Custom, Excise & Service Tax Tribunal
Industrial Sales And Services vs Jaipur I.. on 23 April, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH-COURT NO. 4
SERVICE TAX APPEAL NO. 51873 OF 2018
[Arising out of Order in Appeal No. 212(SM) ST/JPR/ 2018 dated 23.03.2018
passed by the Commissioner (Appeals), Central Goods and Service Tax,
Jaipur]
M/S INDUSTRIAL SALES AND SERVICES Appellant
203, Navjeevan Chamber,
G-4, Vinoba Marg, MI Road,
Jaipur
Vs.
COMMISSIONER OF CGST & SERVICE TAX-
Respondent
JAIPUR NCR Building, Statue Circle, C-Scheme, Jaipur, Rajasthan-302005 Appearance:
Present for the Appellant : None Present for the Respondent: Shri Manoj Kumar, Authorised Representative CORAM:
HON'BLE DR. RACHNA GUPTA, MEMBER ( JUDICIAL ) HON'BLE MR. P. V. SUBBA RAO, MEMBER ( TECHNICAL ) FINAL ORDER NO. 50515 /2025 Date of Hearing: 11/02/2025 Date of Decision: 23/04/2025 P.V. SUBBA RAO
1. M/s Industrial Sales and service Jaipur1 filed this appeal to assail the impugned order in appeal dated 23.03.2018 passed by the Commissioner (Appeals) Jaipur2 whereby he disposed of the appeal filed by the appellant by setting aside the penalty imposed under section 76 of the Finance Act, 19943 but upholding the penalty under 1 The appellant 2 The impugned order 3 The Finance Act.2
ST/51873/2018 section 78 of the Finance Act. Insofar as the appellant's contention before Commissioner (Appeals) that it had availed CENVAT credit of only Rs. 8,33,550/- and not Rs. 9,46,836/- was concerned, he directed the jurisdictional Assistant Commissioner to examine this factual submission.
2. This appeal was listed on several dates and on 10.12.2024 the following order was passed:
"None is present for the appellant. It is perused that ample opportunities have already been given to the appellant to file the written synopsis and to make the final submissions. However, in the interest of justice, one more opportunity is given with the clarification that it shall be the last opportunity and in case of any future failure of any kind on part of the appellant, the appeal shall be decided on its merits. The appeal be now listed on February 11, 2025."
3. Today also none appeared for the appellant but a written request of adjournment is received from the appellant which was opposed by the department. As we had indicated on 10.12.2024 that today's will be the last opportunity, we proceed to hear the departmental representative and examine the records of the case and decide the appeal.
4. The appellant was registered with the department and provided "business auxiliary service" during the relevant period. It was appointed as a commission agent by M/s NEI, Ltd., Jaipur 4 to sell ball bearings manufactured by NEI. The appellant was receiving from NEI a commission as a certain percentage of the selling price. The appellant appointed its sub-agent M/s Sales Services Company which 4 NEI 3 ST/51873/2018 was providing services as its sub-agent. The appellant was availing CENVAT credit of the service tax paid by its sub-agent and using it to pay service tax. During audit of the records of the assessee it was found that the appellant had availed CENVAT credit in violation of Rule 4(7) of CENVAT Credit Rules, 20045 which reads as follows:
"4. Condition for allowing Cenvat Credit :-
(7) The Cenvat Credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be challans referred to in rule 9.
"Provided that while paying duty of Excise or Service Tax as the case may be the CENVAT Credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be for payment of duty or tax relating to that month or the quarter as the case may be."
5. It was felt during audit that the appellant had availed CENVAT Credit of Rs. 9,46,363/- without paying its sub-contractor and thereby it had violated Rule 4(7) of CCR. Accordingly, a show cause notice dated 18.10.2010 was issued to the appellant covering the period 2005-06 to 2008-09 (up to December 2008) invoking the extended period of limitation under the proviso to section 73 (1) of the Finance Act. Interest was also proposed to be demanded under section 75 of the Finance Act and penalties were proposed under section 76 and 78 of the Finance Act.
6. The appellant contested the proposals in the show cause notice which were, however, confirmed by the Additional Commissioner by his order dated 10.02.2012.
5 CCR 4 ST/51873/2018
7. Aggrieved, the appellant filed an appeal before the Commissioner (Appeals) who passed the impugned order. Submissions on behalf of the appellant
8. Submissions in the appeal are as follows:
(i) The amount of CENVAT Credit which the show cause notice had alleged to have been wrongly availed is incorrect and the actual amount must be only Rs.
8,33,550/-
(ii) Rule 4(7) of CCR prohibits availment of CENVAT credit without paying the value of input service indicated in the invoice or the bills. The appellant had, indeed, paid the amounts before availing the CENVAT credit. The appellant had the practice of paying its sub-agent through three different methods.
(a) Through cheques in their favour.
(b) By making deductions from the sale service
commission and adjustment towards security
deposits to be provided by the sub-agent.
(c) By making deductions from the sale service commission and adjustment towards outstanding amounts of buyers towards National Engineering Industries limited.
5
ST/51873/2018
(iii) The Show cause notice did not consider the payments made through adjustments as indicated above and, therefore, it had wrongly concluded that appellant had availed CENVAT credit without making the payment. In fact, it had made all the payments.
(iv) The entire period of demand up to December 2008 was beyond the normal period of limitation. As the appellant had been filing its returns regularly there was no ground to invoke extended period of limitation.
(v) The ground for imposing penalty under section 78 is the same as the ground for invoking extended period of limitation and, therefore, same is also not sustainable.
(vi) In view of the above, the entire demand may be set aside and the impugned order also set aside and the appellant's appeal may be allowed.
Submissions of the Revenue
9. Learned authorized representative appearing for the department vehemently supported the impugned order and made the following submissions:
(i) Rule 4(7) of CCR requires the value of service to be paid and there is no scope for making any book adjustments in the rule. Therefore, the demand was incorrectly confirmed by the impugned order.6
ST/51873/2018
(ii) As far as the contention regarding the quantification of the CENVAT credit is concerned, the Commissioner (Appeals) has already remanded the matter to the Assistant Commissioner for verification.
(iii) Extended period of limitation was correctly invoked because there was suppression/ willful mis-statement or violation of any of the provisions of the law to evade payment of service tax and, therefore, extended period of limitation was correctly invoked.
(iv) In view of the above the appeal may be dismissed and the impugned order may be upheld.
10. We have considered the submissions made on both sides and find that the question of limitation needs to be addressed first because the entire period of demand was beyond the normal period of limitation.
11. Paragraph 4 of the show cause notice gives the reason for invoking the extended period of limitation and it reads as follows:
"4. Whereas, the M/s Industrial Sales, 203, Navjeevan Chamber, G-4, Vinoba Marg, M.I. Road, Jaipur has willfully suppressed the value of taxable services from the department and contravened the provisions of Section 67 & 68 of the Finance Act, 1994 read with Rule 6 of the Services Tax Rules, 1994 & rule 4(7) of the Cenvat Credit Rules, 2004 with intent to evade payment of Service Tax, hence; appears liable for penal action under Section 76 & 78 of the Finance Act, 1994 and rule 15 of the Cenvat Credit 7 ST/51873/2018 Rules, 2004. Interest is also recoverable from them under section 75 of the Finance Act, 1994 on the service tax short paid."
12. It is undisputed that the appellant was registered with the service tax department and was filing returns regularly. The only reason for invoking extended period of limitation is that the audit had discovered that the appellant had availed CENVAT credit without first paying its sub-contractor. We find that the service tax Returns need to be scrutinized by the Range Officer. Had the Range Officer done so the alleged irregularity in filing CENVAT credit would have been noticed. The fact that the Range Officer had not done his job and the audit had pointed out the discrepancies would only show that the Range officer was negligent in his duty. It does not show that the appellant had suppressed any facts. The Range Officer had the duty to scrutinize the Returns and the power to call for any documents or records for the purpose. What is evident from the records is that the audit had done what the Range Officer should have done. If at all there is any irregular availment of CENVAT credit and the demand was not issued within the normal period of limitation, it is purely on account of the negligence by the Range Officer.
13. In view of the above, the entire demand needs to be set aside on the ground of limitation itself.
14. Even on merits, Rule 4 (7) of CCR only requires the payment to be made before availing the CENVAT credit and it does not indicate that the payment should be made in any particular manner by cheque or through cash or through account adjustments. It is a normal practice when two business have a continuing relationship to maintain 8 ST/51873/2018 a running account with each other and make adjustments instead of paying cash or drawing a cheque every time. Since the show cause notice alleged that the appellant had availed CENVAT credit without actually paying the sub-agent, it was for the show cause notice to have examined the records and establish this fact with evidence. The show cause notice did not establish with any evidence that the appellant had not paid its sub-agent before availing CENVAT Credit.
15. In view of the above, the appeal needs to be allowed and the impugned order is not sustainable either on merits or on limitation. The impugned order is set aside and the appeal is allowed with consequential relief to the appellant.
[Order pronounced on 23/04/2025] (DR. RACHNA GUPTA) MEMBER ( JUDICIAL ) (P. V. SUBBA RAO) MEMBER ( TECHNICAL ) Tejo