2024 (8) TMI 92 - AT - Service Tax

CENVAT Credit - service tax paid by them on the invoices issued by automobile dealers - it is the case of the department that the dealers have been providing insurance services to the appellants illegally against the provisions of Insurance Act, 1938 and IRDA Regulations - rejection on the ground that computer generated invoices are not signed - rejection of credit on the ground that the invoices issued by M/s. TVS Sundaram Motors (service provider) contains a different description of the service - Difference of Opinion. HELD THAT - In view of the difference of opinion between the Members, the questions framed for resolving the difference - As the different of opinion has been set aside by the Hon'ble High Court, the order passed by Member (Judicial) as recorded would be applicable. Follwing was held by the member (Judicial). Whether the appellant is eligible to avail credit of the service tax paid by them on the invoices issued by automobile dealers? - HELD THAT - In the case on hand, the department does not dispute the payment of tax. The department has not initiated any proceedings against the dealers alleging that there are no services provided and that no tax has to be paid by them. The SCN is issued to the appellant alleging that the credit availed on such services is ineligible. The Cenvat Credit Rules,2004 provide for a mechanism to the service provider to avail and utilize credit of the tax paid on input services used for providing output services. This credit scheme ensures smooth flow of duties , eliminating the cascading effect of duties /taxes. The very same issue came up for consideration before the Tribunal in the case of Cholamandalam MS General Insurance Company Ltd. 2021 (3) TMI 24 - CESTAT CHENNAI . The facts and allegations are identical. The Tribunal followed the decision of the Jurisdictional High court in the case of Modular Auto Ltd. 2018 (8) TMI 1691 - MADRAS HIGH COURT and it was held that ' It is not disputed that the dealer has paid Service Tax on the services described in the invoices. If that be so, the denial of credit at the recipient s end cannot be justified by the Department without reopening the assessment at the dealer s end.' Similar view was taken by the Tribunal in the case of ICICI Lombard General Insurance Company Vs CCE, Mumbai Central 2023 (2) TMI 1093 - CESTAT MUMBAI . It is held that after appreciating the facts and evidence, and by applying the ratio in the above decisions the denial of edit cannot be justified. Denial of credit on the ground that computer generated invoices are not signed - HELD THAT - The second proviso to the Rule 9 states that if the document does not contain all the particulars, but contains the details of duty or service tax payable, the description of goods or taxable service, service tax registration number, person issuing the invoice etc., the Deputy Commissioner or the Assistant Commissioner of Central Excise can verify the same and if satisfied can allow the credit. This means, when the tax paid is in order, the credit has to be allowed even though the invoice may be technically deficient for want of some particulars. In the present case, it is not disputed that the tax has been paid by the appellant. Merely because the computer generated invoice does not contain the signature, it cannot be said that the credit is ineligible. Further, for the period after 2015, the Board has clarified that signatures are not required in the case of computer generated format - credit allowed. CENVAT Credit - rejection of credit on the ground that the invoices issued by M/s. TVS Sundaram Motors (service provider) contains a different description of the service - HELD THAT - It is not disputed that the tax has been paid as per the invoices. Appellant who is the service recipient cannot be found fault for the description mentioned in the invoice maintained by the service provider. Appellant has no control over the accounts maintained by the service provider (dealer). The credit at the recipient s end cannot be denied for this reason. The denial of credit on this reason is not justified. The impugned orders are set aside - Appeal allowed.

Issues Involved:
1. Irregular availment of CENVAT credit based on invoices issued by automobile dealers and manufacturers.
2. Denial of CENVAT credit on unsigned computer-generated invoices issued by Honda Cars India Ltd.
3. Denial of CENVAT credit due to discrepancies in invoices issued by TVS Sundaram Motors.
4. Invocation of extended period of limitation for issuing the Show Cause Notice.
5. Imposition of penalties under Section 78 of the Finance Act, 1994.

Detailed Analysis:

1. Irregular Availment of CENVAT Credit Based on Invoices Issued by Automobile Dealers and Manufacturers:
The department alleged that the appellant, M/s. Royal Sundaram Allianz Insurance Company Ltd., availed CENVAT credit based on invoices issued by automobile dealers for services that were never actually provided. The dealers, not being agents or brokers of the insurance companies, were not permitted to solicit insurance business or receive commissions. The invoices described services as 'Data processing and Policy servicing related activities,' which were concluded to be a guise for passing over insurance commissions. The appellant argued that the dealers paid service tax on these invoices and that the department did not dispute the nature of the services at the dealers' end. The Tribunal, relying on previous judgments, held that if the service tax paid by the dealers is not disputed, the denial of credit at the recipient's end cannot be justified without reopening the assessment at the dealer's end.

2. Denial of CENVAT Credit on Unsigned Computer-Generated Invoices Issued by Honda Cars India Ltd.:
The department denied CENVAT credit on invoices issued by Honda Cars India Ltd. because they were unsigned. The appellant contended that the service tax was paid, and the credit could not be denied on technical grounds. The Tribunal agreed with the appellant, stating that when the tax paid is not in dispute, the credit cannot be denied merely because the invoices were unsigned. The Tribunal cited decisions where technical deficiencies in invoices did not warrant denial of credit.

3. Denial of CENVAT Credit Due to Discrepancies in Invoices Issued by TVS Sundaram Motors:
The department found discrepancies in invoices issued by TVS Sundaram Motors, where one set described the services as 'Data processing and Policy servicing services' and another set as 'additional incentive.' The appellant argued that they were unaware of the second set maintained by the dealer. The Tribunal held that the appellant could not be penalized for discrepancies in the dealer's invoices and that the credit denial was unjustified.

4. Invocation of Extended Period of Limitation for Issuing the Show Cause Notice:
The appellant argued that the extended period of limitation was not invocable as there was no suppression of facts with intent to evade duty. The Tribunal found that the entire scheme pointed to fraud, collusion, and willful misstatement by the appellant. The extended period for issuing the Show Cause Notice was correctly invoked due to the deliberate intent to evade duty.

5. Imposition of Penalties Under Section 78 of the Finance Act, 1994:
The appellant contended that penalties were not warranted as the issue was technical. The Tribunal disagreed, stating that the appellant knowingly availed ineligible CENVAT credit. The imposition of penalties was justified due to the deliberate act of fraud by the appellant.

Final Judgment:
The Tribunal allowed the appeals, setting aside the impugned orders and granting consequential relief. The decision was based on the findings that the credit denial was unjustified without disputing the service tax paid by the dealers, and technical deficiencies in invoices did not warrant credit denial. The extended period of limitation was correctly invoked, and penalties were justified due to the deliberate act of fraud by the appellant.

← Previous Next →