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2022 (7) TMI 194 - AT - Service TaxRecovery of CENVAT Credit alongwith interest and penalty - input services received by SEZ unit - benefit of exemption notification not sought - demand of under proviso to Section 73(1) of the Finance Act,1994, with interest and penalty on rent-a-cab service - reverse charge mechanism - Penalty imposed under section 73(4A) of the Finance Act - Recovery of amount of CENVAT credit taken on various input services along with interest - Disallowance of CENVAT credit taken on service tax paid on input services received by the SEZ unit - HELD THAT - In the present case, the Exemption Notifications dated 01.03.2011 and 30.06.2012, granted only conditional exemption from payment of service tax. The appellant could, therefore, forego such exemption and claim benefit of CENVAT credit on the same amount of service tax paid on input services as would have been available as refund to an SEZ Unit - It is true that the Notification dated 10.07.2013, which superseded the earlier Exemption Notifications dated 01.03.2011 and 20.06.2012, contained similar provisions as in the earlier Notifications and also extended similar benefit by way of refund of the service tax paid on input services used for authorized operations of an SEZ Unit and that it also expressly clarified in paragraph 5 that an SEZ Unit shall have the option not to avail this exemption and instead take CENVAT credit on the specified services in accordance with the Credit Rules, but this Notification merely clarifies the position and would, therefore, be applicable retrospectively for the period when the appellant had taken the CENVAT credit of service tax paid on input services. In this connection, reliance can be placed on the judgment of the Supreme Court in BELAPUR SUGAR ALLIED INDUS. LTD. VERSUS COLLR. OF C. EX., AURANGABAD 1999 (4) TMI 79 - SUPREME COURT . The issue involved was whether an assessee would be entitled to duty reduction available under an amending Notification before the date of issue of that Notification. The Supreme Court held that denial of the Exemption Notification for the period prior to the date of the amending Notification shall defeat the object and purpose of the Notification itself since the purpose of both the original and the amending Notifications was to give incentive for increasing production of goods which would be effectively served only if the amending Notification was made available to the prior period as well. In the present case, the appellant is not claiming the benefit of the Exemption Notification, but is claiming CENVAT credit on the service tax paid on input service received by the appellant - the finding recorded by the Commissioner (Appeals) disallowing CENVAT credit taken on service tax paid on input services received by the SEZ unit on the ground that the SEZ Unit could only have opted for exemption by way of refund of such service tax cannot be sustained. Service tax liability under reverse-charge mechanism on rent-a-cab services - HELD THAT - The appellant pointed out that the expenses relating to rent-a-cab services were initially accounted in the ledger named 211402 STF-WEL HIRE OF VEHICLES and later transferred to the relevant heads of expenses by way of re-classification. According to the appellant, this re-classification of expenses has no bearing on the total value of rent-a-cab services which had been correctly computed and duly offered to tax by the appellant, as would be evident from the Service Tax returns filed by the appellant for the period April to September 2013 and October 2013 to March 2014. It needs to be noted that the total value of taxable services indicated in the chart submitted by the appellant to the Audit team was Rs. 3,44,67,299/-, and 40% of this amount for the purpose of abatement is Rs. 1,37,86,920/-, which is the amount on which the appellant had paid the applicable service tax - It is, therefore, clear that additional demand of service tax is claimed on the amount on which service tax has already been paid by the appellant. This demand has been computed by wrongly interpreting an internal ledger item. The Commissioner (Appeals) failed to appreciate this factual position - demand cannot be sustained. Penalty imposed under section 73(4A) of the Finance Act - Amount of service tax with interest paid before issuance of SCN - HELD THAT - Section 73(4A) and the Explanation to Section 73 of the Finance Act provide that no penalty shall be imposed if the assessee has paid the amount of service tax along with interest before the service of the show cause notice, whether on the basis of his own ascertainment or on the basis of ascertainment by the Department - The demand of penalty under section 73(4A) of the Finance Act is, therefore, without any basis and the confirmation deserves to be set aside. Penalty imposed under rule 15(3) of the Credit Rules and interest under rule 14 of the Credit Rules - appellant had not made the payment in respect of this invoice till it accepted this mistake and reversed the CENVAT credit taken by voucher - show cause notice contained demands of interest under rule 14 of the Credit Rules read with section 75 of the Finance Act and penalty under rule 15 (3) of the Credit Rules read with section 78 of the Finance Act - HELD THAT - It is not disputed by the Department that the appellant had reversed the CENVAT credit wrongly taken by the appellant through voucher dated 01.07.2014, and this fact is reflected in the show cause notice. It cannot also be disputed three months from the date of the invoice would expire on 01.0.2014. The appellant had, therefore, complied with the provisions of rule 4 (7) of the Credit Rules - when rule 4 (7) of the Credit Rules has been complied with, there is no question of any delay warranting payment of interest by the appellant under rule 14 of the Credit Rules. Similarly, the provisions of rule 15 (3) of the Credit Rules have no application for two reasons. The first is that there is no wrongful taking or utilisation of credit by the appellant, and secondly there is no allegation raised or material relied upon with respect to fraud, collusion, wilful mis-statement, suppression of facts or intent to evade payment of service tax on the part of the appellant - the demand of interest and penalty on the CENVAT credit taken and later reversed by the appellant in accordance with the provisions of rule 4 (7) of the Credit Rules could not have been confirmed. Recovery of amount of CENVAT credit taken on various input services along with interest - inadmissible input services - nexus with out put services or not - Management or Business Consultant services - Maintenance or repair services - Courier services - Storage and warehouse services - Technical Testing and Analysis services - HELD THAT - The disallowance of CENVAT credit appears to be in respect of five input services namely, Management or Business Consultant services, Maintenance or repair services, Courier services, Storage and warehouse services and Technical Testing and Analysis services - Learned counsel for the appellant pointed out how the five input services were used in provision of Information Technology services to the customers and also demonstrated the nexus between the input services and the output service. Learned counsel also pointed out that the definition of input service in rule 2 (l) of the Credit Rules, as applicable for the relevant period, is an inclusive definition, and that none of the five input services utilised by the appellant fell within any of the exceptions in this rule. The Order-in-Original or the Order-in-Appeal have not considered the submissions made by the appellant and in fact merely reproduce the words of the audit letter dated 14.10.2014 and the show cause notice dated 31.03.2016. There is no mention of the nature of the input services on which credit has been disallowed, nor any reason has been given why these services do not have a nexus with the output service of the appellant - This issue would, therefore, have to be remitted to the Commissioner (Appeals) to decide the same in the light of the reply submitted by the appellant. Appeal allowed in part and part matter on remand.
Issues Involved:
1. Disallowance of CENVAT credit taken on service tax paid on input services received by the SEZ unit. 2. Service tax liability under reverse-charge mechanism on rent-a-cab services. 3. Penalty imposed under Section 73(4A) of the Finance Act, 1994. 4. Penalty imposed under Rule 15(3) of CENVAT Credit Rules read with Section 78 of the Finance Act, 1994 and Interest under Rule 14 of CENVAT Credit Rules read with Section 75 of the Finance Act, 1994. 5. Recovery of amount of CENVAT credit taken on various input services along with interest. Detailed Analysis: I. Disallowance of CENVAT credit taken on service tax paid on input services received by the SEZ unit: The appellant availed and utilized CENVAT credit on service tax paid on input services received in its SEZ unit during the period from October 2011 to June 2013. The Department disallowed this credit on the ground that the SEZ unit could only claim exemption by way of refund prior to the Notification dated 01.07.2013. The Tribunal noted that the Department did not dispute the eligibility of the services for CENVAT credit. The Tribunal referred to the Notifications dated 01.03.2011 and 20.06.2012, which allowed SEZ units to either claim exemption by way of refund or take CENVAT credit. The Tribunal cited the Delhi High Court's decision in Commissioner of Central Excise vs. Grand Card Industries, which held that an assessee could choose between availing exemption or taking credit. The Tribunal also referred to the Karnataka High Court's decision in Commissioner of Central Excise, Bangalore-II vs. Federal Mogul TPR India Ltd., which supported the same view. The Tribunal concluded that the appellant could forego the exemption and claim CENVAT credit on the service tax paid on input services. The Notification dated 10.07.2013, which clarified the option to take CENVAT credit, was held to be applicable retrospectively. The Tribunal set aside the disallowance of CENVAT credit. II. Service tax liability under reverse-charge mechanism on rent-a-cab services: The Department demanded service tax of Rs. 7,59,918/- with interest and penalty on the ground that the appellant had recovered expenses on rent-a-cab services from its customers but had not paid service tax under the reverse-charge mechanism. The appellant explained that the amount of Rs. 1,72,70,301/- shown in the chart was a re-classification of expenses and not an actual recovery from customers. The Tribunal found that the appellant had correctly computed and paid service tax on the value of rent-a-cab services, as shown in the service tax returns. The Tribunal held that the additional demand was based on a misinterpretation of an internal ledger item and set aside the demand. III. Penalty imposed under Section 73(4A) of the Finance Act, 1994: The Department imposed a penalty under Section 73(4A) of the Finance Act, 1994, for belated payment of service tax of Rs. 75,555/- under the reverse charge mechanism. The appellant had paid the service tax with interest before the issuance of the show cause notice. The Tribunal referred to Section 73(3) and Explanation 2, which provide that no penalty shall be imposed if the service tax and interest are paid before the issuance of the show cause notice. The Tribunal set aside the penalty. IV. Penalty imposed under Rule 15(3) of the CENVAT Credit Rules read with Section 78 of the Finance Act, 1994 and Interest under Rule 14 of the CENVAT Credit Rules read with Section 75 of the Finance Act, 1994: The appellant had taken CENVAT credit on an invoice dated 31.03.2014 but had not made the payment until it reversed the credit on 01.07.2014. The Department demanded interest and imposed a penalty. The Tribunal noted that the appellant had reversed the credit within three months as required under Rule 4(7) of the CENVAT Credit Rules. The Tribunal held that there was no wrongful taking or utilization of credit and no allegation of fraud or intent to evade payment. The Tribunal set aside the demand for interest and penalty. V. Recovery of amount of CENVAT credit taken on various input services along with interest: The Department disallowed CENVAT credit on various input services during the audit for 2013-14, considering them inadmissible. The appellant explained the nexus between the input services and the output services and argued that the services fell within the inclusive definition of "input service" under Rule 2(l) of the CENVAT Credit Rules. The Tribunal noted that the Order-in-Original and the Order-in-Appeal did not consider the appellant's submissions and merely reproduced the audit letter and show cause notice. The Tribunal remitted the issue to the Commissioner (Appeals) for a fresh decision considering the appellant's reply. Conclusion: The Tribunal set aside the confirmation of demands under heads I, II, III, and IV. The demand under head V was remitted to the Commissioner (Appeals) for a fresh decision. The appeal was allowed to the extent indicated.
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