2017 (7) TMI 726 - AT - Service Tax

Penalty - CENVAT credit - fictitious invoices - doctrine of severability - Section 73 (1A) of the Act - Held that - A perusal of sub-section (1A) of Section 73 shows that it is an option to a person to admit liability in full or in part and proviso to sub-section (2) relates to the liability admitted under Section (1A). Therefore, if the entire amount demanded under the notice is accepted under (1A), it becomes the liability under Section (1A) - the appellants are entitled to the benefit of sub-section (1A) of Section 73 of the Finance Act, in respect of Cenvat Credit wrongly availed on fictitious invoices. Since the appellants have paid the entire amount of Cenvat Credit along with interest and 25% of penalty within one month of the issue of show-cause notice, all proceedings shall be deemed to be concluded in respect of that amount in terms of the proviso to sub section (2) of section 73. On the above ground, the benefit of section 73(1A) read with subsection 73(2) is allowed in so far as it relates to the first issue - appeal allowed. CENVAT credit - duty paying invoices - credit denied as the documents contained alterations - Held that - it transpires that C.P. Systems Pvt. Ltd. had provided services to the appellants and said invoices were indeed issued by C.P. Systems Pvt. Ltd. Difference in format was because of different places where the copies were generated. In these circumstances the fact of genuineness of the transaction cannot be questioned. The fact that the appellant received services and service tax was paid by the service provider for those service is not in dispute. It is seen that during this exercises duplicate copies of the documents have been obtained and transaction has been verified. Provision of service payment of service tax have already been confirmed and duplicate copies of invoices obtained from the service provider, the credit of such invoices in respect of services undisputedly received by the appellant cannot be denied - appeal allowed. Classification of services - works contract service or erection, commissioning and installation services? - Held that - It is apparent that the responsibility of providing of materials except raw materials is that of the appellants. In these circumstances, the character of the contract being a work contract cannot be denied. Consequently, the appellants should be entitled to the benefit of Notification No.25/2007 - it is apparent that the appellants are engaged in the activity in the provision of works contract service and would be entitled to benefit of notification No.25/2007. In these circumstances, the demand and penalties on this count cannot be sustained - appeal allowed. CENVAT credit - denial on the ground that the goods have been received and consumed in their Jaigad site where the benefit of composition under works contract scheme has not been filed - Held that - It is apparent that in principal the impugned order agrees that if the goods were indeed supplied to the appellants plant at JSW Jaigad site, the credit would be available. It appears that the documents presented before us were not presented before the original adjudicating authority. Since it is an issue regarding verification of facts, the demand is set aside and the matter remanded to the original adjudicating authority for verifying the facts with reference to all the documents and records that may be submitted by the appellants in this regard. If it is established from records that the goods were received at JSW Jaigad site the credit should not be denied - matter on remand. Amount received as advance - demand - The appellant have however claimed the benefit of section 73(1A) read with subsection 73(2) as they had paid the amount of service tax demanded along with interest and 25% of the penalty within the prescribed period - Held that - the benefit of section 73(1A) read with subsection 73(2) cannot be denied to them as they have deposited the amount of duty demanded along with the interest and 25% penalty within the prescribed time - appeal allowed. Penalty u/s 77 (2) of the Finance Act, 1994 - Held that - there is no provision for imposition of personal penalty on the director under the Finance Act. The said decision has been distinguished on the ground that in the said case the penalty under subsection 77(c) was examined and not under subsection 77(2). For any person to contravene any provision of the Finance Act or the Rules made thereunder it has to be first established that there was any liability of the person under the act - It is seen that there is no separate liability/responsibility of the Director of the service provider under the act or the rules. All the liabilities/ responsibilities are of the service provider. In these circumstances, penalty under Section 77 (2) cannot be imposed on the Director, the second appellant - appeal allowed. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Cenvat Credit on fictitious invoices
2. Denial of Cenvat Credit on altered invoices
3. Classification of services provided to JSW Jaigad Port Ltd.
4. Cenvat Credit on inputs used in works contract composition scheme
5. Demand of service tax on advances received
6. Imposition of penalty on the second appellant

Issue-wise Analysis:

1. Cenvat Credit on fictitious invoices:
The appellants admitted their liability for availing Cenvat Credit on fictitious invoices, paying the service tax along with interest and 25% penalty within thirty days of the show cause notice. They sought relief under Section 73 (1A) of the Finance Act, 1994. The Tribunal found that the appellants are entitled to the benefit of Section 73 (1A) since they paid the entire amount of Cenvat Credit along with interest and 25% penalty within the prescribed period. The Tribunal held that the proceedings should be deemed concluded in respect of this issue.

2. Denial of Cenvat Credit on altered invoices:
The appellants admitted altering invoices from M/s. CP Systems Pvt. Ltd. but argued that the alterations did not affect the total assessable value or service tax paid. The Tribunal noted that the services were indeed received, and service tax was paid by the service provider. The Tribunal found that the alterations were not material to the validity of the invoices and allowed the appeal on this count, confirming the genuineness of the transactions.

3. Classification of services provided to JSW Jaigad Port Ltd.:
The appellants classified their services under commercial or industrial construction services/works contract service and sought exemption under Notification No. 25/2007. The Tribunal found that the services provided were indeed works contract services, as the appellants supplied part of the materials and included the revenue from these projects in their VAT returns. Consequently, the Tribunal allowed the benefit of Notification No. 25/2007, setting aside the demand and penalties on this count.

4. Cenvat Credit on inputs used in works contract composition scheme:
The Tribunal noted that the appellants provided works contract services to JSW Energy, Ratnagiri, and availed composition scheme under works contract. The appellants claimed that the materials were used at JSW Jaigad site, not JSW Energy. The Tribunal remanded the matter to the original adjudicating authority to verify the facts with reference to the documents and records submitted by the appellants. If the goods were received at JSW Jaigad site, the credit should not be denied.

5. Demand of service tax on advances received:
The appellants paid the demanded service tax along with interest and 25% penalty within the prescribed period. The Tribunal found that the benefit of Section 73 (1A) read with subsection 73 (2) cannot be denied to the appellants, as they deposited the amount of duty demanded along with interest and 25% penalty within the prescribed time.

6. Imposition of penalty on the second appellant:
The Tribunal found that there was no provision for imposing a personal penalty on the director under Section 77 (2) of the Finance Act, 1994. The Tribunal noted that the proceedings against the co-noticees would not survive in respect of the compounded charges. Consequently, the penalty on the director was set aside, relying on the decision in the case of Diwan Rahul Nanda.

Conclusion:
The Tribunal allowed the appeals in respect of the first, second, third, and fifth issues, granting the benefit of Section 73 (1A) and setting aside the penalties. The fourth issue was remanded for verification of facts. The penalty on the second appellant was set aside, and the appeals were disposed of accordingly.

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