Custom, Excise & Service Tax Tribunal
Trent Hypermarket Ltd vs Cce Pune Iii on 26 June, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT No. I
APPEAL No. ST/88668/2014
(Arising out of Order-in-Original No. PUN-EXCUS-003-COM-009-14-15
dated 30.5.2014 passed by Commissioner of Central Excise & Service
Tax, Pune-III)
Trent Hypermarket Ltd. ....Appellant
Vs.
Commissioner of Central Excise, ...Respondent
Pune-III Appearance:
Shri Mehul Jivani, C.A. and Shri Vinod Awtani, C.A. for appellant Shri Vivek Dwivedi and Shri Dilip Shinde, Authorised Representatives for respondent CORAM:
Hon'ble Mr. S.K. Mohanty, Member (Judicial) Hon'ble Mr. Sanjiv Srivastava, Member (Technical) Date of Hearing: 27.12.2018 Date of Decision: 26.06.2019 FINAL ORDER NO. A/86170 / 2019 Per: S.K. Mohanty Brief facts of the case are that the appellant is engaged in the trading activities, involving sale and purchase of goods as well as providing taxable services, defined under the Finance Act, 1994. During the period 2008-09 to 2010-11, the appellant had availed common input services used for trading activities and for provision of taxable service. Availment of cenvat credit was disputed by the department on the ground that prior to 01.04.2011, trading was not considered as an exempted service and therefore, taking of cenvat credit was not permissible as per Rule 3 of the Cenvat Credit Rules, 2004.
2 ST/88668/2014 The show cause notice dated 23.10.2013 issued by the department was adjudicated vide the impugned order dated 30.5.2014, wherein the learned Commissioner of Central Excise & Service Tax, Pune has confirmed the proposed demand of Cenvat amount of Rs.98,61,213/-
along with interest and also imposed equal amount of penalty on the appellant. Certain amount deposited by the appellant prior to adjudication of the matter was appropriated in the impugned order. In support of denial of cenvat benefit, the learned adjudicating authority has held that trading activity undertaken by the appellant during the disputed period was neither to be considered as a service nor a manufacturing activity and hence, it cannot be treated as an exempted service, defined under Rule 2(e) of the Cenvat Credit Rules, 2004. Feeling aggrieved with the impugned order dated 30.5.2014, the appellant has preferred this appeal before the Tribunal.
2. The learned Chartered Accountant appearing for the appellant submitted that the amendment brought in the definition of "exempted services" is clarificatory in nature and therefore, the trading activities have to be treated as exempted service even for the period prior to April 2011. He further submitted that since trading activity is to be considered as exempted service, the case of the appellant falls under the provisions of Rule 6 ibid. The learned Chartered Accountant also submitted that since some of the disputed services are covered under Rule 6(5) ibid, credit of such input service is available to the appellant, since the same were used both for providing the taxable service and for the exempted trading activities. He has relied upon the judgment of Hon'ble Madras High Court in the case of Ruchika Global Interlinks Vs. CESTAT, Chennai- 2017 (5) G.S.T.L. 225 (Mad.) to state that inclusion of the term 'trading' as exempted service in the explanation clause appended to Rule 2(e) ibid is clarificatory and 3 ST/88668/2014 should be applicable retrospectively. He further submitted that the show cause proceedings initiated by the department are barred by limitation of time inasmuch as there is no element of suppression, misstatement etc., and thus, the adjudged demand cannot be confirmed on the appellant. In this context, the Learned Consultant has relied upon the decisions of this Tribunal in the case of CI Automotors Pvt. Ltd. 2015 (6) TMI 788 (Tri-Del.), TFL Quinn India Pvt. Ltd. 2016-TIOL-856-CESTAT-HYD, Krishna Auto Sales 2015 (40) S.T.R. 1121 (Tri.-Delhi), Franke Faber India Ltd.-2017 (52) S.T.R. 155, Kundan Cards Pvt. Ltd.-2016 (43) S.T.R. 630, Crown Worldwide Movers Pvt. Ltd.-2016 (44) S.T.R. 667 (Tri.-Mumbai).
3. On the other hand, the learned AR appearing for the Revenue reiterated the findings recorded in the impugned order and further submitted that the amendment made in Rule 2(e) ibid vide Notification No.3/2011-C.E. (N.T.) dated 1.3.2011 is effective prospectively and cannot have retrospective operation inasmuch as a substantive provision was incorporated in the explanation clause, providing for the activity of trading as exempted service. Thus, he submitted that since the common input service credit was taken by the appellant prior to such effective date, the availment of credit is not in conformity with Rule 3 ibid and accordingly, the adjudicating authority has correctly confirmed the adjudged demand on the appellant. He has placed reliance on the judgment of Hon'ble Supreme Court in the case of Union of India Vs. Martin Lottery Agencies Ltd.-2009 (14) S.T.R. 593 (S.C.) to substantiate the stand of Revenue that the amendment of Rule 2(e) ibid will have prospective effect and cannot be applied with retrospective effect.
4. Heard both sides and examined the case records.
4 ST/88668/2014
5. It is an admitted fact on record that during the disputed period 2008-09 to 2010-11, the appellant had availed Cenvat credit of service tax paid on common input services namely, real estate agent's service, cleaning service, repair and maintenance service and security service for both the category of activities undertaken by it i.e. trading of goods and for provision of the taxable output services. Rule 3 ibid entitles a provider of taxable service to take Cenvat credit of duties and taxes paid on the inputs, input services and capital goods. However, an embargo has been created in Rule 6 ibid, which is to the effect that the Cenvat credit shall not be allowed on the input or input services used for providing the exempted services. The said Rule mandates that in case of availment of common input or input services for providing both the taxable and exempted service, the service provider should maintain separate records in respect of uses of input/input services in respect of both the category of services and in absence of non-maintenance of records, to follow the procedures laid down in the sub-rules itemized in Rule 6 ibid. On perusal of the said Rule, it transpires that an obligation has been created therein with respect to use of common input or input services for providing the taxable and exempted service.
5.1 The issue involved in this appeal for consideration by the Tribunal is, whether the trading activities can be categorized as "exempted service" for the purpose of a decision regarding availment of Cenvat credit on the input services specified in sub-rule (5) of Rule 6 ibid.
5.2 The phrase "exempted services" has been defined in Rule 2(e) ibid to mean "taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under Section 66 of the Finance Act". The said definition was 5 ST/88668/2014 effective up to 31.03.2011. The Central Government vide Notification No. 3/2011-C.E. (N.T.) dated 01.03.2011 has made the Cenvat Credit (Amendment) Rules, 2011, effective from 01.04.2011. The effect of amendment, relevant for the present case, is that an explanation clause was appended to such definition, clarifying that for the removal of doubts, "exempted services" includes trading.
5.3 On careful examination of the notification dated 01.03.2011 (supra), it transpires that in clause 1(b) contained therein, it has been specifically stated that "save and otherwise provided in these rules, they shall come into force on the 1st day of April. 2011." The legislative intent behind the amending Rule, 2011 is manifest that in some of the clauses included therein, the effective date was provided as 01.04.2011 and in some of the other clauses; the date of effect was considered as 01.03.2011 itself i.e. the date of issue of the notification. It has no where been stated in the notification that the said amendment was either clarificatory or declaratory and should be given effect to retrospectively. The law is well settled that an amendment can be considered to be declaratory and clarificatory, only if, the statute itself expressly and unequivocally states so; on the contrary, if there is no such clear statement in the statute itself, the amendment shall not be considered to be merely declaratory or clarificatory and cannot operate with retrospective effect. Therefore, we are of the considered view that the legislature had never intended to give effect to the notification dated 01.03.2011 with retrospective effect inasmuch as, in such an eventuality, the amending notification/Rules, 2011 would have made effective either from the date of publication of the said notification in the official gazette or from the date of enactment of the Cenvat Rules in 2004.
6 ST/88668/2014 5.4 Further, the legislative intent or mandate to levy duties or taxes on the goods and services is derivatives of the supreme law i.e. the Constitution of India. The yardstick was formulated in the supreme law, in the way that, in case of manufactured goods, the incidence of levy of Central Excise duty is on the activities of manufacture of excisable goods in India; and that in respect of levy of service tax, there must be involvement of two entities/persons, one is the service provider and the other is the service receiver. The activity of trading of goods is not confirming to either of the legislative mandates of manufacture or provision of service, exigible to Excise Duty under the Central Excise legislation of 1944 or the provisions of the Finance Act, 1944, governing the service tax issues. Therefore, insertion of the explanation clause in the definition of "exempted services" in the Cenvat statute has provided an artificial meaning as, "for the removal of doubts, it is hereby clarified that 'exempted services' includes trading". In this context, the law is well settled that when an explanation seeks to give an artificial meaning and brings about a change, effectively in the existing law and in addition, is stated to come into force with effect from a future date, there is no principle of interpretation, which would justify reading the explanation as operating retrospectively.
5.5 It is evident from the amending provisions of Cenvat statute w.e.f. 01.03.2011 that a substantive law was enacted to consider the activities of trading as an exempted service. Now the issue remains for resolution, as to whether, such amendment in the statutory provisions is to be construed as retrospective in effect or prospective, in order to be given effect to. In this context, the law is amply clear that if a substantive law is introduced, the date of effect of the instrument through which the decision of legislation was conveyed should be considered as the 7 ST/88668/2014 relevant date, when the same was issued or published in the official gazette for the knowledge of the general public. In this contest, the Hon'ble Supreme Court in the case of Martin Lottery Agencies Ltd. (supra) have ruled that by reason of an explanation, a substantive law may also be introduced and if a substantive law is introduced, it will have no retrospective effect. We find that the Hon'ble Madras High Court in the case of Ruchika Global Interlinks (supra) have held that inclusion in Explanation to Rule 2(e) "trading" was only clarificatory. It is further observed that the arguing counsels before the Hon'ble Madras High Court did not refer to or relied upon the judgment of Hon'ble Supreme Court in the case of Martin Lottery Agencies Ltd. (supra). Since, the law is well settled by the Hon'ble Apex Court in context with retrospective or prospective operation of the statute, the principles enunciated in the case of Martin Lottery Agencies Ltd. (supra) will be considered as the guiding factor for deciding the issue involved in the present case.
5.6 In view of the above discussions, we do not find any infirmity in the findings recorded in the impugned order, holding that amendment to Rule 2(e) by Notification No. 3/2011-C.E.(N.T.) dated 01.03.2011 will have the prospective effect and cannot be applied retrospectively. Thus, we do not find any merits in the appeal filed by the appellant.
6. In this case, the department had issued the show cause notice on 23.10.2013, seeking for recovery of the irregularly availed Cenvat credit by the appellant during the period 2008-09 to 2010-11. The provisions of Rule 14 ibid read with the proviso to Section 73(1) of Chapter V of the Finance Act, 1994 were invoked for effecting recovery of the alleged demands. Section 73(1) ibid provides the manner of recovery of service tax not levied or paid or 8 ST/88668/2014 short levied or short paid. As per the statutory mandates, in such an eventuality, the show cause notice was required to be issued within one year from the relevant date. However, in the proviso clause appended to Section 73(1) ibid, it has been mandated that where any service tax has not been levied or paid or has been short levied or short paid by reason of fraud; or collusion; or wilful misstatement; or suppression of facts; or contravention of the provisions of Chapter V or the rules made there under with intent to evade payment of service tax, instead of the period of one year, the show cause notice shall be issued within the period of five years. Admittedly, in this case, the show cause proceedings were initiated against the appellant beyond the normal period of limitation of one year. Thus, under such circumstances, it has to be ascertained whether the ingredients contained in the proviso clause are satisfied, justifying invocation of the extended period of limitation.
6.1 We find that the Learned adjudicating authority has recorded in the submissions of the appellant that it had filed the periodic ST-3 returns, reflecting therein the particulars of availment of Cenvat credit on the disputed input services. Thus, under such circumstances, it cannot be said that the appellant had suppressed the facts regarding availment of irregular credit, with the intent to defraud the Government revenue. Further, the issue with regard to interpretation of the amending definition of "exempted service" under the Cenvat statute, whether to be applicable prospectively or retrospectively, was highly debatable and there were divergent views in the judicial forum. The law is well settled that in case of interpretational issue, the extended period of limitation cannot be invoked, without proper substantiation that availment of credit is owing to the reason mentioned in the proviso to Section 73(1) ibid. In this case, on perusal of 9 ST/88668/2014 both the show cause notice and the impugned order, we do not find any justifiable reason being assigned by the department for invocation of the extended period of limitation. Thus, we are of the considered view that the adjudged demands confirmed against the appellant cannot be sustained on the ground of limitation.
7. In view of the above discussions and analysis, the impugned order is modified and the appeal is allowed on the ground of limitation only.
(Pronounced in court on 26.06.2019)
(Sanjiv Srivastava) (S.K. Mohanty)
Member (Technical) Member (Judicial)
HK