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2021 (3) TMI 24 - AT - Service TaxCENVAT Credit - duty paying documents - credit availed by General Insurance Companies on the basis of invoices issued by dealers of motor vehicles containing description of services which were never provided by them - allegation of the Department is that no services have been provided by the dealers to the appellant as per the invoices and therefore, the appellant is not eligible to avail credit of the Service Tax reflected in this invoices - HELD THAT - The case of the Department is that the payout paid by the appellant to the dealers on the OD premium collected by the dealers from the customers is camouflaged as service provided by the dealers to the appellant; that therefore, the services contained in the invoices have actually not been provided by the dealers to the appellant and thus, CENVAT Credit is not eligible. Though in the Show Cause Notice the main allegation is that the description of services in the documents on which credit has been availed is not correct, at the time of adjudication, the main finding is that no services have been provided by the dealers to the appellant and that therefore credit is not eligible. At this juncture, it needs to be pointed out that the Department has no dispute with the Service Tax collected from the appellant by the dealer and remitted to the Government. The assessment of Service Tax paid at the dealer s end has not been disturbed/questioned by the Department; only the credit availed at the service recipient s end has been questioned by issuing the present Show Cause Notice. The impugned order cannot sustain and requires to be set aside - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of CENVAT Credit availed by the appellant on the basis of invoices issued by car dealers. 2. Correctness of the description of services in the invoices. 3. Alleged violation of IRDAI guidelines. 4. Applicability of the extended period of limitation for issuing the Show Cause Notice. 5. Whether the Department can deny credit at the service recipient’s end without questioning the service tax assessment at the service provider’s end. Detailed Analysis: 1. Eligibility of CENVAT Credit: The appellant, a General Insurance Company, availed CENVAT Credit on service tax paid on invoices issued by car dealers. The Department alleged that no services were provided by the dealers to the appellant, making the credit ineligible. The appellant argued that the services provided fell under 'Business Support Services' and that the service tax was duly paid and collected, making the credit valid. 2. Description of Services in Invoices: The Department contended that the invoices issued by the dealers described services that were never provided, such as "computing network connectivity through extranet, Internet space, Furniture and Fixtures, consumables, salary of staff, computers," etc. The appellant countered that the services described were indeed provided and necessary for their business operations. The Department did not dispute the service tax collection but questioned the credit availed based on these descriptions. 3. Alleged Violation of IRDAI Guidelines: The Department alleged that payouts to dealers violated IRDAI guidelines. The appellant referred to a letter from IRDAI recognizing such outsourcing arrangements, thus negating any violation. 4. Extended Period of Limitation: The Show Cause Notice was issued on 14.10.2015 for the period from 2010 to 2015. The appellant argued that the extended period of limitation was not applicable as there was no suppression of facts or intent to evade tax. Previous Show Cause Notices on similar issues had been resolved in favor of the appellant, indicating no intent to evade tax. 5. Department’s Stand on Service Tax Assessment: The Department accepted the service tax paid by the dealers but denied the credit at the appellant's end without reopening the assessment at the dealer's end. The Tribunal referenced the Hon'ble High Court's decision in M/s. Modular Auto Ltd., which held that unless the assessment at the service provider's end is revised, the credit at the recipient's end cannot be denied. Conclusion: The Tribunal found that the Department's approach of accepting service tax at the dealer's end while denying credit at the recipient's end was unjustified. Following the precedent set by the Hon'ble High Court in M/s. Modular Auto Ltd., the Tribunal held that the impugned order could not sustain without revising the assessment at the dealer’s end. The appeal was allowed with consequential reliefs as per law. Order: The impugned order was set aside, and the appeal was allowed with consequential reliefs, if any, as per law.
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