Custom, Excise & Service Tax Tribunal
Vodafone Cellular Ltd vs Commissioner Of Central Excise And ... on 23 October, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/27788/2013-SM [Arising out of Order-in-Appeal No. 111/2013 dated 05/07/2013 passed by Commissioner of Central Excise and Service Tax , COCHIN( Appeal) ] Vodafone Cellular Ltd 4th Floor, Angels Arcade, South Kalamasserry, COCHIN - 22 KERALA Appellant(s) Versus Commissioner of Central Excise and Service Tax COCHIN. Respondent(s)
Appearance:
Ms. Sandhya Sarvode, Advocate LAKSHMI KUMARAN & SRIDHARAN WORLD TRADE CENTRE NO.404-406, 4TH FLOOR, SOUTH WING BRIGADE GATEWAY CAMPUS NO.26/1, DR. RAJKUMAR ROAD, MALLESWARAM BANGALORE - 560009 KARNATAKA For the Appellant Mr. Pakshirajan, AR For the Respondent Date of Hearing: 23/10/2017 Date of Decision: 23/10/2017 CORAM:
HON'BLE SHRI ASHOK JINDAL, JUDICIAL MEMBER Final Order No. 22502 / 2017 Per : ASHOK JINDAL The appellant is in appeal against the impugned order for denial of CENVAT credit of input and input services received by them for providing output telecommunication services.
2. The facts of the case are that during the impugned period, the appellant is provider of telecommunication services and are receiving certain inputs and input services and availing CENVAT credit thereof. On their output service, in case of pre-paid connection, the appellant is not receiving amount of service provided by them from the recipient of the service and during the impugned period, the service tax was payable on receipt of the amount of service tax from the service recipient. Therefore, it was alleged that appellant is not entitled to avail CENVAT credit on the inputs/input services attributable to the output service for which they could not realize the amount of service provided by them from the service recipient as the service tax has not been paid thereon. The matter was adjudicated and the demand on account of input/input service attributable to the output services for which the appellant could not realize the amount, the demand was confirmed. Aggrieved from the said order, the appellant is before me.
3. Heard the parties and considered the submissions.
4. I find that at the time of availment of CENVAT credit, it was not disputed that the said credit has been used by the appellant for providing taxable output service. It is also a fact that the service which has been provided by the appellant is a taxable service. The only issue is that the appellant could not realize the amount from the service recipient and during the impugned period, the service tax was payable on realization of the service tax from the service recipient. In that circumstance, I hold that the services provided by the appellant is a taxable service and for providing output taxable service, as per Rule 3 of CENVAT Credit Rules, 2004, the appellant is entitled to avail CENVAT credit. The same issue was dealt by this Tribunal in the case of CST, Ahmedabad vs. Krishna Communication as reported in 2013 (31) STR 285 (Tri.-Ahmd.) wherein the facts of the case are as under:
3.?During the course of audit conducted by CERA, it was noticed that Service Tax would be paid to the credit of Central Government on prescribed due date in which the payment are received towards the value of taxable services. Further, the amounts billed by the appellants against customers but not realized are not liable to Service Tax as the event of payment of Service Tax is on the basis of actual realization of amounts towards the cost of service. Where the cost of service billed become irrecoverable for any reason and the same is written off fully in the in the books of accounts of the assessee, the element of input service credit attributable to such write off was required to be reversed or paid by the appellants as no Service Tax was realized on the output service in which such input service has been used. The CENVAT Credit scheme envisages availment of credit towards payment of Service Tax on output services. Where no Service Tax is payable on any output service either because such service itself is exempt or because the service charges billed for in respect of such services becomes irrecoverable, the Service Tax credit was not available to the appellants and the credit cannot be used as set off against output service in such cases. In view of the above, the CENVAT Credit to be reversed by the appellants was calculated to be Rs. 1,45,808/- and the appellants, vide letter dated 12-11-2009, were requested to pay up the said amount. In that set of facts, the findings were recorded as under:
9.?I have considered the submissions made at length by both the sides and perused the records. I find that the issue involved in this case is denial of the proportionate credit of Service Tax credit, on the ground that the appellant had written off the certain amount as bad debts from the books of accounts for which input services were utilised. It is also undisputed that the respondent had not received the Service Tax liability on the amount which has been written off by them, as per the provisions of Service Tax Rules. From the records, it is seen that there is no dispute as to the eligibility of availment of CENVAT Credit of the Service Tax paid, by the service provider. It is also not in dispute that such services were received by the appellant and were utilized for providing output service. It is also to be noted that there is no dispute as to the discharge of Service Tax liability by the service provider to the respondent.
10.?I find that the grounds of appeal of the Department, would indicate that the Department is trying to co-relate the input services to the output services. It is settled law that there cannot be one-to-one co-relation in availing of the CENVAT Credit of the input service to the provision of output service. I find that the first appellate authority while appreciating the law, had recorded the following :-
8.?I find that the show cause notice has been issued to deny proportional CENVAT Credit on the ground that certain amount has been shown as bad debts in the books of accounts of the appellants and the adjudicating authority has also confirmed the demand made in the show cause notice. As per Rule 6(10) of Service Tax Rules, 1994, Service Tax shall be paid to the credit of the Central Government on prescribed due date in which the payment are received towards the value of taxable services. Further, amounts billed by the service provider against customer but not realized are not liable to Service Tax as the event of payment of Service Tax is on the basis of actual realization of amounts towards the cost of service. However, in the impugned order, it is held that where the cost of service billed becomes irrecoverable for any reason and the same was written off fully in the books of accounts of an assessee, the element of input service credit attributable to such write off was required to be reversed or paid by the service provider as input service to this extent had gone into an output service on which no Service Tax was payable. The reason attributed for the proposed reversal of input credit availed is that the CENVAT Credit scheme envisages availment of credit towards payment of Service Tax on output services. Where no Service Tax is payable on any output service either because such service itself is exempt or because the service charges billed for in respect of such services becomes irrecoverable, the Service Tax credit was not available to the assessee, as the credit cannot be used as set off against output services in such cases. Accordingly, the adjudicating authority has confirmed the demand.
9.?I find that the credit on the input service has been taken correctly. The inputs/input services have been used in providing output services. The output services are liable for payment of Service Tax. Hence, the eligibility of availing and utilizing the credit was not in question. As per Rule 6(10) of Service Tax Rules, Service Tax is payable when the payment towards taxable services are received. No Service Tax is payable on that part of the payment which is not received. No Service Tax is payable on that part of the payment which is not received. There is no provision in the CENVAT Credit rules to deny proportional credit on the inputs which were used in providing the output service on which recovery is pending. The adjudicating authority has cited Rule 14 of CENVAT Credit Rules and held that when Service Tax was not realized, the output service has not suffered any Service Tax. Hence, the credit availed would fall under the category of wrongly utilized credit and Rule 14 of CENVAT Credit Rules would be applicable in this case. Accordingly, he confirmed the reversal of CENVAT Credit under Rule 14 of the CENVAT Credit Rules, 2004. For the sake of easy reference, Rule 14 of the CENVAT Credit Rules is reproduced below :-
Rule 14 : Recovery of CENVAT Credit wrongly taken or erroneously refunded. - Where the CENVAT Credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of Sections 11A and 11AB of the Excise Actor Sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.
The rule envisages reversal of credit wrongly utilized or erroneously refunded. In this case, the services rendered are taxable services. The credit of inputs/input services availed is utilized in providing taxable output services. Hence, there is nothing wrong in availing and utilization of the credit. Rule 14 does not envisage recovery of credit in situations where Service Tax recovery was pending and written off as bad debts later. Further, I find that the bad debts have accumulated over a period of time. It is not possible to identify this bad debt with any particular invoice/invoices on which the recovery was pending. There is no one-to-one connection in availing and utilization of the credit in taxable output services. Hence, I find that there is no merit in the allegation that the input credit has been wrongly utilized. Thus, I hold that proportional credit on the amount of bad debts written off by the appellants is not liable to be reversed. Since credit availment and utilization is not wrong, no penalty is imposable.
5. I find that the issue involved in this case is squarely covered by the decision of the Tribunal in the case of Krishna Communication (supra), therefore, no demand on account of denial of CENVAT credit on input/input services is sustainable against the appellant. Therefore, the impugned order is set aside. In the result, the appeal is allowed with consequential relief, if any.
(Order was dictated in Open Court on 23/10/2017) ASHOK JINDAL JUDICIAL MEMBER rv...
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