from this, there is no other service provided by them te the insurance companies, Hence even the car manufacturers were not a aaa ye ST/AUSLOf/2017 & ST/A01 98/2020 GF providing the whole gamut of service to the appellant which is contrary to their agreement.
441.12 Revenue in their written submissions have invited attention to para 5.7.16 of the O10 wherein Shri Venkatachalam Sekar, Financial Controller of M/s RSAICL when asked to state whether any third party is Involved while the Insurance policy purchased by the customers of the car from the dealers and if so whe are all the third parties and their role. He has replied that the third parties ke TASSL provide the IT Support to the insurance companies and car dealers, that they maintain a website of their cornpany wherein they give access to afl the dealers of car manufacturer by giving them username and password, that these dealers can login in their website and enter the details of the cars like model number, price of the car, registration number chassis number etc. and the car owners name, address, phone number etc. which is required by the dealer itself while selling a car and get the insurance policy printed In their showroom itself and give {& to the customers at the time of delivering the car or other motor vehicles, that the infra company gives them the cetalls of the oremium callected from each dealer which then reconciled with the payment deposited py each dealer in their account, that thereafter they make payment of payouts to the car dealers accordingly and the infra-~company gets a sérvice charge at rate as negotiated with them, however, the amount paid is accounted as 'Payouts' in their Books of Accounts and that the present rates of service charge to Infra~companies are:
TBSS-TATA __| 4% oF OB Premium HCIL . 2% of OD Premium TRSS-Fard 1.75% of OD Premium TESS-Renault ; 1.75% of OD Premium _ 7 "goo fe %, ST/408 10/2017 & $¥/40198/2020 The deposition made shows very clearly that whatever support which are needed for issuance of insurance policies are not srovided by the car dealers but by the Infra-cormpany for which they are oald a very small percentage of the OD Premium but with an Intention to suppress this fact M/s RSAICL has shown this charge as 'Payouts' In their Books of Account. Shri Venkatachalam Sekar has further admitted that they have no option but to pay the 'payouts' to the car dealers due to their agreement with the car manufacturers and that there is no separate sale of insurance policies because it is automatically sole with the sale Price' of the carn Hence it is seen that the dealers who have a pool of captive customers which would be otherwise difficult for the insurance company to net, cafivasses the purchaser of an insurance policy, helps in making the sale of the car insurance policy, enters the details avaliable with them about the customer using the appellants IT supnart infrastructure jin furtherance of the sale of policy, receives the insurance premium from the custorners and takes a orint out of the insurance policy to complete the sale of the palicy and hand it over to the customen Apart fromm this activity towards the sale of insurance policy to the customer, no other service activity is provided to the appellant which was listed in the agreement.
41.13 Shri Venkatachalam Sekar, Financial controller stated that they have entered into a tripartite agreement with M/s Ford (car manufacturer), M/s TBSSL and the car dealers. The 'payout' given by the appellant to car dealers of different car manufacturers is as under:
4 oe
4. & ST/S0810/2047 & ST/ANI98/2020 63 Name of the car manufacturer Payout to the dealers Honda _ _ | 22% on OD Premium .
Maruth _15 to 30% on OD Premium Tata 10 to 30% on OD Premium Renault ; 20% on OD Premium Ford 18 te 25% on OD Premium Piaggio 10 te 20% on QD Premium _ Ashok Leyland 10 to 30% on OD Premium Mahindra 10 to 20% on OD Premium AS per the staternent of Sri Jethmall Chordia, Partner in M/s Khivras Pearl (a division of the car dealer Khivraj Motors}, the commissions payouts received from the various preferred insurance companies is at a fixed percentage @ 55% on the premium amount for the insurance policies booked for new vehicles and 10% for renewals. It is relevant to note that the Service Charge paid to infra-companies for their service is in the range of 1.78 to 4% of OB premium ane the dealer, who cannot recall having provided any service activity as per the agreement to the Insurance Company, gets pald a percentage between 19 to 55 % on the OD premium amount for the Insurance policies booked, allegedly for providing 'services' These cannot be held to be genuine transactions of 'data processing and policy servicing'. Hance it cannot be said as averred by the appellant that the method of calculating the 'consideratian' is wholly irrelevant to decide the nature of services provided by the appellant. When examined in totality the ordinary prudence would do while hiring services. They signify something more, 41.34 Third, the statements of senior officials of the appellant company, which was again based on a 'Question' and 'Answer' format, reveal that some of the questions which were asked by the Me cpyptte pone 70 departmental officers were, a request to provide documents like agreement and as to what tvpe of services were rendered by the appellant towards data processing and pollcy servicing and related actividies? What was the documentary evidence In support of their Claim? How is the smount caiculated towards cost? What was the expenses incurred by the gopellant with reqard to data processing and policy servicing and related activities and whether it is soecified under any agreement? How are the charges arrived at for data processing and policy servicing and related activities? How many data processing and policy servicing and related activities have been made by the dealers? How the data processing charges raised on the appellant by cer dealers are accounted for in the books of accounts? For which the officials have replied that no staff is deployed by the anpellant In any of the car dealers' premises. They do nat verify or monitor the services as claimed in the invoices of the dealer and that the amount paid out by the appellant to the dealers are actually fixed as a percentage on the Own Damage (OD) premium collected by the dealers. That the payout details are collected by the appellants 'Central Payout Team' (CPT) located at their corporate office and the same is communicated to the car dealers for raising invoices on them {appellant}. The CPT sends emalis to their sales team which in turn sends it to the branch who then conveys the detals to the car dealer through the Territory Manager of the branch. Based on this payout statement, the dealers issue invoices to the appellant for claiming payouts. The total payout to the dealers is exactly the same as that of 'data processing and policy servicing and related activities' shown in the invoice given by the ST/A08 10/2017 & ST/40198/2020 dealers to the appellant since it Is based on the appellants own payout statement.
41.15 The belief, knowledge and intention of the parties are a part of evidence. Documents cdo not always speak in a lanquace understood by the layman. These are effectively brought to life throuch the statements of officials who are In the know of things. Basecl on this evidence the jearned AA has to form his own conclusion. When all the parties to the act were of the knowledge that no taxable service was required to be provided or were actually provided and were of the belief that they would be renumerated for selling the insurance policy to their unsuspecting captive customers for the appellants benefit with the intention of profiting from this business, then it Is a case where no activity was done or provided by the dealers and what monies were received by the dealers based on Invoice prepared and sent to them by invoice, In such a situation the service tax shown to be paid on the invoices was not a tex. It was the misuse of a tax mechanism of CENVAT credit to not only pass on monies to car dealers but to unjustly enrich ail the participants of this scheme both financially and in the growth of business, at the cost of the customer-taxpayer who was clueless of the whole fraudulent scheme. While the appellant paid the dealer, he got back the amount as input credit to be used for payment of duly on output service. No financial injury was caused to either the dealer or the appellant. They benefitted at the cast of the customer, who in reality was not expected by law to bear the final burcien of a nor-tax. \ oy & ASS, he N ST/408 10/2017 & ST/40398/2020 72 41.16 The entire story unravels through facts and documents which are cannected and explained by the officials involved and hence lend credibility to the findings in the impugned order.
S11? i find that with respect to SCN 30/2012-ST. the impugned order States that the service providedl by the dealer is Hable for payment of Service Tax under the Reverse Charge Mechanism, I find that this finding Is not based on the charge made in the SCN and hence does not sustain, Ae Uniess the assessment made by the jurisdictional officer of the dealer is revised, the credit at the recipient's end carnnet be denied.
42.4 The appellant states that the dispute is regarding classification and hence CENVAT credit cannot be denied at the hands of the recipient-appellant, 42.2 From going through the facts In issue, T find that this Is not 3 case of the cepartrnent seeking to change the classification of a service at the recipient's end. It's a case where as per the proviso to Rule 9(2) of CENVAT Credit Rules, 2004, {CCR 2004) the appellant being the grovider of output service, is required to satisfy the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, that the input services on which CENVAT credit Is sought to be taken has been received and is covered by the description given In the invoice which has been received and accounted for in the books of the appellant. It is for the recipient of the service / appellant to prove and satisfy the proper office in this regard, The SCN to the appellant is about this deficiency by the appellant to satisfy the proper officer. The principle that the burden of proof Le. nt we ST/AOR10/2017 & ST/40198/2020 73 regarding the admissibility of CENVAT, while taking input credit, falls on tie recipient is further made clear by Rule 9(5) of CCR, 2004, There cannat be @ compromise regarding the actual receipt of service according to the description In the invoice, as discussed at para 40 below.
42.3 The mode and method of avalling CENVAT credit is provided for in the CCR, 2004. Relevant portions of Rule 9 of the said Rules are extracted below:
RULE 9, Documents and accounts. ~ (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input { service disthbutor, as the case may be, on the basis of any of the following decuments, .... a (2) No CENVAT credit under sub-rule (ysh ibe taken unless all the particulars as prescribed under the Central 1 Excise Rules, 2002 ar the Service Tax Rules, 1994, as the case may be, are contained in the said document Provided that if ihe said document does not cantain all the particulars bul 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 bs, name and address of the factory or warehouse or premises of first or second stage dealers or provider of output service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may he, is satisfied that the goods or services covered by the said document have been received and accounted far in the hooks of the account of the receiver, he may allow the CENVAT credit.
ON WY A es (5) The manufacturer of final products or the provider of output service shail maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credii iaken and utliged, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall le upon the manufacturer or provider of output service taking such credit, jemphasis added} The jurisdictional Han'ble High Court of Madras happened to examine the claim of credit by the reciolent, under the GST laws, the principles $y"
gO, % ST/40810/2017 & 57/40198/2020 rat of which are similar to the claim of CENVAT credit, in Pinster Automotive India Private Limited v. Addi. Cammissioner CGST & CE, OW.P. No. 8493 of 2023]. The Hon'ble Court held that in the case of non-payment of GST by supplier to the Government, the substantive Habllity falls on the supplier and the protective lability upon the purchaser, Relevant portion of the judgment is below;
"tO. An additional factor is that where the tex liability has bean met by way of reversal of ITC and similarly recovery is effected from the supplier as weil, this would amount to a double benefit to the revenue. Thus, while the Department may reverse credit in the hands of the purchaser, this has.to be a protective move, to be reversed and credit restored | if f ihe pabilty is made good by the supplier, Thus, the upon. the purchaser q mechaniem must be put in place to "address this situation."
emphasis added) The Hon'ble Apex Court too examined a similar matter in Civil Appeal es No. 230 OF 2023 (Arising fram SLPCCivil}) No. 2572/2022) The State of Karnataka Vs M/s Ecom Gil Coffee Trading Private Limited. Though the above-mentioned case pertains to VAT/ Pre-GST regime, it's principles are squarely applicable under the Service Tax regime as well, It examines the relevance of the 'burden of proof as per Section #Q of the KVAT Act, 2003, which is similar to Rule 9(5) of the CENVAT Credit Rules 1994, extracted above. Since the matter has been examined extensively along with contra arguments a major portion of the judgment is extracted below:
9. Whils considering the aforesaid issue/question, Section 70 of the Narmnataka Value Added Tax Act, 2003 is required to be referred fo, which reacts as under:
"70. Burden of proof- (1) For the purposes of payment or assessment of tax or any claim to Input tax under this Act, the burden of proving that any lransaction of a dealer is not lable fo tax, or any claim to deduction of input tax is correct, shall lis on such dealer.
ST/A0810/2017 & ST/407 98/2020 73 {2} Where a desler knowingly issues or produces a fatse tax invoice, credit or debit note, declaration, cerifficate or other dacument wih e view fo support or make any claim that a transaction of sale or purchase effected by him or any other dealer, is not Hable to be taxed, or lable fo tax at a lower rate, or that a deduction of input tax is available, the orescribed authority shail, on detecting such issue ar production, direct ine Gealer issuing or producing such document fo pay as panally:
{a} in the case of first such detection, three times the tax due in respect of such transaction or claim; and (G) in the case of second or subsequent deteciian, five times the tax due in respect of such transaction ar claim.
(3) Before issuing any direction for the payment of the penalty under this Section, the prescribed authority shall give to the dealer the opportunity of showing cause in writing against the imposition of such penalty."
9.1 Thus, the previsions of Section 70, quoted hereinabove, in its olain terms clearly stloulate that the burcen of proving that the [TC Burden of proof that the ITC claim is correct is squarely upon the assesses who has to discharge the said burden. Merely because the dealer claiming such ITC claims that he is a bone fide purchaser is iT remains upon the dealer claiming such (TC. Such a burden of sroof_ cannot get shified on the revenue. Mere praduction of the invoices ar the payment made by cheques is not enough and cannot de said to be discharging the burden of proof cast under section 7D of the KVAT Act, 2003. The dealer ciaiming [TC has te prove beyond nas delivered the goods. payment of freight charges. acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The aforesaid information would be in invoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as ser section 70 of the Act, 2003.
70. Even considering the intent of section 70 of the Act, 2003, it can be seen that the ITC can be claimed only on the genuine transactions of the sale and purchase and even as per section 70(2) if a dealer kriowirigly issues or procluces a false tax invoice, creditor debit notes, declaration, certificate or other document with a view to suppor or make ony claim that a transaction of sale or purchase effected by him ST/40810/2017 & ST/AOL98/2020 76 or any other cegler, is not lable to be taxed, or fable to take ata iower rate, or that a deduction of input tex is avalabla, such a dealer is Hable fo pay ihe penalty. Therefore, as observed hereinabove, for claiming ITC, genuineness of the transaction and actual physical movement of the goods are the sine qua non and the aforesaid can be proved only by furnishing the names and address of the selling dealer, details of the vehicle which has deliversd the goods, payrrent of freight charges, acknowledgement of taking delivery of goods, fax invaices and payment pariiculars etc. The purchasing dealers have to prove Ure actual physical movernentof the goods, alleged to have been purchased fram the respective dealers. H the purchasing deaier/s faiis/fad to establish and prove the said imporiant aspect of physical movement of the goods alleged to have been purchased by itihem from the concerned dealers and on which the ITC have been claimed, the Assessing Dificer is absolutely justified in rejecting such IPC claim.
1. in the present case, the respective ourchasing dealer/s has/have produced either the invoices or payment by cheques ta claim (TC. The Assessing Officer has doubled the genuineness of the transactions by giving cogent reasons on the basis of the evidence and material on record. in some of the cases, the registration of the selling dealers have been cancelled or even the sale by the concered dealers has been disputed and/or denied by the concerned dealer. in none of the cases, the concerned purchasing dealers have oroduced any further supporting material, such as, furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, paymert of freight charges, acknowledgement of taking delivery of goods, tex invoices and payment particulars etc. and therefore Ro can be sai} that the cancerned purchasing dealers failed to discharge the burden cast upon them under Section 70 of ihe KVAT Act, 2003. At the cost of dealer discharges the burden cast under Section 70 of the KVAT Act, 2005 and proves the genuineness of the transaction/ourchase and sale by producing the aforesaid materials, such purchasing dealer shall not be entitled to Inout Tax Credit,
12. Despite the findings of fact recorded by the Assessing Officer on the genuineness of the transactions, while refusing to allow the ITC, which came to be confirmed by the first Appellate Authority, the second Appellais Authority as well as the High Coun have upset the concurrent findings given by the Assessing Officer as well as the first Aposiiate Authority, on irrelevant considerations that sroducing invoices or payments through cheques are sufficient fo claim [TC which, @s observed hereinabove, is erronsous. As observed hereinabove, over and above the invoices and the particulars af payment, the purchasing dealer has to produce further material ike the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods including actual physical movement of the goods, alleged to have been purchased fram the concerned dealers.
13. Now so far as the reliance placed upon Rules 27 and 29 of the Karnataka Value Added Tax Rules, 2005 and the submission on ST/40810/2017 & STfAN198/2020 behalf of the purchasing dealers that under the provisions of ihe Rules 2005, more pariiculary under Rules 27 & 29, the oniy requirement is fo issue the fex invoice and to produce the same and there is no other requirement is concerned, the aforesaid has no substance. Rule 27 cast an obligation on the dealers to issue tax invoice and the pariiculars of the tax invoice are provided under Rule
20. Merely because the tax invoice as per Rule 27 and Rule 29 might have been produced, that by iself cannot be said to be proving the aciual physical movernent of the goods, which is required to be proved, as observed hereinabove. Producing the invoices as per Rules 2/7 and 29 of the Rules 2005 can be said ta be oraving one of the dacurnents, but not all the documents to discharge the burden ta nrove the genuineness of the transactions as per section 7O of the KVAT Act, 2003.
14. Now so far as the rellarice upon the decision of the Delhi High Court in the case of On Quest Merchandising india Pyt Lid. v. Gavernment of NCT of Delhi (Writ Petition (Civil) No. 6093/2017, decided on 26.70.2017), relying upon by the learned counsel appearing on Sehailf of the purchasing dealers is concerned, at the outset, # ig required fo be noted that before the Delhi High Court, Section S(2ig} of the Delhi Value Added Tax Act was under
consideration, which reads as under:
'Srehia) fo te dealers or class of dealers uniess tie tex paid Oy the purchasing dealer has actually been depasiied by the selling dealer with the Government or Aas bean lawfully adjusted against outpue tax dabliity and correctly reflected in the return Aled for the respective fax period."
The burden of proof as oer Section 70 of the KVAT Act, 2003 was not an issue before the Delhi High Court. How and when the burden of proof can be said fo have been discharged to prove the genuineness of the transactions was not the issue before the Delhi High Court. As observed hereinabove, while claiming ITC as per section 70 of the KVAT Act, 2003, the purchasing dealer has to prove the genuineness ofthe tansaction and es per section 70 of the KVAT Act, 2003, the burcen is upon the purchasing dealer fo prove the same while claiming FTC, 1S, in view of the above and for the reasons stated above and in absence of any further cogent material ke furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement ov taking delivery of goods, tax invoices and payment particulars ate. and the actual physical movement of the goods by producing the cogent materials, the Assessing Officer was absolutely justified in denying the ITC, which was confirmed by the first Appellate Authority. Both, the second Appellate Authority as well as. the High Court have materially erred in allowing the {TC despite the concerned purchasing dealers failed to prave the genuineness of the transactions and failed to discharge the burden of proof as per section 70 of the KVAT Act, 2003. The impugned judgment{s) and order(s) passed by the High Court and the second Appellate Authority allowing the ITC are unsustainable and deserve to be quashed and set aside and are hereby quashed and set aside. The orders passed by the Assessing ST/408 10/2017 & ST/anias/2ne0 78 Officer denying the [TC to the concerned purchasing dealers, confirmed by the first Appellate Authority are hereby restored.
18. The instant appeals are accordingly allowed. However, there shail be no order as to costs."
famphasis added} The princiole Howing fram the above judgement as applicable in the present context Is very lucid and emphatic. The burden of proving to the Deputy Commussioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, the correctness oF CENVAT credit sought to be claimed/ availed, as per groviso to Rule $i2} ibid, remains upon the output service provider, who seeks to take such credit. Such a burden of proof cannot get shifted to Revenue, Credit can be claimed and availed only on genuine transactions. Mere praduction of the Invaices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as required by the Rules. The situation In the present case gets compounded as It is the appellant himself who has devised the fraudulent scheme and is also the one availing the credit. To repeat the general principle of law, a person ought not to be able to profit from his or her own wrona.
424 Hence the appellant being the provicer of output service, while taking CENVAT credit, on the impugned invoices, has not satisfied the proper officer regarding the admissibility of the credit, as required under proviso to Rule 9¢2) of the CCR 2004 and the credit has hence been irregularly availed,
43. No penalty proceedings have been initiated against the car dealers hence the service provided by dealers is not disputed.
reeigypecspprnet Be ae POLED ST/A0OB LO /2017 & ST 40198 /2020 73 S34 The appellant is of the view that since no penalty oroceedings has been initiated against the car dealers for incorrect issuance of invoice, the department is not disputing the fact of. providing the service as described in the Invoice or remittance of duty on the same.
43.2 This averment of the apnellant is not carrect. The SCN does not disclose that no action has been taken against the car dealers. The appellant's claim: is hence not substantiated and is not a part of the dispute in this case. Moreover, the present case has been made by officers of DGCET and not by the Commissionerate. The actlon taken oy Diviston officers who are doing the normal assessment functions are not know and are a separate cause of action, No inference can be drawn an the baid statement made by the appellant. The action in this case is appellant specific based on Rule 9 of CCR 2004. Moreover, in Basawaraj & Anr. vs Special Land Acquisition Officer [(2013) 14 SCC 81}, the Apex Court ruled that:
"S. itis a settled Jagal proposition that Article 14 of the Constitution js not meant to pernetuate Hagality or fraud, even by extending the wrong decisions made in other cases, The said provision does not envisage negative squaliiy but has only a positive aspect. Thus, ff same other similarly situated persone have been granted some relieffbeneafit inadvertently or by mistake, such an order does not confer any legal ight on others fo get the same relief as well, a wrong is committed in an earlier case, it cannot be perpetuated."
(emphasis added) Further, in The State of Odisha v. Anup Kumar Senapati [2019 SCC Online SC 1207] the Supreme court observed as follows:
"an legality and irregularity has been committed in favour of an individual or a group of Individuals or a wrong order has been passed by @ judicial forum, others cannot Invoke the jurisciction of the higher of Superior court for repeating ar multiplying the same irregularity or Negality or for passing a similarly wrong order. A wrong order/decision in favour of any particular party does nat entile any ather party ta claim bonefite on the basis of the wrong decision."
gprae ST/AOS 10/2017 & ST/40198/2020 80 Hence even if there has been no action on the dealer, that benefit cannot be relied upon as @ orinciple of parity or equality by the appellant. No inference can be drawn fram the alleged and unsubstantiated claim of inaction against the car dealers, even if it is found true, Their plea in this regard falls.
AGA The appellant submits that they are eligible to aval! and utilize the CENVAT credit of the services in question because they quallfy as input services.
44.8 The sppellant is entitled for avaliment of credit of service fax paid based ¢ on the | invoices in questions. in any case, 44,€ Without orejudice, the dealers are providing Business Auxiliary Services" and the appellant is entitled to the CENVAT credit of the same 44,0 @ appellant submits services classified under the taxable cree ef "business SEGQEGES Service" nave been provided £9 appellant. Contractual supply os A4E Cost of input service is included in the assessable value of the final services.
44.4 itake up the issues ralsed by the appellant listed as points s4 Ato E above, together as they are related. It has been seen im the pare above that the appellant being the provider of output service, has not satisfied the proper officer regarding the admissibility of the credit, as required under Rule 9 of the CCR 1994, Hence the averment that they qualify as Input services is not carrect. Contractual supply may be the essence of applicability of service tax only if there is a proper S$1/40810/204? & ST/40193/2020 §i agreement which is executed in letter in spirit by the parties cancerned.
a Hegality cannet get the caver of an agreement/ contract and succeed. Further no taxable activity was performed by the dealers as described in the invoice, as ciscussed above, hance the question of eligibility for the mis-declared invoice to qualify as an input service-related cocurment does not arise. The matter has been discussed elaborately at para 3/7 above. To put H briefly in "Intercontinental Consultants and Technocrats Private Limited' (supra), the Hon'ble Apex court held that as per section 67 of the FA 1994 service tax Is with reference to the value of service, As a necessary corollary, it is the value of the services which are actually rendered the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. Any other this case the 'service' as declared in the invoice, cannot be @ part of that valuation as that amount is not calculated for providing such 'taxable service' The issue is not merely technical as stated by the appellant, but goes to the heart of the law of taxation.
The issue is no! inteara stands settied Enger res by the adjudicating authority in. the case of M/s.
Cholamandaiam MS General Insurance Company Limited.
45.1 FAS appellant suomits that the very same issue was the subject matter of dispute in the Show Cause Notice No. 309/2011 (C) dated 24.10.2011 issued to M/s. Cholamandalam MS. General! Insurance Company Ltd. This Show Cause Notice alleged that additional amounts over and above the sermitted IRDA cammission were being paid on the basis of 'referral agreements'. Since the .
x x S. Ro 8 Xe Sk ':
ST/4O8 30/2017 & ST/40198/2020 2 department has also not fled any appeal against these findings and as such they have attained finality. In the above circumstances, the issuance of present Show Cause Notice is not sustainable in any manner and the same merits to be dropped. During the oral submissions made they have further referred to the judgments listed below In their favour:
as a.
Si.
Modular Auto Ltd. Vs. CCE, Chennai reported in 2018 (8} TMI 602 Madras High Court Commissioner of Income Tax Vs. Walchand & Co. Ltd. reported in [1967] 65 ITR 381 (SC} Sarvesh Refractories (P} Ltd. Vs. CCE, Chennai reported in 2007 (218) ELT 488 ($c} CCE Vs. Nahar Granites reported in 2014 (305) ELT 9 (Guj.) M's Ford India Pvt. Ltd. Vs. CGST & CE reported in 20190- VIL-182-CESTAT-CHE-ST Karur Vysa Bank Lid. Vs. CCE, Trichy reported in 2019 (22) GSTL 63 (fri. Chennal} Automax Vs. CCE, Delhi reported In 2018 (363) ELT 1124 (Tri. Chan} Poornam Info Vision Vs. CCE, Cochin reported in 2019 (365) ELT §92 (Tri. Bang.) CCE Cochin Vs. A.8S. Mauri India Pvt. Lid. reported in 2018 (8) GSTL 209 (Tri. Bang.} iCicy Lombard General Insurance Company Ltd. Vs. CGST & CE reported in 2023 (2) TMI 1093 ~ CESTAT Mumbai CCE Vs. MDS Switchgear Lid. reported in 2008 (8) TMI 27 ~ Supreme Court Cable vision Vs. CCE reported in 2023 (3) TMY 13 CESTAT Chennai Shireeraj] Panmasala Pvt. Ltd. Vs. Commissioner of Customs, Jodhpur reported In 2018 {12} TMI i237 CESTAT, New Delhi eee rprat ide:
ge % '4: oe:
fe STf4OB10/2017 & ST/A0198/26 83 rt. Cholamandaiam MS General Insurance Co. Lid. Vs. CC& reported in 2021 (3) TMI 24 - CESTAT Chennai o, Continental Foundation Jt. Venture Vs. CCE, Chandigarh reported in 2007 (216) ELT i77 (Sc) p. Padmini Products Vs. Callector of Cantral Excise reported in 1989 (43) ELT 195 (SC} I shall discuss the implications and applicability of the sald Judgements as per the facts emerging frorn them and applicable to the facts In issue in this case below, an the acceoted principle that it is neither desirable nor permissible to pick out a word or a sentence from a judgment divorced from the context of the question under consideration and treat iL io be complete faw.
45.2 in the 'Modular Auto Lid' (supra} the Hon'ble High Court examined the following questions of law;
aj) When the service provider was not before the Tribunal, whether the Tribunal can go inte the question as to whether the said service provider had provided service fo the appellant or not, more so when the said service provider has been assessed fo service tax under Business Support Service for the service rendered by them to the appellant.
b) is the Tribunal not in error in refusing credif to the appellant for service tax pald by them to service provider when payment of service tax by the appellant for the service rendered by service provider is not in.dispute and that itis setiied, the assessment to tax atthe hands of fhe service provider and cannot be questioned in ine hand of service receiver (appellant in this case} (emphasis added} The matter examined by the Hon'bie High Court relates to a question where the payment of service tax by the appellant for the service rendered by service provider was not in dispute. The issue here is of n activity which was not a taxable service rendered to the appellant as mentioned in the invoice, which is in dispute. Moreover, the question of law pertaining to the 'ourden of proof' cast on the recipient of service ST/HOS LO/2O17 & ST/40198/ 2020 84 before availing credit, as in Rule 9(S) of the CCR, 2004, was not an issue before the Hon'ble High Court. This principle, which is relevant to the present case, has been examined later by the Apex Court in The State of Karnataka Vs M/s Ecom Gill Coffee Trading Private Limited fsupra) under Section 70 of the KVAT Act, 2003, which is similar to Rule 9¢5). Similarly, an important principle was stated by a Coordinate Bench of the Hon'ble Madras High Court in its later judgment in Pinstar Automotive India Private Limited v. Addl. Cammmissioner CGST & CE and referred to in para 42.3 abave, The Hon'ble Court while examining an issue under section 16 Of the Central Goods and Services Tax Act, 2017 held that there can be no dispute on the position that the provisions of the sald Section are to be observed strictly, such that, there Is no jeopardy to the interests of the revenus, Further that while substantive Habiiity fails on the supplier protective fiability les upon the purchaser (recipient). This legal point was also mot an issue for consideration before the Hon'ble High Court in 'Modular Auta Ltd" Both these subsequent judaments have been discussed at para 45 of this orden In "'Walchand and Co' (supra}, the Hon'ble Supreme Court felt, that increased renumeration can only be justified if there be corresponding increase in the profits of the employer is erroneous. The current issue which deals with claim to input credit by the service provider of final output service and the Hlegality of using an agreement to cover up. a payment as being consideration towards 'data processing and policy servicing', and is distinguished. In '"Sarvesh Refractories' {supra}, and similarly in'M/s Ford India', the issue Involve was whether reclassification of goods can be dome at the receiver's end. The issue here relates to the provider of output service satisfying, with proof, the S1/40810/2017 & $T/a0198/2020 proper officer that the input service on which crecit Is taker has actually been received by him. The question of law pertaining to the 'burden of proof' as per Rule 9(5) of the CENVAT Credit Rules, 2004 on the recipient was aiso not an issue in the cited judament. The matter has been discussed at para 45. In 'Nahar Granites' (supra), the Hon'ble department did not dispute the classification by the manufacturer and accepted the declaration and duty. It was held that CENVAT credit cannot be denied to the purchaser whe otherwise Full all conditions.
In the instant case the issue's Include the disoute regarding the taxabliity of a 'service' and that the appellant did not discharge the burcen of proof that ail the conditions required for taking CENVA dit nave been fulfilled. In 'Karur Vysya Bank' (Supra) again a coordinate Bench of this Tribunal examined an issue where the appellant was providing services such as supply of Infrastructure ke, table, chair network, electricity, telephone etc. to an Insurance company, [t's the appellants avermrent that in this case the department themselves had demanded service fax under 'Business Support Services' on infrastructure support services srovided to Insurance companies and the same was upheld by this Hon'ble Tribunal. That being the case, there is no merit in stating that the no services, as described in the dealer's invoices, have been provided to the Appellant {in the oresent case. I find that each case is decided on the scecullar facts invalved. The dispute in the sald case was the classification of the service either as 'Insurance Auxillary Service' as claimed by the appellants who were corporate agents of a insurance company and "Business Support Service' as claimed by the department. In the present case the se Ye, ae ST/AQR10/2017 & ST/40298/2020 6 question is not with regard to the classification of a service provided by a person holding himself to be a corporate agent of an insurance company. Hence the judgment is distinguished. In 'Automax' (supra) the issue related to the issue was the discrepancy in description of the goods not being @ reasan to deny CENVAT credit In the facts and circumstances of the case. They are not similar to the appellants case, as tan be seen frarn the discussions above and are hence distinguished, In 'Poornarm Info Vision' (supra) and "M/s Cable Vision' (supra) relates ta denial of CENVAT credit on non-submission of original invoices and the lack of signature on computer generated invoices. Similarly in "A.B. Maurl' the Hon'ble Tribunal again examined an issue related to a claim based on computer generated documents and has been discussed elaborately at para 46 below. In "ICIC] Lombard' {supra} the Hon'bie Tribunal the undisputed fact was that the described in the invoice issued to the apspellant. Avaliment of such credit was found in conformity with the CENVAT statute. In the instant ase the provision of a taxable service itself is under challenge and is distinguished. In "MDS Switchgear' (supra) the Hon'ble Supreme Court relates to the quantum of duty already determined by the jurisdictional officers carinot be challenged by revenue officials in charge of the reciplent unlt. The issue is distinguished being similar to the one eiscussed at para 45. Further, the question sertaining to the "burden of groof on the recipient of service and whether substantive lability fall tft on the supplier and the protective Habliiy upon the purchaser (recipient) was also not an issue before the Hon'ble Court. 'Shreeraj Panmasala' (supra) relates to clandestine removal. Since allegations SLLEO by 4 % .
ST/40840/2017 & ST/40198/2020 87 were mot collaborated and the SCN was based an assumptions and presumptions they have no leg to stand on. In contrast the present matter the departmental officers have established their case based on facts, documents and statements in a proper manner and the allegations were found to sustain as discussed elaborately above. In 'M/s Cholarmandalany (supra) a Coordinate Bench of this Tribunal examined the issue was that credit was availed by an Insurance Co. on the basis oF invoices issued by the dealers of motor vehicles containing description of service which was allegedly never provided by them. Since the appellant has placed great stress on the said judgment, paras 6.2 to 7.3 which is important to understand the basis of the decision is reproduced below:
"6.2 From the above, = can be seen that the case of the Deperiment is that fhe payoul paid by the appellant to the dealers on the OD premium collected by the dealers from the customers is camouflaged as service provided by the dealers to the appellant; tha therefore, tie services contained in the invoices have actually not bean provided by the dealers fo the appellant and thus, CENVAT Credit is not sigibie.
7.1 Though in the Show Cause Notice the main allegation is that the descripti an of services in the documents on which credit has been availed is not correct, at the tine of adjudication, the main finding is that no services have Deen provided by the dealers fo the appellant and that therefore credit is not eligible. At this juncture, needs to be oointed out that the Depariment has no dispute with the Service Tax collected from ihe epopellant by the dealer and remitted to the Government. The ASSES semen af Service 7 Tax paid at the q ener § eng aval lied at the eervice raci cini 'ent g "end has bean questioned by issuing the present Show Cause Notice.
2 ff the Department contends thal no service has been provided, the crucial question arises as to why Service Tax was collected from the deal ler. The discussion by the Original Authority at paragraph 37 countering {his argument is as under :
"37, As regards their cantention in Para N.1 to N.7 that f no service is provided by the Dealer there Js no requirement to pay service tax: that at the ime of accepting service tax from the dealer, the department chooses fo look al the form of transaction and accent setvice tax. I in } this § regard, i find that the | issue InVal ved | is not about "gefeeurene ST/408 10/2017 & ST/407T 98/2020 88 true descrintion of services In the 10 Appeal. No.: ST/40938/201 ?- OR invoice anc the services mentioned in the invoices jn the instant case admittedly were not provided by the Dealers. Only after the in- depth investigation conducted with the Dealers, the fact of Dealers issuing Invoice with the description suggested by the Taxpayer have come to light. Hence their contention that department cannot aporobaie and reprobate in the same case is not valid."
7.3 ih is not disputed that the dealer has paid Service Tax on the servicas described in the invoices. if that be so, the denial of credit at the recipient's end cannot be justified by the Department without reopening fhe assessment at the dealer's end."
famphasis added} It is seen that the questions raised by appellants in the sald case and fo which were also raised by the appellant In this case, have been answered by me at para 39.1 above.
10.2 The appellant has raised two fssues of jaw here; G} When there are no services being provided by the dealer to the appellant, then why the service fax paid on such transactions were accepted by inc department. ap When there is na requirement to pay service tax by the dealer to the depariment, the amounts collected should be refunded. It was concluded that as per Section 73A(2) of the Finance Act, 1964, even if tax is not flable ta be collected fram a person, if collected, the coliacted amount has to be paid to the credit of the government. In this case, it doas not mean that department has accepted the taxpayer's assessment and that the actions of the taxpayer have been ratified. Further taking guidance fromm the Hon'ble Apex Courts judgment in 'Mafatlal Industries' (supra) that it is for the person who is aggrieved to inftlate the process of refund in terms of Section 118, if he feels that he has pald tax not due and it's not for the department to so suo-mofo refund the same. A refund can only be processed when an applicant for refund sets out the context of his clairn satisfying the requirements of jaw, which is then examined and found eligible by the eon ie ST/AO8 10/2017 & ST/40198/2020 89 department, I find that neither Section 7SAC2) of the Finance Act, 1994 rior the Apex Courts decision in 'Mafatlal Industries' was brought to the notice of the Hon'ble Tribunal. Similarly, neither was Rule 9(5) of the CCR, 2004 or the Apex Courts judgment in 'M/s Ecom Gill Coffee Trading' {supra} brought up for discussion and consideration by the contesting parties before them and If done, it was not discussed. Further there fs nothing in the proceedings to show that no action has been taken against the car dealers as stated by the appellant here and eyen so a wrong cammmitted by another person cannot be perpetuated or equality of action/ parity sought. Hence the decision was rendered considering only the peculfar facts and limited Jaw relating to the matter In this context in D.P. Chadha vs Triyugi Narain Mishra, (C4003) 2 SCC 2217, the Hon'bie Supreme Court, held as follows;
"26. A lawyer must not heslate in telling the court the correct postion of law when if is undisputed' and admits of ne exception. A view of the law settled by the ruling of a superiar court or a binding precedent even if i does nol serve the cause of his client, must Be brought to the notice of court unhesitatingly. This obligation of a counsel flows from the confidence reposed by the court in the counsel appearing for any of the Ovo sides. A counsel, being an officer of court, shall apprise the Judge with Ihe correct position of law whether for or against either party."
This position, of the contesting parties In the appeal not Bringing up the relevant Rules and case laws goverming the subject before the Hon'ble Tribunal for consideration has, I feel, deprived the judgment in "M/s Cholamandalam' (supra) of its precedential value. They do not nelo in the development of correct law. The issue does not involve reclassification of a service but preof by the person who wants to avail credit Chat the invoice on which credit is sought to be availed, satisfies the provisions of the Rules. The Han'bie Supreme Court's judgment in SY/ANHIO/2017 & ST/4O198/2020 ou 'Continental Foundation' (supra) relates to the interpretation of the expression 'suppression' used in section 11A of the Central Excise Act and will be taken up in the appropriate para below. Similarly, the Apex Courts judgment in '*Padmini Products' (supra) states that the extended period of 5 years is inapplicable for mere failure or negligence. This too will be discussed later In this order. I have discussed the facts and law of each case cited before us, and have tried to demonstrate that these cases cannot serve as a precedent in this case for reasams discussed. In Escorts Ltd. Vs Commissioner of Central Excise, Delhi - 27 [2004 (173) E.L.T. 213 (S.C.)], the Apex Court held;
"T5. Circumstantial flexibility, one additional or different fact may make a ward of difference between conclusions in two cases. Disposal of cases by Diindly olacing reliance oan a decisian is not proper,
11. The following words of Lord Denning in the matter of applying precedents have become locus classicus :
"Each case depends on its own facis and a close similaniy 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 fas said by Cordozo) by matching the colour of one case against ihe calaur of another. Yo decide therefore, an which side of the ine a case falls, the broad resemblance to another case is not at all decisive."
"Precedent should be follawed only so far as it marks the path of justios, but you must cut the dead waod and frim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede i."
t2. This aspect has been highlighted In Collector of Central Excise, Caicutta v. M/s. Alnoor Tobacco Products and Anr. [Civil Appeal Nos. 4802-4503 of 1998 decided an 21-7-2004]."
i aaemal Gage ST/AORIO/2017 & ST/AIL 98/2020 ot 4S, Avaiiment of CENVAT credit by the appellant on the basis of Irreqular invoices without sianature, issued by the automobile manufacturer vic. Hondas Cars India Lid.
48,1 The appellant has submitted that the Invoices are system generated and hence do not require signature. The signature of the service provider could mot be affixed as the invoice was system generated and sent over electronic means. Rule $(2) of the CENVAT Credit Rules, 2004 which deals with documents on the basis of which CENVAT credit can be claimed states that if the DC/ AC of Central Excise is satisfied that the documents have been received and accounted for in the books of accounts he may allow the CENVAT credit. Hence this contravention is f at all a pracedural defect and hence credit may be allowed. They have relled upon the Tribunal judgments in 'Poocrnam Info Vision', "A.B. Mauri' and "Cable Vision' (supra) in support of their averments, 46.2 The facts are that the appellant availed credit to the tune of Rs.69,35,.403/- based on unsigned invoices issued by the car manufacturer M/s Honda Cars India Ltd through email. The invoice was in soft copy and not In the proper format as prescribed under Rule 48f1) of the Service Tax Rules 1994 and was being received by them in this mode since 2010. Shri Venkatachalam Sekar, Financial Controller of the apoellants company who was questioned in this regard accepted that the Invoice was not in the proper format, he further reversed the said CENVAT credit avalied. The reversal is now contested. 46.3 Issue of Invoices and maintenance of records in electronic media Rad come into effect from 6.¥.2015 onwards. Notification No. IS/ZOL5-CE(NT) dated 6.7.2015 specifies certain conditions, eit ypwtttes.
oo (Abe ST/4OB81 0/2017 & ST/A0198/2020 92 safequards and procedures for issue of invoices, preserving records in electronic media and authentication of invoices by digital signatures. Board vide instruction in FNo. 224/44/2014-Cx.6 dated 6.7.2015 had brought out the salient features of the above Notification for guidance. Relevant portions are reproduced below;
. the Centre! Board of Excise and Customs hereby specifies the following conditions, safeguards and procedures for issue of invoices, preserving records in-electranic form and authentication of records and invoices by digital signaturas, namely
1. Every assessee proposing to use digital signature shall use Class 2 or Class 3 Digital Signature Certificate duly issued by the Cartifving Authority In india.
i) Every assesses proposing te use digital signatures shall intimate the following details {co the jurisdictional Deputy Commissioner or Assistant Cammissioner of Central Excise, at least ivteen days in advance:
a} name, e-mail id, ofice address and designation of the person authorised to use the digital signature certificate:
by) name of the Certifying Authority:
¢} date of issue of digital certificate and vaticily of the digital signature with @ copy of the certificate issued by the Certifying Authority along with the complete address of the said Authority: Provided that in case of any change | in the details submitter! fo the jurisdictional Daputy Commissioner or Assistant Commissioner, complete details shail be submitted afresh within fifteen days of such change.
di} Every assessee already using dighal signature shall intimate ta the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise the above details within fifteen days of issue of this nottication.
3. Every assessee who opis to maintain records in electronic form and who has more than one factory or service tax registration shat maintain separate electronic recards for each factory or each servic tax registration.
4. Every assesses who apts to maintain records in electronic form, shall an request by a Geniral Excise Officer, produce the specified records in electronic form and involess through e-mail or on a sper ied Storage device An an electronical y readable format for such records and i voices 5 shall be specified i in the letter 0 ar e-mail oy the Central Excise Officer
3. A Central Excise Officer, during an enquiry, investigation or audit, in accordanice with the provisions of sectian 14 of the Central Excise Gyo GA as ST/A08 10/2017 & ST/ANL98/2626 O38 Act, 1944 and as mace applicable to Service Tax as per the provisions. cortained in section 83 of the Finance Act, 7994, may diyect an assesses fo furnish printouts of the records In electronic form and involees and may resume orintouts of such records and assessee in this regard, if so requested by such Central Excise ONficer, &. Every assessee who opts to maintain records in slectronic form shall ensure that appropriate backup of records in slectronin form is maintained and preserved for s period of 5 years immeciately afer ihe financial year to which such records pertain."
{emphasis added} 46.4 Ar invoice is an important document, it serves as an agreement between a business and its customers, evidencing coads sald or services rendered, tax paid and payment owed or received, In the context of Indirect Taxation, they assume even more importance in the MODVAT/ CENVAT/ GST credit era inas much as, when taken as iiguid cash for payment of duty, An invoice showing a payment of duty of Rs. one crore when taken into the books of a manufacturer or service provider can be instantly used for the discharge of duty payable of the same amount at the same time of entry into books of account. The temptation for creating a fake or irregular decument so as to avold availing a costly loan facility is great and has ta be quarded against, by a strict adherence ta Rules. System generated Invoices created without legal safeguards are easy to manioulate much more se than manual document. If the government treasury is allowed to be bled In this manner, the statute would be seen not to have been followed sufficiently by the officers so as to carry out the intent for which FA igS4 was enacted. This cannot thus merely be a srocedural matter Apart from the field of taxation, government has introduced facilities ts yepyaeretee pe % ST/AOSTO/2017 & ST/40198/2020 4 ike the online platform TReDS (Trade Receivables Discounting System) that facilitate the financing of invoices of venders drawn on big organizations and other corporates, including Public Sector Undertakings (PSUs) and Government Departrnents, by discounting the invoices through financiers. These two activities itself reveal the importance and value of an invoice, In daily fife no person, including the appellant, would be prepared to freely allow the bank to encash a cheque even for a paltry amount, bearing the company's name if it is transactions. Dishonesty in the issue of such an instrument is an offence under relevant statutes. It is on the basis of this trust that day to dey business thrives. The menace of fake invoicing and its deleterious effect on the economy is well known. Rule 4A of Service Tax Rules, 1994 (STR 1994} has to be understood in this context. The Rule Kself rnakes it mandatory that the invoice is signed by a person providing texable service or @ person authorized by him in respect of such taxable service. In The State of U.P. & Ors. v. Babu Ram Upadhya [(1961) 2 SCR 679(CB)], it was observed by the Apex Court as under:
"Rulss made under a statute must be treated for all purposes of construction or obligation exactly as if they were In the Act and are to (emphasis added ieitoueren $1/40810/2037 & $T/40193/2020 95 Rule 44 of STR, 1994 deals with the manner in which invoice has to be issued by a service orovider. Extract of the relevant rule fs. reproduced below:
"Rule 44. Taxabie service to be provided or credit fo be distributed on inveice, bil or challan-
(1} Every person providing taxable service shail, not later than thirty days from the date of compiation of such taxable service or receipt of any payment towards the value of such taxable service, whichever is eanier issue en invoices, a bill or, as the case may bs, a challan signed by such person or 9 person authorized by him In respect of taxable service provided or adreed to be provided and such invoice, bill or, as the case may Be, challan shall be serlaly numbered and shail conta the following, namely :-
(} the name, address and the registration number of such person: Gi} the name and address of the parson receiving taxable service) GH) description and value of taxable service provided or agread to be provided: and (emphasis added) Rule 9 of the CENVAT Credit Rules 1994, extracted above is again reproduced for juxtanositian and convenience of reference. If states:
ROLE 9. Documents and accounts. --
(1} The CENVAT credit shall be taken by the manufacturer or the pravider of output service or Input service distributor, as the case may (2) No CERVAT 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 ¢ the said document does nat contain all the particulars but contains the details of duty or service tax payable, description of the goads or taxable senice, assessable value, Central Excise or Service tex registration number of the person issuing the Invoice, as ihe case may be, mame and address of the factory or warehouse or premises of first or second stage dealers or provider of output service, and the Deputy Commissioner of Central Excise or fhe Assistant Commissioner of Central Excise, as the case may he, is satisfied that ihe goods or services covered by the said document have been received and accounted for in the books af the account of the receiver, he may allow the CENVAT credit.
jamphasis added} Sprites re 3 aca ST/40840/2047 & ST/40198/2020 06 itis necessary to examine every word of a statute in its context, more so considering the instant liquidity given by the said document when taken into the books of account. A easy facility far removed from the rigors and checks Involved in getting a loan from the bank. In the light of the mandatory provision for affixing of signature under Rule 4A of STR, 1994, which is the heart of the Rule, proviso to Rule 9(2) of the CCR, 1994 which creates an exception to the main ruJe cannot be sean to be cantraling the main provision. In case a conflict armong the Rules is perceived, then as per the Apex Courts judgment in Commercial Tax Officer, Rajasthan Vs M/s Sinani Cement Ltd & Anr. ((2014] 2 &.C.R.2}, when @ general law and a special law dealing with some aspect dealt with by the general law are in question, the rule adopted and applied Is one of harmonious construction whereby the genera! jaw, to the extent dealt with by the special law, is impliedly repealed.
Further it is for the appellant in this case to claim the benefit of praviso to Rule 9(2) before the proper officer af the time of receipt of a defective invoice. The proper officer who [5s alsa the guardian of oovernment revenues has to satisfy himself that the request of the essee who has come to him with clean hands, can be acceded to, based on the facts and circumstances of each case, It is seen that the invelce recelved in soft copy, not in the proper format as prescribed under Rule 4A(1} of the Service Tax Rules 1994 and without a signature was being received by the appellant since 2010. They should have corrected the situation by taking up the matter with the supplier and aiso taken oro-active steps to approach the DC/ AC and appraise him ofthe issue and get his approval. By not doing so they have suppressed "eespepen eet 4 ee %s ST/40840/2017 & ST/401 98/2020 a7 this fact tH they were called out and have thus violated the Rule.
contain the detalis of the correct description of the goods or taxable service, among other things, The proner offfcer does not have the discretion to overlook this important fact. The impudned invoices fails both these tests. As per the quidelines of the Hon'ble Apex Court in "Gazi Saduddin v, State' (supra), this Tribunal cannot go into the merits of the AA's satisfaction so long as it is not perverse or without proper reason. The satisfaction has to be of the authority passing the order.
a ee wa ty x Ls if is se im para 46.3 above that maintenance of records in electronic media had come Into effect only from 6.7.2015. Hence prio to that date, without the safequards prescribed for an electronic signature, the jurisdictional officer would not be aware that the appellant was taking credit on electronic documents and such a modus gperand! could be unearthed only after a search of the office by the officers. Even otherwise if this pernicious practice is accepted it will allow all assesses to take credit an incomplete decuments and when found out seek the benefit of proviso to Rule O(2) of CCR 1904. A situation not envisaged by the Rules. Proviso to a Rule cannot become the Rule. In the instant case the position becomes even more adverse as the appellant has been found Induiging in blame worthy conduct.
46,5 Further if is observed that Notification No. 18/2015-Centrai Excise (N.T.), Dated 01/07/2015 while specifying the safeguards and gracequr fe if for issue of digital invoices lays out more stringent canditions, Hke use of only Class 2 or Class 3 Digital Signature certificate duly issued by the Certifying Authority in India, praservatio of appropriate back up of records in electronic form for a period of 5 ST/AOSLO/IOLF & ST/A0 19S /2020 98 years, document modification history, access to key Information from the signature panel and acceptance of signer post verification of necessary particulars etc. Hence the appellants plea that the error is. only procedural and hence credit may be allowed, cannot be accepted and fails.
46,5 With regard to the case laws cited by the appellant and mentioned at para 46.1 above, itis to be stated that Tribunals cannot legislate or amend the Rule. Statutory authorities also cannot pass a general order that militates against / or nullifles the specific provisions of the Rules for all times. If is seen that the orders are cryptic and do not examine the full maanituce of the legal issues involved and are hence distinguished. They are relevant to the facts and circumstances of the cited cases and do not come to the help of the appellant, Ay, Irrequiar avaiiment of CENVAT by the appellant credit on the basis of invoices issued by the automobile dealer, * viz. M/s. TVS Sundaram Motors.
47.3 During the course of investigation at the appellants Head Office, (f appeared that they had availed CENVAT credit amounting to Rs 1,72,63,912 based an Invoices issued by one of their Car Dealer mamely M/s. TVS Sundararn Motors (herein after called as TSM). It was noticed that TSM had issued two sets of invoices for the same transaction. Ome set of invoice issued to the appellant as "Date Processing and Policy Servicing Services" based on which CENVAT credit was avaiied by the appellant. The other set of Invoice issued by ToM was for their own internal accounting purpose mentioning the mature of service as "Additional Incentive".
"gieginettte.
g ST/AOBIOY 2017 & S1/40198/2020 $8 4? 2 The apoellant submits that TSM for some reason chose to issue an invoice containing different description of service for their office use and a different one to them. They are not aware of the reason for the same. The appellant has referred to Boards Circular Np 120/1/2010 dated 19/01/2010, which states that In case of incomplete invoices, The department should take a liberal view in view of various judicial pronouncements by courts. The contravention if at all, is a procedural defect and hence credit may be allowed.
4A? 3 Ordinarily credit taken on invoices that give the correct description of a service when complete in all respects is valid. A liberal yiew can aiso be taken of minor discrepancies in normal cases. However, in this case firstly there is another set of documents for "additional incentive" available with the service provider casting aspersions on the actual taxable activity statec on the credit availed invoice. They point towards transactions that are not genuine. Having found the credit irregular as a part of the full-scale investigation done by DGCET and examined by the AA, the decision cannot be faulted, 4g, The appellant humbly submits that the service tax department cannot act as a super-requiator and hold the appellant responsible for violation, if any, under other laws and requiations
48.4 The appellant submits that firstly, there has been no violation of IRDA principles. Fram the statements of the personnel of the dealers, the department has concluded that the payment made to the dealer by the appellant constitutes "commission" and therefore, since the appellant is in violation of the IRDA regulations in this regard, tay SAE PEEEE yun 4 ST/A08 10/2007 & ST/40798/2020 400 there Is no separate service provided by the dealer, therefore, the credit of the same fis not available to the appellant. The appellant other laws in force. In the present case, the service tax has been discharged on the invoices ralsed by the dealers in this case. However, the violation of the IROAT requlation, if any, cannot be a ground for denying the credit. otherwise avaliable to the appellant. Without prejudice, the Hlegallty of a transaction does not determine or alter its tax Inuications. Therefore, the credit is available to the appellant in the oresent scenaria. The apoellant has further submitted that the IROAI self issued a letter dated 12.8.2015 wherein the said authority stated that they have notified "Guidelines on Outsourcing activities' in February 2011 in terms of which all other activities which support the core activities (such as policy servicing and related activities) and noan- core activites can be outsourced. Thus, the allegation in the Show Cause Notice that the appellant has violated the IRDA Regulations fs incorrect, besides being Irrelevant for the purposes of service tax. In view of the above submissions, the impugned order merits to be set aside for this reasan ftself, 4s.2 Revenue per contra has stated that IRDA Circular Ref. GLL/IRDA/Brok-Comm/August 2008 dated 25.8.2008 Issued under Section i4 of IRDA Act, 1999, limits the payment of cammission or brokerage to 10%. The circular specifically state, "No payment of any kind including "administrative or servicing charges" is permitted to be made to the agent or broker In respect of the business in respect of which he is paid agency cammission or brokerage." Further the Insurance Regulatory and Development Authority of India vide Final ST/AGS T2017 & ST/40198/2080 101 Order in Ref. No. IRDA/ENF/ORD/ONS/O86/05/2016, dated 11/05/2016 in 'Decision on 21 and 32° has examined the tripartite agreement and found the appellant quilty of outsourcing the core activities due to which the Authority in exercise of powers conferred under section 102(b} of Insurance Act, Imposed a penalty of Rs.5 lakh on the appellant. The anpellant-Insurer was further advised to revise the clauses of agreements to comply with the all clauses of Guidelines on Outsourcing of activities 6y the Insurance Company. (Circular Number IRDA/LIFE/CIB/GLD/O13/02/2011 dated ist Feb, 2011). This Revenue states, goes an to show that what the department has been alleging regarding the non-providing of taxable service is correct, 4AS,3 it is seen from para 5.7.18 of the impugned order that during the investigation one of the very senior officials admitted that while making payrnent to the dealers as payout, they have to give a description of the services as 'data processing and policy servicing and related activities' in the Invoices, This is because they cannot term such 8 payment as commission. Commission can only be given to the insurance dealers / brokers / intermediaries, who are duly approved by IRDA (or by Insurance campanies), that since the dealers are mot the appraved persons / agencies for selling the insurance polices and hence can't be officially allowed to sell the insurance policies, they cannot call such payouts as carnmmission as it will be in violation of the IRDA guidelines. That the maximum commission fixed by IRDA is 10% of OD premium and the payout are far more, hence they cannot bi the amount as cammission. That the car dealers are nat authorized to sell the car insurance policies according to IRDA however there is no separate sale of Insurance policies to car customers because it Is ST/SOSIO/2017 & ST/ADI98/2020 102 automatically sold with the sale of the new car as price of Insurance Is inbuilt In the 'on road price' of the car. This staternent was recorded while the official was confronted with documentary evidence and carat be ignored.
asd Any person, let alone an officer of the tax department, aware of the commission of an offence or intention thereof, including an econamic offence, is duty bound to give information to the authorities concerned. I find that the allegations made by Revenue were meant in that direction and to show that the huge payouts by the appellant to the car dealers were not on account of 'Data Processing and Policy Servicing and related activities' [ find that Revenue has succeeded in this limited objective. It does not make them a super regulator. To find whether the arnounts oald by the appellant to car degiers were within or in violation of IRDAY guidelines is not the rernit Fthis autharity. it suffices to say that both the appellant and the car dealers understoad that the payrnents made and received were towards the sale of insurance policy and for which the dealers were being renumerated as a percentage of the OD premium of the car insurance policy and the activily was not what the Invoice made it out to be.
48.5 The appellant has made a submission to the effect that, without prejudice, the Hlegality of a transaction does not determine or alter its tax implications, I find that the concept has met with legal traction in matters relating to Income Tax laws, where the illegal gains are to be taxed at the hands of those who financially gained from these jiegal actions. However, in the case of Indirect Taxes where the burden of tax rests on the final consumer, while those who perpetuate the ape tttttte y % ST/40810/2017 & ST/ANL9B/2020 103 ifegality are beneficiaries of the legal monies collected as 'tax' - due to input credit schemes meant to neutralize the cascading effect af tax ~ Needs to be tested against tne legal principle that a persan ought not to be able to prafit from his or her own wrong. In any case the issue in the Impuqned matter Is, the burden of the output service provider (appellant) falling to prove to the proper officer, the correctness of CENVAT credit sought to be claimed/ availed, as per proviso to Rule S(2) of CCR 2004, Hence an admission of ilegality and the suggestion of an alternative classification under FA 1994, which fits the activity could have been tested before the lower autharity, while cansidering their specific request In permitting Input credit, under proviso to Rule 9(2) ibid, 49, The extended period of imitation is not invocable in the present case since the apoeliant had not wilful suppressed any fact much less with intention to evade payment proceedings.
Ps 9.1 The appellant states that in the present case, the Show Cause Notice is dated 16.10.2015. Whereas the period involved in the present case is from 2010 to 2015. Therefore, the majority of the demand in the present Show Cause Notice is beyond the normal period of imitation. The extended period of limitation for raising a dernand Is not invocable as there was no suppression of facts much less with intent to evade payment of duty. The appellant was under bona fide bellef that they are entitled to avail and utilize credit of service tax paid en various imput services for the reasons mentioned in this reply.
tigen 1 B Boome as ST/ADSLO/2017 & $T/40198/2020 104 Hence, allegation of suppression of facts with Intention to evade is erroneous. They have relied upon the judgments @) 'Shreeraj Fanmasala Pyt. Lid.' {supra} to state that when Revenue has nor cGllaborated its allegations with sufficient reliable evidence, the allegations have no legs to stand on, in (1) 'Continental Foundation Jt, Venture' {supra} to state that the expression 'suppression' has to be construed strictly There cannot be suppression that is not willful, and CHi} Padmini Products Vs. Collector of Central Excise (supra), to state that fraud, collusion, wilful mis-statement postulate a positive act and mere non observance of RuJes etc. wil amount te a falure under the OFrovision.
49,2 Revenue submitted that the appellant is on a wrong footing that the demand proposed in the SCN and confirrmed by the AA in the impugned order is interpretational in nature, inasmuch as, it is a case of well pre-planned and pre-meditated act of multiple offence involving fraud, collusion and suporession of facts cornmitted by the aopellant. Revenue submits that even after the trrequiarity was pointed out and SCN issued, M/s RSAICL had continued the same practice resulting to issuance of Statement of Demand for the period from April 2015 ta June 2017 which showed that M/s RSAICL and motor dealers had scant regard for CENVAT Credit Rules 2004. Hence the extenced period for issue of SCN has correctly been Invoked, 49.3 The discussions above have led te the conclusion that the entire scheme as unraveled by Revenue points to fraud, collusion with dealers, willful misstatement In the Invoices at the behest of the appellant and suppression of facts by contravention of the Act and the Rules made thereunder with intention to evade payment of duty using aE65r iy, ST/S0810/2017 & ST/40198/2020 105 ineligible credit. This misconduct is deliberate and with the Intent to enrich themselves unfustiy at the cost of the car customer who bears the ultimate incidence of the 'non-tax', The matter could not have been unraveled by supervisory checks of the jurisdictional Division / Range taff and without an investigation by departmental officers based on gocuments, agreements and statements from officials concerned explaining the whole matter, as was done by DGCEI. Hence the extended period of time under croviso to section 73 of the Finance Act, L994, for issue of SCN has been correctly invoked, The judgments cited by the appellant do not come to thelr rescue as the substance of the whole scheme planned and perpetuated by the appellant satisfies praviso fo Section 73 of the Finance Act 1994, as submitted by Revenue and held in the impugned order. In Commissioner of Custams, Kandia Vs M/s Essar OH Limited & Ors. [2004 (172) ELT. 433 S.C.)] it was held:
"Fraud" in relation to statute must be a colourable transaction to evade the provisions of a stetuis. if a statute has been passed for same one particular purpose, a court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which is quite foreign to its object and beyond its scope."
itis naw well settied that fraud vitletes all solernn acts. Any advantage obtained by practicing fraud is a nullity Hence the extended period of time hes been rightly Invoked in this case.
SO. Penalty under section 78 of the Finance Act, 1994 read with Rute 15 of Credit Rules is not attracted case ST/A0810/2017 & ST/A02 98/2020 106 50.1 The appellant is of the view that since they are eligible to avail CENVAT credit, and as the issue is technical in nature, no penalties can be imposed.
50.2 This averment has been contested by Revenue. Once it is found that the issue involves any one of the Ingredients like fraud, collusion, suppression of facts etc with intention to evade payment of duty, penalty has te be impased as has been correctly done in the impuoned order 50.3 The discussions above show that the appellant has wrongly and knowingly availed of CENVAT credit for which he was not eligible. It is a general principle of law that a person ought not to be able ta profit from Ris or her own wrong. The use of legal instruments to subvert law was examined by the Hon'ble Supreme Court in Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana & Anr., [(2012)} i SCC 6567). The Hon'ble Court in that case felt that whatever be the intention, the consequences are disturbing and far reaching, adversely affecting the economy, civil society and law and order. It is felt that a similar situation will prevail if tax laws are subverted by using colourahie legal devices like tallor made agreements meant to serve as é legal cover for blame worthy conduct. Hence penalty was correctly imposed. In an apt quotation which also applies to this case the Patna High Court in Syed Askari Hadi All Augustine vs Union Of India And Ors. [1994 (42) BLIR 1389] at para 20 mentioned the following guote with approval;
"20. In Howard De Walden (Core) v. IRC [1942] 1 AN ER 287 (CA) at page 289, Lord Greene observed ; "For years a battle of manoeuvre has bean waged between the Legislature and those who are minded to throw the burden of taxation off their own shoulders on to thoss of their fellow-sublecis. In that bettie, the Legislature has offen been a Segre:
ae ST/AOBIO/217 & ST/40198/2020 107 worsted by the skill, determination and resourcefulness of its opponents, af whoarn the present appellant has not been the isast successful, would not shock us in the least to find that the Legislature has defermined to pul an end to [he struggle by imposing the severesi of penalties. i scarcely les in the mouth of ihe taxpayer who plays with fire fo complain of burnt fingers."
{emphasis added} In the circumstances the imposition of penalty is justified as per law.
Si. No interest payable 4.1 it's the appellant's view that since CENVAT credit was properly taken and mo amount is recoverable fram the appellant in the First place, the question of payment of Interest does not arise. 51.2 We Rave earlier elaborately discussed and found that th CENVAT credit was not availed properly. [tis seen that interest is necessarily linked fo the duty payable, such flability arises Sutomatically by operation of law. As ner the Hon'ble Supreme Court's judgment in Commissioner of Central Excise, Pune Vs M/s SKF India [2009-TIOL-82-SC-CXR] interest is to be paid on delayed or deferred payment of duty for whatever reasons. The relevant portion is as below:
"S. Section 174 puts the cases of non-evy or short levy, non-payment or short payment or erroneous refund of duty in two categories. One in which the nor-payment or short payment etc. of duty is for a reason other than ceceit; ine defaull is due to oversight or some mistake and is not intentional. The second in which the non-payment or short payment etc. of duly is "by reason of fraud, collusion or any wilful mis- statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duly" that is to say, ft is intentional, dalberate ancl/or by deceitful means. Naturally, the cases falling in the fwo groups lead to diferent consequences and are dealt with differently. Section 114, however allow the assessees In default in both kinds of cases io make amends, sublect of course to certain terms and conditions. The cases where fhe non-payment or short payment etc. of duty is by reason of fraud collusion ete. are dealt with under sub-section (1A) of section TIA and the cases where the non-payment or shart payment of duty iS not intentional under sub-section (2B).
10. Subsection (2B) of section TIA provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own open 4 3 4% 's 4, ST/SOB1G (2017 & ST/A0198/2020 08 ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about ihe payment made oy hum and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes i axpressiy clear that such payment would not be exempt from interest chargeable under section TTAB, that is, for the period frarn the first date of the month succeeding the manth in which the duty ought to have been paid tii the date of payment of the duty. Whal is stated in Explanation 2 fo sub-section (2B) fs reiterated in section TTAB that states where any duty of excise has not been levied or pald or has seen short levied or shart paid or erroneously refunded, the person who has paid the cuty under sub-section (2B) of section 114, shall, in addition to the duby, be Hable fo pay interest. fl is fhus to be seen thal unlike penalty that is attracted to the category of cases in which ime nan-payment or shorl payment etc. of duly is "by reason of fraud, collusion or any wilful mis- statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules mace thereunder with intent to evade payment of duty", under the scheme of the four sections (771A, TIAA, TIAB & TIAC) interest js leviable on delayed or deferred payment of duty for whatever reasans."
(emphasis added} SUMMARY OF FINDINGS
52. T now summarise my findings on the various issue of law t iy and fact arising from the appeal, A) Tax Habilty does not arise due ta consent of parties. There has to be a jegally valid levy.
8) AS per proviso to Rule $9(23 of CCR 2004 the appellant being the provider of output service, is required to satisfy the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, that the Input services on which CENVAT credit is sought to be taken has been received and is covered by the description given in the invoice and accounted for in the books of the appellant.
C} Rule 95) of CCR, 2004 makes the principle clear that the burden ef proof regarding the admissibility of CENVAT, while taking input credit, falls on the recipient of service i.e. the appellant.
ST/AOBLO/2O1TF & ST/40198/2020 108 GE} As per the general ruie In legal proceedings also, he who asserts must prove. The appellant who Is asserting the taxabiity of the activity received by him, if any, should have shown that the activity described in the Invoice was indeed received and secondly that i was a texable service eligible for being claimed as CENVAT credit.
E} For the reasons cited at (Aj, (B}) anc (C) above the SCN had rightly required the appellant to show cause as to why the credit availed should not be denied and on failure te do so the Impuaned has confirmed the demand.
F} As per section 67 of the FA 1994 service tax is cclfected with reference to the value of service. As a necessary corollary, {f is the value of the service which is actually rendered which is to be ascertained for the purpose of calculating the service tax payable thereupon. Any other amount which is calculated not for oroviding such taxable service, in this case the 'service' as declared In the Invoice, cannot be a part of that valuation as that amount is not calculated for providing such 'taxable service' is} COAs per Section 73A(2) of the FA, 1994, even if the tax is not Hable to be collected from a person, if collected, the collected armiount has to be paid to the credit of gavernment. This does not mean that department has accepted the taxpayer's assessment and that the actions of the taxpayer have been ratified.
HM} OAny 'tax' collected, retained ar not refunded by the department in accordance with the provisions of a statute must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Hence any excess money collected as tax and paid to government is seen to have been retained under the authority of law.
teete, 'MGetoasere ie ie eis St/408 10/2017 & ST/40198/2020 if The Finance Act, 1994, is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law. It, therefore, follows that any and every claim for a refund of service tax can be made only under and in accordance with the provisions of the Sct and In the forums provided by the Act. Hence In this case it is for the persan who remitted tax to government fo claim any eligible refund, if he feels so, only in terms of Section LIB of the Central Excise Act,1944 (CEA i944) as made applicable ta FA,1994 by virtue of Section 83 of the sald Act.
J} A fact asserted by a person which is within his knowledge must be proved by him, as the burden of proof is cast upon him. Moreso, when he is canfronted with dacuments and manner of working which are within his special knowledge. Section 106 of the Indien Evidence Act,, 1872 gives statutory recognition to this universally accepted rule of evidence. The appellant in the present case Nas shown remarkable shyness in showing physical / documentary proof which would establish that the activities mentioned in the agreements with dealers were being actually performed.
K} The bellef, knowledge anc Intention of the parties are a part of evidence. Docurnents do not always speak In a language understood Gy the layman. These are effectively brought to fife through the statements of officials who are in the know of things. Based on this evidence the learned AA has to form his own conclusion.
L} Persons claiming that statements were obtained under threat / duress must, for that ground to operate, establish that the threat is such that the person in making the statement belleved or suppased ; tee ke ST/408 10/2017 & ST/40193/2026 Aad that by making it he would sin any advantage or avoid any evil of temporal nature in reference to the proceedings against him. This has not been done by the officials concerned.
M) In spite of a tarde list of 25 activities that were to be performed by the automobile dealers as per the "Service Provider Agreement"
listed at pare 33 above, the officials of both the appellant and the dealers' cammpany, when questioned were unable to Hist out the activities that were actually performed. In fact, they admitted that no service at all was performed.
N} Appellants company officials have stated In legally admissible statements that they have no option bul to pay the 'payouts' ta the car dealers due to their agreement with the car manufacturers and that there is no separate sale of insurance policies because [ft Is automatically sold with the sale of the new car as the price of the insurance is In-bullt in the 'On Road Price' of the car O} ©6Te Is relevant to note that the Service Charge paid to infra- companies for their service is In the range of 1.75 ta 4% of OD premium and the dealer, wha cannot recall having provided any service activity as per the agreement, to the Insurance Company gets paid a percentage between 10 to 55 % on the OD premium amount for the insurance policies booked, allegedly for providing 'services'. These carmnot be held to be genuine consideration towards transactions far 'data processing and policy servicing, When examined in totality the payments do not satisfy the test of what a reasonable person of ordinary prudence would do while Afring services. They signify something more.
hpeorere Paes 'a, hee ST/4O8 10/2017 & ST/40198/2020 412 P} What monies were received by the car dealers" based on Invoice prepared and sent to them by the appellant was not the fruit of a taxable activity as declared in the invoice. In such a situatian the service tax shawn to be paid on the invoices was not a tax.
QO} =The SCN does not disclose that no action has been taken against the car dealers. The appellant's claim is hence not substantiated and is nota part of the dispute. Further if an Hlegality or frrequiarity has been cammitted in favour of an individual or a group of individuals and even if there fas been mo action on the sald individual or group of individuals, that benefit cannot be relled upon as a orinciple of parity or equality by the appellant.
R} System generated invoices created without legal safequards are easy to manipulate, much more easly than manual document. In dally fe no person, including the appellant, would be prepared to freely allow the bank to encash a cheque even for a paltry amount, bearing the company's name if it is not signed by an authorized representative. There is no reasan why government finances and tax payment should be handied differently and in a cavalier manner. Even otherwise if this pernicious practice is accepted it will allow all assesses to take credit an incomplete documents and when found out seek the benefit of proviso to Rule 9{2}) of CCR 1994. A situation not envisaged by the Rules, Proviso to a Rule cannot become the Rule. It has to be applied to the facts of each case as per the satisfaction of the proper officer, when approached by assessee's with clean hands. Secondly provisa to Rule 9{2) ibid clearly mandates that the document should contain the details of the correct description of the goods or taxable service, among SY/408 10/2017 & ST/Al1 98/2020 Ws other things. The proper officer does not have the discretion to overlook this important fact.
&)} Allegations mace oy Revenue regarding non-compliance with IRDAI guidelines, were only meant to show that the huge payouts by the appellant to the car dealers were not on account of 'Data Processing and Policy Servicing and related activities, Revenue has succeeded in this limited objective. To find whether the amounts paid by the appellant to car dealers were within or in violation of IRDAT quidelines ig mot the remit of this Authority.
TY} The appellant has made a submission to the effect that, without oreludice, the Nlegality of a transaction does not determine or alter its tax inmmplications. The concept has met with legal traction in matters rélating to Income Tax laws, where the illegal gains are to be taxed at the hands of those who financlally gained from these actions. Nowever, in the case of Indirect Taxes where the burden of tax rests on the fina! consumer, while those who perpetuate the legality are beneficiaries of the Hlegal monies collected as 'tax' - due to input credit schemes meant to neutralize the cascading effect of tax - needs to be tested against the jegal principle that a person ought not to be able to profit from his or her own wrong.
U}) The entire scheme as unraveled by Revenue ocints to fraud, collusion, willl misstatement in the invoices at the behest of the appellant and suppression of facts by contravention of the Act and the Rules made thereunder with intention ta evade payment of duty, using ineligible credit. The blame worthy act by the appellant is deliberate and with the intent to enrich themselves unjustly at the cost of the car custemer who bears the ultimate incidence of the 'non-tax', The matter fo ates ie gion a %, ST/40B 10/2017 & ST/A0198/2020 could not Have been unraveled by Supervisory checks of [the jurisdictional Division / Range staff and without an in-depth investigation by departmental officers based on documents, agreements and statements from officiais concerned explaining the whole matter, as was cone by DGCET, Hence the extended seriod of time under proviso to section 73 of the Finance Act, 1994, for issue of SCN has been correctly invoked.
) 'TRis is a case where tax Jaws have been subverted by using colgurable legal devices like agreements tailor made to serve as a legal cover for blame worthy conduct. Hence penalty has been correctly imposed for a deliberate act of fraud by the appellant. In this situation it scarcely fies in the mouth of the appellant, who played with fire, to complain of burnt fingers.
Wh Underthe scheme of the Finance Act 1994, Interest Hability arises automatically by operation of law and has to be pald on delayed or deferred payment of duty for whatever reasons.
53. Base on the above discussions, I find myself unable to concur with the views of the learned Member (Judicial).
o4. 1 hereby reject bath the appeals ST/40810/2017 and ST/40198/2020 filed by the appellant and uphold the impugned order.
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iM. AIT RG MAR) Member (Technical) ST/40810 2017 & ST/40198/2020 Tis DIFERENCE OF OPINION In view of the difference of opinion between the Members, the follawing questions are frarned for resolving the difference: ~ Whether the appeal is to be allawed by setting aside the impugned order as held by Member Oudicial?
(OR) Whether the appeal is to be dismissed by upholding the impugned order as held by Member (Technical)?
{Pronounced In court on _--
ond ae a SS ay ¥ AAAS , Ny uf u x x wv S a : yer ~ ceecenayranenrvennmnannensnnn (M. AITT-KUMAR) {SULEKHA BEEVI C.8.)} Member (Technical) Member Gudicial) 116 The above matter wes referred to the Third Member Thereafter, the appellant had anproached the Hon'ble High Court of Madras against such reference and vide judgement dated 24.05.2024 In Writ Petitio Nos. 31725 & 31726 of 2023, the Hon'ble High Court nas set aside the difference of opinion expressed by Member (Technical). Thereupon, the matter was intimated to the Third Member and also glaced before the on/ble President. As per letter dt. 24.07.2024 the matter has been reverted back to the Division Bench In view of the order dated 24.05.2024 passed by the Hon'ble High Court.
As the clfferent of opinion has been set aside by the Hon'ble High Court, the order passed by Mamber (Judicial) as recorded would be apolicable. in view thereof, the impugned orders are set aside. The 3B A oO ea) Oy wm ou re allowed with consequential relief, if any.
» cers 9 et . Goats farder pronounced in apen courton <The So Re 'A (SULEKHA SEEVI c. s. $.) Member (ludicial)