2017 (1) TMI 803 - AT - Service Tax

CENVAT credit - duty paying document - CSR is a summary of AWBs, i.e., invoices raised by the airlines - whether availment of credit on the document called Cargo Sales Report (CSR) is in order or otherwise? - the order for appeal is mainly on the ground that the appellant is not eligible to take Cenvat credit on service tax paid by airlines at all and that the recipient of the service is the shippers of the goods/documents and not the appellant. Held that - when the relevant Air Way Bills (AWBs) have also been made available to the Department, the appellants taking credit on their consolidation and summarization in a fortnightly Cargo Sales Report is therefore, to be considered as their having taken credit on the AWBs themselves. It has to be also kept in mind that the appellants conduct their business in a unique niche of the airline industry, that of booking cargo space on behalf of airlines, and as such the universal practices in such areas should be properly understood and appreciated before issuing demands of this nature. So long as the primary and essential requirements of the procedural Rule have been satisfied, benefit should not be denied on insubstantial grounds. In fact, even the said Rule 9, lays down that minor inadequacies in the document on which credit is availed should be overlooked, in the Proviso to sub-rule (2) thereof. The availment of Cenvat credit based on the Cargo Sales Report prepared from the AWBs, cannot be denied to the appellant. By implication, utilization of such availed credit to discharge their service tax liability cannot also be held as irregular - Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Wrongful availment and utilization of Cenvat credit.
2. Validity of Cargo Sales Report (CSR) as a document for availing Cenvat credit.
3. Reversal of Cenvat credit.
4. Procedural compliance and substantial compliance of law.

Detailed Analysis:

1. Wrongful Availment and Utilization of Cenvat Credit:

The appellants were rendering taxable services under Courier Services and Business Auxiliary Services. The Department alleged that the appellants wrongly availed and utilized Cenvat credit by making payments based on the Cargo Sales Report (CSR) to various airlines and availing Cenvat credit on the same. Notices were issued for different periods, proposing demands for irregularly availed credit and non-paid service tax, which were confirmed by Orders-in-Original (OIO). The appellants argued that they paid service tax on the freight amount plus commission received from the airlines and reversed the Cenvat credit availed on the service tax remitted to the airlines. They contended that the payment towards taxes amounted to the reversal of credit taken.

2. Validity of Cargo Sales Report (CSR) as a Document for Availing Cenvat Credit:

The core issue was whether the CSR, a fortnightly summary of Air Way Bills (AWB), was a valid document for availing Cenvat credit. The Department contended that CSR is not a specified document under Rule 9 of the Cenvat Credit Rules, 2004. However, it was undisputed that AWBs, which were summarized in the CSR, contained necessary details like AWB No., Service Tax Registration No., name of service provider, value, nature of service, and service tax amount. The Tribunal concluded that AWBs could be considered eligible invoices or bills under Rule 9 of the Cenvat Credit Rules, 2004, and Rule 4A of the Service Tax Rules, 1994. The Tribunal held that the appellants' practice of taking credit based on the CSR, which summarized AWBs, should be considered as taking credit on the AWBs themselves.

3. Reversal of Cenvat Credit:

The appellants argued that they had already reversed the amount of Cenvat credit availed on the service tax remitted to the airlines. The Tribunal noted that the Department's verification for a subsequent period (April 2011 to March 2012) found the credit availed by the appellants as regular, and no periodical show cause notices were issued thereafter. Additionally, the appellants had centralized registration in Mumbai from January 2012, and subsequent show cause notices on the same issue were adjudicated in favor of the appellants, allowing the Cenvat credit taken on AWBs.

4. Procedural Compliance and Substantial Compliance of Law:

The Tribunal emphasized that the appellants conducted their business in a unique niche of the airline industry, and the universal practices in such areas should be understood and appreciated. The Tribunal referred to Rule 9(2) of the Cenvat Credit Rules, 2004, which allows minor inadequacies in the document if essential details are present. The Tribunal also cited judicial decisions supporting the view that substantial compliance of law should not be denied on procedural grounds. In cases like Temple Packaging Pvt. Ltd. and Him Teknoforge Ltd., the Tribunal held that procedural lapses should not result in denial of Cenvat credit if there is substantial compliance.

Conclusion:

The Tribunal unequivocally held that the availment of Cenvat credit based on the Cargo Sales Report prepared from the AWBs could not be denied to the appellants. Consequently, the utilization of such availed credit to discharge their service tax liability was also deemed regular. The impugned orders were set aside, and the appeals were allowed with consequential reliefs as per law.

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