2024 (11) TMI 991 - AT - Service Tax

Denial of CENVAT credit - expenses incurred at unregistered branches - Appellant undertakes the services of the Technical Testing Analysis Service from the branches that are performed on the blood samples of the Volunteers obtained during the human trials - IP molecule which is administered to the Volunteers is sometimes mixed with ancillary products. Study of the samples are sent to the Ahmedabad office from where final report is prepared - appellant did not obtain centralised registration for three branches namely Mumbai, Nadiad and Mehsana, they fail to prove that the appellant was paying the Service Tax for the services at Ahmedabad for these branches HELD THAT - We find that though the appellant at Ahmedabad did not obtain the centralised registration but the overall business is accounted for at Ahmedabad and depending on the nature of the activity i.e. Technical Testing Analysis Service, which were performed on the sample of the volunteers obtained during human trials. Since, this nature of activity has to be carried out at different places, but the same is carried out by the appellant at Ahmedabad only. Therefore, merely because of obtaining the blood samples of volunteers at different places such as Mumbai, Nadiad and Mehsana but the final study of the samples are carried out at Ahmedabad office, where the final analysis report is prepared. For all the activities, as regards the expenses, the Ahmedabad office only making the payment for those expenses. Therefore, all the activities carried out irrespective at different places such as Mumbai, Nadiad and Mehsana, but same are accounted for and carried out from Ahmedabad only. Therefore, there is no reason to deny the credit in the peculiar facts of the present case. Centralized registration - Revenue's contention that the appellant have not obtained the centralised registration, for this reason Cenvat credit cannot be denied as held in catena of the judgments that for the purpose of availment of Cenvat credit registration is not prerequisite. The only criteria to allow the Cenvat credit on any input service is that the service should be used in or in relation to output service. The service should be tax paid. These criteria is not under dispute. The appellant have centralised accounting at Ahmedabad only. Therefore, even though the part of the activity are carried at different places but for all the activities of different places, the accounting is done at Ahmedabad office only. Therefore, in our considered view there seems to be no reason to deny the Cenvat credit. This issue has been considered by this Tribunal in the case of Manipal Advertising Services Pvt Ltd 2009 (10) TMI 434 - CESTAT, BANGALORE wherein the Tribunal held that if a person is discharging service tax liabilities from his registered premises, the benefits of Cenvat Credit on the service tax paid by the service providers cannot be denied to the assesse only on the ground that the said services are in the name of branch offices. There is no dispute that the branch offices are not registered with the Service Tax Authorities and they are not discharging service tax liabilities. Since, the entire service tax liabilities is of Ahmedabad office, all the activities irrespective carried out at different places, are ultimately attributed to the Ahmedabad office only. Therefore, availment of Cenvat credit at Ahmedabad is absolutely in order and as per the law. Even though there is no centralised registration at Ahmedabad office but on the fact that all the services even if received at branch offices for same is attributed to the final output service of Ahmedabad. Therefore, in our considered view the Cenvat credit is admissible to the appellant. Demand on account of difference of taxable income as appearing in the profit and loss account, vis-a-vis taxable value declared in the half yearly ST-3 return - As we find that firstly, merely on the basis of difference between the ST-3 return and books of accounts, the confirmation of demand is not sustainable unless until the Revenue establish that the difference is on account of any service and the nature of service if any performed. Therefore, on this ground itself, the demand of Rs. 1,50,829/- is not sustainable. Further we find that the appellant have provided the reconciliation statement, according to which the appellant paid service tax on the excess amount coming after the reconciliation. Therefore, there is no short payment of service tax. We have perused the reconciliation statement as Annexed-2 of the appeal memo. Accordingly, on this count also demand is not sustainable. We place reliance on the decision in the case of Chartered Logistics Ltd 2023 (7) TMI 770 - CESTAT AHMEDABAD dealing with the situation where there is a demand on difference of value shown in books of accounts and ST-3 return. Merely on the difference between the value mentioned in books of accounts and ST-3 returns, demand of service tax cannot be confirmed. Demand on the premise of totaling mistake and short payment of service tax to that extent - We find that the appellant have provided the explanation before the first Appellate Authority and as per the statement in Annexed at page No. 19 of the appeal it clearly shows that the appellant have correctly paid service tax on the taxable service and there is no calculation mistake as alleged by the revenue. Therefore, on this ground also the demand is not sustainable. Demand on the basis of debit notes issued by Wockhardt Ltd the allegation of the department is that the appellant could not provide the proof of payment of service tax to the Government Exchequer. We find that the appellant have submitted that they have paid the service tax during the year 2019 and produced the documents evidence in that respect. We fail to understand that despite giving this documentary evidence which clearly show the payment of service tax, the Learned Commissioner (Appeals) for no reason discarded such documentary evidence, only on the basis that the same unsigned. It is the submission of the appellant that though they did not pay the service tax immediately upon issuance of debit notes in the month of July,2008. Since, the appellant have received money subsequently from Wockhardt Ltd., thereafter they paid the service tax with the department at the time of receipt of amount. I am convinced with the submission of the appellant which is supported by the documentary evidence. Therefore there was no reason for Learned Commissioner (Appeals) to uphold the demand. Hence, the same is not sustainable. Invoking extented period of Limitation - We find that the period involved for the present matter is 2008-09 and the show cause notice has been issued on 22.10.2013. Hence, the entire demand is under extended period. In this regard we find that the appellant obtained service tax registration and the department had conducted various audits from the date of registration. The entire data on the basis of which the service tax demand was raised in the present case were retrieved from the existing books of accounts of the appellant. Therefore, there is no suppression of fact or any mala fide intention with intend to evade payment of duty on the part of the appellant. Therefore, in the facts of the present case also hold that the demand is not sustainable on the ground of limitation also. The demands are not sustainable on merit as well as on limitation.

Summary

Issues Involved:

1. Whether the Appellant rightly claimed CENVAT credit of Rs.10,25,059/- for expenses incurred at unregistered branches.
2. Whether the demand of service tax of Rs.1,50,829 based on reconciliation of income with books of account and ST-3 returns was sustainable.
3. Whether there was a totalling mistake leading to short payment of service tax of Rs.67,190.
4. Whether demand of service tax of Rs.2,02,902 is recoverable based on debit notes issued to M/s. Wockhardt Ltd.
5. Whether the larger period of limitation can be invoked in the absence of wilful misstatement, suppression, or mala fide intention.

Detailed Analysis:

1. CENVAT Credit Claim:
- The Appellant claimed CENVAT credit for expenses incurred at branches in Mumbai, Nadiad, and Mehsana, which were unregistered. The Commissioner (Appeals) denied the credit on the grounds that centralized registration was not obtained, and the Appellant failed to prove service tax was paid at Ahmedabad for these branches. The Tribunal found that the final analysis and accounting were conducted at the Ahmedabad office, and all services were attributed to this location. It was held that centralized registration is not a prerequisite for availing CENVAT credit, provided the service is used in relation to output service and is tax-paid. The Tribunal relied on precedents, including Manipal Advertising Services Pvt Ltd, to conclude that the Appellant was entitled to CENVAT credit.

2. Service Tax Demand of Rs.1,50,829:
- The demand was based on discrepancies between the taxable income in the Profit and Loss Account and the ST-3 returns. The Appellant provided a reconciliation statement showing service tax was paid on the excess amount, negating any short payment. The Tribunal held that the demand was unsustainable as the Revenue failed to establish that the discrepancy was due to any service performed. The decision in Chartered Logistics Ltd supported the view that mere differences in accounting records do not justify a service tax demand.

3. Totalling Mistake and Short Payment of Rs.67,190:
- The Commissioner (Appeals) upheld the demand based on a totalling mistake in calculating the value of services. The Appellant provided a statement demonstrating correct payment of service tax, and the Tribunal found no calculation error. Consequently, the demand was deemed unsustainable.

4. Service Tax Demand of Rs.2,02,902 on Debit Notes:
- The demand was based on the Appellant's failure to provide proof of service tax payment for amounts collected from Wockhardt Ltd. The Appellant submitted evidence of tax payment during 2009-10, which was disregarded by the Commissioner (Appeals) due to an unsigned annexure. The Tribunal accepted the Appellant's explanation and evidence, noting that service tax was paid upon receipt of payment from Wockhardt Ltd. The demand was thus found unsustainable.

5. Invocation of Larger Period of Limitation:
- The Tribunal addressed the issue of limitation, noting that the demand was raised for the period 2008-09 with a show cause notice issued in 2013. The Tribunal found no evidence of suppression of facts or intent to evade tax, as the data was derived from the Appellant's existing records. Citing judgments such as Pahwa Chemicals Pvt. Ltd and Continental Foundation Joint Venture, the Tribunal concluded that the extended period of limitation was not justifiable, and the demand was time-barred.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal and ruling that the demands were unsustainable on both merits and limitation grounds. The judgment emphasized the importance of centralized accounting and the absence of statutory requirements for centralized registration in availing CENVAT credit, as well as the necessity for clear evidence when invoking extended limitation periods.