2024 (7) TMI 270 - HC - Service Tax

Writ petition against the split decision / difference of opinion - Validity of sending the matter to Third Member - The similar issue has already been decided in various cases - CENVAT Credit - no service has been provided to the petitioner by the dealers or manufacturers - petitioner, as a provider of output service, can avail CENVAT input credit on the invoices generated by the dealers or not - doctrine of precedents - difference of opinion between Member (Judicial) and Member (Technical). HELD THAT - It is important to point out that the co-ordinate benches of the Tribunal, in several cases, have dealt with the aforesaid issue. In this connection, reference was made to the decision of the CESTAT, Chennai in the case of M/S. CHOLAMANDALAM MS GENERAL INSURANCE CO. LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI 2021 (3) TMI 24 - CESTAT CHENNAI , by the learned Senior Counsel for the petitioner. In that case, the assessee entered into agreements with car dealers and Insurance policies have been issued through dealer network. While so, the Credit availed by the Insurance company on the basis of invoices issued by dealers of motor vehicles has been questioned by the Commissioner of GST Central Excise. In the decision of the CESTAT, Mumbai in the case of ICICI LOMBARD GENERAL INSURANCE COMPANY LTD. VERSUS COMMISSIONER OF CGST AND CENTRAL EXCISE, MUMBAI CENTRAL 2023 (2) TMI 1093 - CESTAT MUMBAI , relied on the side of the petitioner, on the basis of the invoices issued by the automotive dealers, service tax was paid by the automotive dealer to the government and the service recipient availed CENVAT credit. However, the Commissioner of CGST and Central Excise, Mumbai not only questioned the availment of CENVAT credit, but also recovered it along with interest and penalty. When the denial of CENVAT credit and recovery of the same were questioned, the CESTAT, Mumbai, following the ratio laid down in Cholamandalam case, held that when tax had undisputedly been received by the Government from the automotive dealers, the denial of CENVAT credit is unreasonable and arbitrary. As per the principles enunciated by the Hon'ble Supreme Court in the case of Official Liquidator v. Dayanand and others 2008 (11) TMI 679 - SUPREME COURT , it is clear that High Court cannot sit in appeal in an earlier order passed by it in the same matter, which has already attained finality and set aside that order. Further, the doctrine of precedents is well explained by observing that a coordinate Bench of the High Court is bound by the order of another coordinate Bench where the order has attained finality and judicial discipline has to be maintained in this regard. The dissent expressed by the Member (Technical) of the Tribunal in derogation of the various orders passed by the coordinate benches of the Tribunal on the very same issue, cannot be countenanced - the very reference made to the third member to adjudicate an issue, which was already set at naught by the coordinate benches of the Tribunal, is unnecessary. The prejudicial portion of the order dated 25.07.2023 passed by the Member (Technical) of the CESTAT, is quashed - Petition allowed.

Summary

Issues Involved:
1. Validity of the CESTAT order dated 25.07.2023.
2. Eligibility of the petitioner to avail CENVAT credit on service tax charged by automobile dealers.
3. Impact of unsigned invoices on CENVAT credit eligibility.
4. Judicial propriety and adherence to precedent in tribunal decisions.

Issue-wise Detailed Analysis:

1. Validity of the CESTAT Order Dated 25.07.2023:
The petitioner, engaged in general insurance services, challenged the CESTAT order dated 25.07.2023, which was prejudicial due to a split verdict between the Judicial and Technical Members. The Member (Judicial) allowed the appeals, while the Member (Technical) dismissed them, leading to a reference to a third Member. The petitioner argued that the split verdict and subsequent reference were unnecessary as the issue had been settled by previous decisions of coordinate benches of the Tribunal and the jurisdictional High Court. The court found that the prejudicial portion of the CESTAT order was passed in derogation of established precedents and quashed it, emphasizing the need for judicial discipline and adherence to binding precedents.

2. Eligibility of the Petitioner to Avail CENVAT Credit on Service Tax Charged by Automobile Dealers:
The petitioner argued that the dealers provided infrastructure support services and paid service tax, which the Department had accepted for years without dispute. The Department's investigation concluded that the dealers, not being authorized insurance agents, could not solicit insurance business or receive commissions, and the invoices raised were a means to pass insurance commissions under the guise of services. The petitioner relied on several decisions, including the High Court's ruling in Modular Auto Ltd. and Tribunal decisions in Cholamandalam MS General Insurance Co. Ltd. and ICICI Lombard General Insurance Co. Ltd., which held that unless the assessment at the dealer's end is revised, the credit at the recipient's end cannot be denied. The court upheld this view, stating that the denial of CENVAT credit at the recipient's end without questioning the dealer's assessment was unjustified.

3. Impact of Unsigned Invoices on CENVAT Credit Eligibility:
The petitioner contended that the denial of CENVAT credit on unsigned invoices was untenable, as the tax was paid, and the invoices were not fake or bogus. The Department argued that the invoices did not conform to Rule 4A of the Service Tax Rules, 1994. The court referred to the Tribunal's decision in Automax vs. CCE Delhi, which held that credit cannot be denied merely due to incorrect descriptions in invoices if the duty paid and receipt of goods are undisputed. The court agreed with the petitioner, stating that the absence of signatures on invoices did not justify denying CENVAT credit.

4. Judicial Propriety and Adherence to Precedent in Tribunal Decisions:
The petitioner argued that the Tribunal failed to follow binding precedents set by coordinate benches and the jurisdictional High Court, leading to an arbitrary and perverse decision. The court emphasized the importance of judicial discipline, citing the Supreme Court's rulings in Union of India vs. Kamlakshi Finance Corporation Ltd. and East India Commercial Co. Ltd. vs. Collector of Customs, Calcutta, which mandate that coordinate benches must follow established precedents. The court criticized the Tribunal's deviation from settled law and reiterated that judicial propriety requires adherence to binding decisions. The court concluded that the reference to a third Member was unnecessary and quashed the prejudicial portion of the CESTAT order.

Conclusion:
The court allowed the writ petitions, quashing the prejudicial portion of the CESTAT order dated 25.07.2023. The court emphasized the need for judicial discipline and adherence to binding precedents, holding that the denial of CENVAT credit to the petitioner was unjustified without revising the dealer's assessment. The court also ruled that unsigned invoices did not warrant denying CENVAT credit.