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2024 (1) TMI 581 - AT - Service TaxDemand of differential service tax - installation of towers by denying the benefit of abatement under notification no. 1/2006-ST dated 1.3.2006 along with equal amount of penalty under section 78 - demand under Rule 6(3) being 6%/8% of the value of exempted services rendered in the state of Jammu and Kashmir - denial of CENVAT credit - levy of penalty u/s 78 - extended period of limitation - penalty of Rs. 5,00,000/- imposed on the appellant under Rule 26(2) of the Central Excise Rules, 2002 and penalty u/s 78. Denial of abatement under notification no. 1/2006-ST and consequential demand - HELD THAT - So far as the inclusion of the value of the towers is concerned, the Explanation to entry no. 5 of the notification relevant to this case states that the gross amount includes the value of the plant, machinery and equipment and parts and any other material sold during the course of providing erection, commissioning or installation service. Since the towers are sold separately under a separate invoice and not during the course of providing the service, we find that the value of the tower need not be included. However, as the appellant had, undisputedly, availed CENVAT credit of input services, it cannot avail the benefit of the abatement under this exemption notification. The CBEC s Circular relied upon by the appellant does not carry its case any further as it was issued clarifying the scope of another exemption notification and it does not help the appellant s case - The appellant made an alternative claim that its service should be classified as works contract service under section 65(105)(zzzza) and it should be allowed to pay tax under Rule 2A (1) (ii) (A) of the Service tax (Determination of value) Rules, 2006 which the Commissioner had not considered. As the appellant s service was classified as erection, commissioning and installation service under section 65(105) (zzd) and it claimed exemption notification accordingly. The classification cannot change because the appellant s claim to an exemption notification was not accepted - this question is answered in favour of the Revenue and against the appellant. Demand under Rule 6(3) of the CCR - HELD THAT - Evidently, the services rendered in J K were not taxable at all as the provisions of service tax did not extend to that State. In other words, it was beyond the taxable territory. The appellant had wrongly taken CENVAT credit of input services of the service tax wrongly paid by its sub-contractor. Once this amount of Rs. 3,02,408/- is reversed, the requirement under Rule 6(1) of CCR is fully met and therefore, Rule 6(3) will not apply. According to the appellant, CENVAT credit of this amount has already been denied to it as a part of CENVAT credit of Rs. 13,45,364/-. Therefore, the demand of an amount under Rule 6(3) therefore, needs to be set aside - Needless to say that the appellant could not have taken credit of an amount paid under mistake of law because CENVAT credit can only be taken of the service tax paid and not of any amount paid. If service tax is not chargeable, what was paid was not service tax and there is no provision under the CCR to allow credit of any amount paid as service tax. If the amount was paid by the sub-contractor under the mistake of law or fact, it can claim refund of such an amount. Wrong availment of CENVAT credit - HELD THAT - CENVAT credit of an amount which is not service tax but erroneously deposited under mistake of law or fact is not service tax and credit of such an amount is not available under CCR. CENVAT credit on the invoices where the address of the head office or wrong address is mentioned cannot, be a ground to deny CENVAT credit. Where the service tax registration code is not mentioned in the invoices, the appellant claims to have cured this defect and therefore, it is not found that CENVAT credit can be denied. However, where the original copies of the invoices are not available, CENVAT credit cannot be allowed on the strength of photocopies because photocopies of invoices are not valid documents under Rule 9 of CCR to allow CENVAT credit. Allowing such a credit can result in utter chaos because several copies of any invoice can be made and credit can be taken on them - CENVAT Credit of the amount deposited by the sub-contractors for the services rendered in J K and the CENVAT credit on photocopies of invoices are not admissible is not admissible. Rest of the CENVAT Credit is admissible. Invoking extended period of limitation and imposition of penalty under section 78 of the Finance Act, 1994 - HELD THAT - Since the appellant had not disclosed the facts which were found from the appellant s own records when audited and investigated and since the appellant has been a long established company, the presumption of wilful suppression of facts was drawn in the impugned order. It is found that no legal basis for such a presumption. The appellant is only required to disclose such facts as are required in the ST-3 returns. If these returns require aggregate values of say, services rendered and service tax paid, there is no scope for the appellant to disclose more facts which to the department in its returns. The scheme of the service tax law is clear. The appellant is required to self-assess service tax, pay it and file returns. The central excise officer with whom the return is filed is required to scrutinize it. If no return is filed but the return is filed and the self assessment is not done correctly, the officer can make his best judgment assessment under section 72 and raise a demand. For this purpose, the officer can call for any records, etc. and the assessee is bound to provide them - From the SCN it is evident that all facts and figures were in the appellant s records but they were belatedly scrutinized by auditors and investigating officers and the jurisdictional central excise officer has either not scrutinized the returns or having scrutinized, not issued a demand under section 73 - the demand for extended period of limitation and the penalties under section 78 set aside. Penalty under Rule 26(2) of Central Excise Rules, 2002 - HELD THAT - This penalty was imposed by the Commissioner on the ground that the Faridabad office of the appellant tampered with the addresses to facilitate availment of CENVAT credit by the appellant s Rajasthan unit. As the CENVAT credit allowed on these invoices, the penalty under Rule 26(2) is set aside. Appeal allowed in part.
Issues Involved:
1. Demand of differential service tax and penalty under section 78. 2. Demand under Rule 6(3) for exempted services in Jammu and Kashmir. 3. Denial of CENVAT credit. 4. Imposition of penalties under section 78 of the Finance Act, 1994. 5. Invocation of the extended period of limitation. 6. Penalty under Rule 26(2) of the Central Excise Rules, 2002. Summary: Denial of Abatement under Notification No. 1/2006-ST and Consequential Demand: The appellant claimed abatement under notification no. 1/2006-ST, which was denied by the Commissioner because the value of the towers was not included in the installation charges and the appellant availed CENVAT credit of service tax paid on input services. The Tribunal upheld the denial of abatement, noting that the appellant had availed CENVAT credit on input services, which disqualified it from the exemption under the notification. Demand under Rule 6(3) of the CCR: The appellant provided services in Jammu and Kashmir, where service tax is not applicable. The Tribunal held that since the appellant reversed the CENVAT credit of Rs. 3,02,408/- taken for services erroneously taxed in J&K, Rule 6(3) does not apply. Therefore, the demand of Rs. 6,34,710/- under Rule 6(3) was set aside. Wrong Availment of CENVAT Credit: The denial of CENVAT credit of Rs. 13,45,364/- was upheld for amounts deposited by sub-contractors for services in J&K (Rs. 3,02,408/-) and credit taken on photocopies of invoices (Rs. 4,19,457/-). The Tribunal allowed the rest of the CENVAT credit, noting that minor discrepancies like address issues and missing service tax codes were not valid grounds for denial. Extended Period of Limitation and Penalty under Section 78: The Tribunal found no basis for invoking the extended period of limitation or imposing penalties under section 78, as there was no evidence of wilful suppression of facts by the appellant. The Tribunal noted that the facts were available in the appellant's records and discovered during audits, indicating a failure on the part of the department to scrutinize returns timely. Penalty under Rule 26(2) of Central Excise Rules, 2002: The penalty under Rule 26(2) was set aside as the Tribunal allowed the CENVAT credit on the invoices in question. Disposition of Appeals: - Appeal No. 52036 of 2014: Partly allowed, partly rejected, and remanded for recalculating demands within the normal period of limitation. The demand for the extended period and penalties under section 78 were set aside. - Appeal No. 52037 of 2014: Allowed, and the penalty under Rule 26(2) was set aside. Order Pronounced: The order was pronounced in open court on 10/01/2024.
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