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TMI Blog2018 (1) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Merely because the assessee here had provided the details on it's letter head, it would not entail any further, other or new inquiry mechanism or step to be taken by the revenue to make such reconciliation. It would make no material difference to the revenue. In so far as it is admitted to the revenue that the CENVAT credit that had been transferred to the manufacturing unit had arisen at its head office, mere non-issuance of the invoice bill/challan while transferring that CENVAT credit to another manufacturing unit (of the same assessee) appears to be a purely technical infringement arising from absence of form rather than absence of substance. It is the substance and contents of the documents that was relevant to be disclosed in the interest of revenue and not the form on which such details were required to be furnished. For instance, an invoice if issued is either wanting in necessary details or the details that are filled up are wrong, the assessee would not be entitled to any benefit - no prejudice appears to have been caused to the revenue merely on account of issuance of the letter by the assessee, as has been done in the instant case. Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Distributor ; name and address of the recipient; amount of CENVAT credit arising the amount of CENVAT credit distributed and; the amount of CENVAT that arose against the same, at the head office. Subsequently, upon an internal audit objection being raised, the aforesaid CENVAT credit was withdrawn in view of alleged non-compliance of Rule 7 and 9 of the CENVAT Credit Rules, 2004 (hereinafter referred to as CENVAT Rules) read with Rule 4A(2) of the Service Tax Rules, 1994 (hereinafter referred to as the Service Tax Rules). The audit objection appears to have been to the effect that the head office of the assessee i.e. the Input Service Distributor though had sufficient CENVAT credit available with it, it did not issue any invoice or bill or challan to the manufacturing unit (containing the prescribed details). Instead, the head office of the assessee/ Input Service Distributor merely issued a letter containing such details. Therefore, according to the audit objection, the requirement of the CENVAT Rules and Rule 4A of the Service Tax Rules had not been met. Hence, it was alleged, the CENVAT credit had been wrongly availed. The adjudicating authority reversed the credit take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'shall' and not 'may' while requiring of transfer of CENVAT credit against issue of an invoice or challan or bill. Responding to the above, learned counsel for the assessee submits, all particulars required under Rule 7 and 9 of CENVAT Rules read with Rule 4A of the Service Tax Rules had been submitted by the assessee and therefore the assessee had rightly been allowed CENVAT credit by the Tribunal. He submits that the purpose required to be served by issuance of an invoice or bill or challan of the CENVAT credit transferred by the Input Service Distributor to its manufacturing unit is to offer for scrutiny, details of the service tax paid and credit that may have arisen as a consequence thereto as also the credit component transferred. All such details had been disclosed by the assessee though on a letter head duly signed, fulfilled the purpose of the Act by providing all necessary details. Logically, it follows from such a submission that the word 'shall' used in Rule 4-A of the Service Tax Rules is directory/non-mandatory and so far as the assessee had disclosed all particulars and details required to be disclosed on such invoice, bill or chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard, Rule 4A(2) of the Service Tax Rules, reads as under: Rule 4A. Taxable service to be provided or credit to be distributed on invoice, bill or challan - (1)...... (2) Every Input Service Distributor distributing credit of taxable services shall, in respect of credit distributed, issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him, for each of the recipient of the credit distributed, and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following namely:- (i) the name, address and registration number of the person providing input services and the serial number and date of invoice, bill, or as the case may be, challan issued under sub-rule (1); (ii) the name and address of the said Input Service Distributor ; (iii) the name and address of the recipient of the credit distributed; (iv) the amount of the credit distributed: Provided that in case the Input Service Distributor is an office of a banking company or a financial institution including a non-banking financial company providing service to any person an invoice, a bill or, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. at p. 731 added: It is clear that the word ''shall' is not always used in a mandatory sense. There is abundance of authority to the contrary in cases where it has been held to be directory only. 13. It was thus that the word shall was held to be directory only, in that case, by Coutts Trotter, C.J., in Manikkam Pattar v. Nanchappa Chettiar [(1928) MWN 441] by Russel, J., in In re Rustom [(1901) ILR 26 Bom 396 : (1901) 3 Bom LR 653] by Venkatasubba Rao, J., in Jethaji Peraji Firm v. Krishnayya [(1929) ILR 52 Mad 648, 656] and by the Judicial Committee in Burjore and Bhavani Pershad v. Mussumat Bhagana [(1883) LR II IA 7] . 14. Now, Rules 8 and 8-A and the notification only lay down what lump sum payment has to be in each case, if a lump sum is being paid. The mandatory language is used to fix peremptorily the amount of the lump sum. Rules 8 and 8-A and the notification cannot be said to overreach the section to which they are subordinate and from which they must take their colour and meaning. If the Act creates an option, it cannot be negatived by the Rules. The Act and the Rules must be read harmoniously, and reading them so, it is plain that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive/mandatory or directory. Further, it was found that procedural provision would not be mandatory despite word 'shall' being employed, unless prejudice was caused. In that case a dispute had arisen whether the word 'shall' used in section 23(3) of the Representation of the Peoples Act, 1950 was imperative/mandatory or merely directory. Under that provision if satisfied, the Electoral Registration Officer shall direct the name of an applicant to be registered in the electoral roll. However that exercise was to be completed before close of time for filing nomination to the election proposed to be held for any constituency. Though, the Supreme Court found that prima facie, due to use of the word 'shall' the provision in question was worded as an imperative provision, yet, it did not conclude so on that consideration alone. The purpose and object of the Act and the particular provision were examined and in that light. The Supreme Court found that it was imperative/mandatory for the Electoral Registration Officer to finalise the electoral roll before lapse of time for filing nomination to the election as it had a direct bearing on the elections, their conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more, a provision in a statute which is procedural in nature although employs the word shall may not be held to be mandatory if thereby no prejudice is caused. (See Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur [AIR 1965 SC 895 : (1965) 1 SCR 970] , State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364 : 1996 SCC (L S) 717] , Venkataswamappa v. Special Dy. Commr. (Revenue) [(1997) 9 SCC 128] and Rai Vimal Krishna v. State of Bihar, (2003) 6 SCC 401. (emphasis supplied) Then in Dove Investments (P) Ltd. v. Gujarat Industrial Investment Corpn., (2006) 2 SCC 619 the Supreme Court again dealt with this issue in the context of the word 'shall' appearing in sections 108 and 111 of the Companies Act. In that case the company Dove Investments had obtained finance of ₹ 4.5 crores from Gujarat Industrial Investment Corporation against pledge of 25 lakhs shares. However, when the latter sought to enforce such security, the debtor Dove Investments (P) Ltd. resisted the claim and set up a defence in respect of 22 lakh shares pleading that the creditor could not enforce the security against those shares because the same had not been registered under section 108 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority of India [(1997) 9 SCC 132] this Court observed: (SCC p. 144, para 17) 17. The distinction of mandatory compliance or directory effect of the language depends upon the language couched in the statute under consideration and its object, purpose and effect. The distinction reflected in the use of the word ''shall' or ''may' depends on conferment of power. In the present context, ''may' does not always mean may. May is a must for enabling compliance with provision but there are cases in which, for various reasons, as soon as a person who is within the statute is entrusted with the power, it becomes duty to exercise. Where the language of statute creates a duty, the special remedy is prescribed for non-performance of the duty. In Craies on Statute Law (7th Edn.), it is stated that the court will, as a general rule, presume that the appropriate remedy by common law or mandamus for action was intended to apply. General rule of law is that where a general obligation is created by statute and statutory remedy is provided for violation, statutory remedy is mandatory. The scope and language of the statute and consideration of policy at time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be primary evidence of duty payment made by the assessee giving rise to CENVAT credit. Also, it being a case of transfer of credit only, not involving transfer or movement of any goods or service, the normal procedural requirements attached to clearance of goods were not attracted in the present case inasmuch as admittedly there is no clearance of any goods etc. to be verified or recorded. Then, the CENVAT Rules read with Service Tax Rules do not prescribe or require primary evidence of CENVAT credit arising to be transmitted by the Input Service Distributor /head office to it's manufacturing unit where such credit is to be utilised. Those Rules only require details of such existing CENVAT credit to be transmitted. Obviously, the eventual utilisation would have to be equal to and reconcile with the exact/correct figures of CENVAT credit available with the Input Service Distributor before it's transfer to the manufacturing unit. However, as noted above, there is no allegation of excess claim made by the assessee. In such a situation, whether through invoice, bill or challan or through a letter, so long as all the details prescribed under the Rules (noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the departmental authorities for reason of transfer of CENVAT credit having been evidenced on a letter and not an invoice or bill or challan. Thus, in so far as it is admitted to the revenue that the CENVAT credit that had been transferred to the manufacturing unit had arisen at its head office, mere non-issuance of the invoice bill/challan while transferring that CENVAT credit to another manufacturing unit (of the same assessee) appears to be a purely technical infringement arising from absence of form rather than absence of substance. Therefore, as to purpose and prejudice, we find that on one hand no prejudice would be caused to the revenue because the invoice or bill or challan had not been issued by the assessee under Rule 4A of the Service Tax Rules and on the other, upon full details being available (giving reference of the duty payment and it's consequential effect of CENVAT credit having arisen), the purpose of Rule 4A of Service Tax Rules would be fulfilled inasmuch as the verification and reconciliation would be done of the transactions and documents that are to be mentioned/recorded in the invoice or bill or challan. Verification of such invoice or bill or cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s business organisation and structure be required to be utilised at different locations/ manufacturing units. Then, Gujarat High Court in C.C.E. C., Vadodara-II Vs. EUPEC-Welspun Pipe Coatings India Ltd. reported in 2010 (260) E.L.T. 381 (Guj.) had the occasion to consider whether requirement of Rule 9(2) of CENVAT Rules was satisfied by the assessee in that case though it had instead of endorsing the bill of entry itself, had issued a separate certificate/declaration to the same effect i.e. of payment of duty and utilisation of goods. In this context, it held: 2.1 The Tribunal has further observed that according to proviso to Rule 9(2), the jurisdictional Assistant Commissioner can allow CENVAT Credit if he is satisfied that the duty has been paid and goods have been actually used. The Tribunal found, as a matter of fact, that all these details are available except the name and address of the factory on the bill of entry. The only omission was that instead of endorsing the bill of entry itself in name of the assessee, the importer has issued separate certificate/ declaration. The Tribunal, therefore, took the view that the same has to be considered as part of the bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all details required by the Rules are disclosed by the assessee though in the shape of the letter and the same are true and complete in every respect, the revenue would not be prejudiced merely because the same had not been issued in the form of an invoice or bill or challan. Therefore, no prejudice appears to have been caused to the revenue merely on account of issuance of the letter by the assessee, as has been done in the instant case. Also, as to consequence of non-compliance of the Rules in question, in view of discussion made above, we do not find any statutory intent to either express or implied that may persuade us to opine that the Rule making body intended to visit their non-compliance of Rule 4A of the Service Tax Rules with specific consequence/penalty. Therefore, the provisions are clearly non-imperative or non-mandatory. Further, the Rules in question are purely machinery provisions. Such provisions being directory in nature we do not find any prejudice being caused to the revenue if assessee is allowed to make substantial compliance. Substantial compliance may be established if details furnished by the assessee on the letter are found to be true and complete up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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