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TMI Blog2022 (10) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... R PER: SANJIV SRIVASTAVA These appeals are directed against Orders-in-Original No. PUN-EXCUS-001-COM-018/17-18 dated 12.03.2018 and No. PUN-EXCUS-001-COM-022/18-19 dated 24.12.2018 both passed by Commissioner of Central Excise GST, Pune-I. By the impugned orders, the Commissioner has held as follows:- Order-in-Original No. PUN-EXCUS-001-COM-018/17-18 dated 12.03.2018 ORDER a) I determine and confirm the demand of CENVAT Credit amounting to Rs. 94,65,20,833/- (Rupees Ninety four crores sixty five lakhs twenty thousand eight hundred and thirty three only) being the ineligible CENVAT Credit availed and utilized by Ms Bajaj Allianz General Insurance Company Limited as discussed above under the provisions of Rule 14(1)(ii) of the CENVAT Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994 and order recovery of the same from the assessee M/s. Bajaj Allianz General Insurance Company Limited, under Section 73(2) of the Finance Act, 1994. b) I confirm the demand of interest on the amount of CENVAT Credit confirmed as detailed in Sr. No. (a) above at the applicable rates, and order recovery of the same from the assessee M/s. Bajaj Allianz General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety Two Lakhs Sixty Four Thousand Two Hundred and Forty Three only) on M/s Bajaj Allianz General Insurance Company Limited, under the provisions of Rule 15 (1) of the CENVAT Credit Rules, 2004 read with Section 76 of the Finance Act 1994 read with the provisions of Section 174(2) of the CGST Act 2017. I accordingly order for its recovery. d) However, I give an option to M/s Bajaj Allianz General Insurance Company Limited, under Section 76(1) of the Finance Act, 1994, OS amended, to pay the entire amount of CENVAT Credit, as determined confirmed at Sr. No. (a) above, along with interest payable thereon as ordered in Sr. No. (b) above as well as the reduced 25% penalty, within 30 days of the date of communication of this order. e) I refrain from imposing Penalty under the provisions of Section 78(1) of the Finance Act, 1994, read with Rule 15 (3) of the CENVAT Credit Rules, 2004 for the reasons discussed in Para 27.9 above. 2.1 Appellant is a general insurance company and is providing general insurance including motor vehicle insurance services. 2.2 Acting on intelligence that the appellant had availed Cenvat credit on ineligible input services on the strength of bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce dated 16.10.2015 was issued to the appellant demanding an amount of Rs.94,65,20,833/- being the ineligible Cenvat credit availed by the appellant on the basis of the invoices raised by the automobile dealers and automobile manufacturers for the services which were not entered by them. 2.5 Subsequently a show cause cum demand notice dated 24.04.2018 asking the appellant to show cause as follows:- (i) The provisions of Section 174(2) of the Central Goods Service Tax Act. 2017 should not be invoked for taking recourse to the provisions of erstwhile Finance Act, 1994 and the Rules made there under as if the same have not been so repealed; (ii) Service Tax of Rs 49.26.42.431/- (Rs. Forty Nine Crore Twenty Six Lakh Forty Two Thousand Four Hundred Thirty One Only) for the period from July 2015 to September 2018 should not be demanded and recovered from them under proviso to Section 73 (1) of Finance Act 1994; (iii) Interest as applicable should not be demanded and recovered from them on the amount demanded as at Sr. No. B) above under Section 75 of Finance Act 1994; (iv) Penalty should not be imposed on them under the provisions of Section 76 and Section 78 of the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E-ST] and Cholamandalam MS General Insurance Co. Ltd. [2021 (9) TMI 442 CESTAT Chennai. Substantive benefit of credit cannot be denied on the basis of violation if any under IRDAI. First notice issued invoking extended period of limitation beyond is time barred. No interest and penalty can be imposed on them. 3.3 Arguing for the Revenue, learned AR while reiterating the findings recorded in the impugned orders relied upon the following decisions:- Aanex Services [2012 (28) STR 139 (Tri.-De.)] Hira Steels Ltd. [2011 (273) ELT 370 (Chhattisgarh)] Karan Agencies [2014 (36) STR 667 (Tri.-Mumbai)] Tata Motors Ltd. [2015 (318) ELT 437 (Tri.-Mumbai)] PB Nair C F Pvt. Ltd. [2015 (318) ELT 437 (Tri.-Mumbai)] Shoppers Stop Ltd. [2018 (8) GSTL 405 (Tri.-Mumbai)]. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 For confirming the demand against the appellant, the Commissioner has after quoting the provisions observed as follows:- 23.8 CENVAT scheme was mainly introduced to avoid cascading effect of tax for making the product competitive in that in the domestic market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax payable thereon Mandatory 24.1 As per above, even though few particulars of invoice are not mandatory. credit can still be allowed by the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be. on being satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver. If the Assistant Commissioner or Deputy Commissioner is satisfied. then he may allow the CENVAT Credit on the same. 25.1 I find that E-mails were received by the dealers from M/s. Tata Business Support Services Ltd. (hereinafter referred to as TBSS ) for preparation of Invoices on BAGIC for claiming Insurance commission. On enquiry with the dealers, it was informed that they use to receive such e-mails at the end of every month from TBSS indicating the monthly commission payable by BAGIC for the insurance business provided by them to BAGIC during the month. It was also informed that the emails invariably contained an attachment of the Invoice, prepared by TBSS, which has to be downloaded and printed on their Invoice format and sent back to BA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfrastructure expenses incurred as Office Space. Manpower used. Dedicated computers and printers used etc and display charges and transaction fees etc; that no amount was spent by them on marketing of the Insurance policies for Preferred Insurance Companies; that they have not rented any portion of the premises on rent to the insurance company; that the income from Insurance Companies were being accounted as Insurance Commission received: that they have raised invoices during the past period also on the said Insurance company, as if services were provided to the said insurance company, only to get the payouts/commission from them as per their communication (by e-mail): Automobile Manufacturer M/s. Honda Cars India limited have also been raising computer generated invoices quoting reimbursement of Infrastructure expenses incurred as Office Space, Manpower used. Dedicated computers and printers used etc on BAGIC for recognizing BAGIC as a Preferred Insurance Company (PIC) for Honda cars on which the CENVAT Credit has been availed by BAGIC and no services are rendered by such Automotive Manufacturers. 25.3 The Officials of BAGIC have in their statements admitted that the rates are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsurance premium sourced through the particular dealers but have asked the respective dealers through e mails to raise the invoices as if they have provided the infrastructure services, display service and transaction fees, which had admittedly been denied by the car dealers to have been provided by them. BAGIC have taken credit on the strength of invoices from the motor vehicle dealers as per their instruction without actually receiving the services as described in such invoices in violation of the CCR, 2004. The car dealers and the persons of BAGIC at their Regional Office at Chennai, have admitted to the fact that the dealers have not provided any service as mentioned in the invoices raised by them to BAGIC, it emerges that BAGIC are wrongly availing the input services CENVAT credit based on such invoices of car dealers in violations of Rule 4(1) of the CCR, 2004. BAGIC have deliberately devised a method by which the IRDA Commission/ORC payable to the car dealers and twowheeler dealers for the insurance business sourced by them were passed on as 'Display charges and Transaction Fees, the services which both the car dealers and the officers of BAGIC Regional office at Chennai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the fact that the amount paid are only in the nature of commission by stating that in order to survive in the market, these Infrastructure expenses are required to be incurred to get access to the dealership for insurance business. 25.7 As per Section 40(1) of the Insurance Act 1938, no person shall after the expiry of six months from the commencement of this Act. pay or contact to pay any remuneration or reward whether by way of commission or otherwise for soliciting or procuring insurance business in India to any person except an insurance agent or an intermediary or insurance intermediary. As per IRDA Circular Ref: 011/IRDA/ Brok. Comm/August 2008 dated 25-08-2008 issued under Section 14 of IRDA Act 1999, which limits the payment of Commission or Brokerage to 10%. The Circular specifically states, No payment of any kind including administrative or servicing charges is permitted to be made to the agent or broker in respect of the business in respect of which he is paid agency commission or brokerage . 25.8 The officials of BAGIC in their voluntary statements have stated that as per the IRDA circular, only the brokers/licensed agents can solicit and procure insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me under various heads such as 'Infrastructure Expenses. 'Business Support Service Expenses, etc. BAGIC, thus have advised the Automotive Dealers in fabricating the invoices by compelling the Automotive Dealers to raise invoices as per formats sent to them to avail ineligible CENVAT Credit. In general, when a Customer buys a new car/two wheeler, it is mandatory to have RTO registration and Insurance before taking delivery. Since, for any Automotive Dealer, issue of insurance policy is incidental to the business of selling cars, the insurance Companies are compelled to give Commission as PAYOUT to Automotive Dealers who are in turn compelled to raise fictitious documents as fabricated by BAGIC as per their requirements for availing CENVAT Credit. In view of the above, all the documents mentioned above are 'make-believe documents prepared merely to mislead the exchequer with the sole aim to avail ineligible CENVAT 25.10 From the Scrutiny of documents of Dealers/ BAGIC and the statements it is clear that Automobile Dealers collect premium from the customers and issue policies to them by accessing the portals of the Insurance Brokers. For insuring the vehicles the Dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 prescribed the particulars which are required to be contained in an Invoice issued by the provider of input service. As per which the main four elements are required to be shown on the invoices viz. (i) the name, address and the registration number of such person; ()the name and address of the person receiving taxable service: (i) description and value of taxable service provided or agreed to be provided: and (iv) the service tax payable thereon required to be shown in an invoice. 25.13 in the present case, the invoice raised by the Automotive Dealers and Automotive Manufacturers on BAGIC does not contain the true description of the Service; a mandatory requirement, as such the requirements of Rule 4A of the Rules was not fulfilled. Further, the description of the service has not been mentioned correctly in terms of Rule 4A of the Rules, as such the services mentioned in the invoice cannot qualify as input service in terms of Rule 2(1)(1) of the CCR, 2004. BAGIC have not maintained any documentary evidences for having received the input services hence they have contravened the provisions of Rule 4(1) of the CCR, 2004. Thus, it is not disputed that services covered by the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Service providers nor received by BAGIC, as such the said invoices are not eligible documents to BAGIC for availment of CENVAT Credit under Rule 9(2) of CCR. 2004. The documents based on which CENVAT was availed is inadmissible as eligible input document hence the CENVAT credit availed by BAGIC is not in order and is ineligible as per extant law. An amount of Rs. 49.26.42,431/- (Rupees Forty Nine Crores Twenty Six Lakhs Forty Two Thousand Four Hundred and Thirty One only) being the ineligible CENVAT Credit availed by BAGIC based on invoices raised on BAGIC by Automotive Dealers and Automotive Manufacturers and TBSS on the Services which were not rendered by them is therefore liable to be demanded and recovered from them under Rule 14 of CCR. 2004. 27.1 The IRDA regulations do not allow any person other than insurance agents and insurance brokers approved by IRDA, to sell vehicle insurance policies. Further the maximum brokerage/commission payable for selling insurance policies is also capped at 10% of the premium. To circumvent these regulations, BAGIC asked the car dealers to raise invoices to show that the car dealers have provided services such as advertisement, renti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payout details are calculated by the Head Office of M/s. Chola and communicated to the Dealers; (ii) M/s. Chola could not term such payout as commission (which would be in violation of IRDA guidelines) and hence the Dealers were given prescribed format to raise invoices as if they provided computing network connectivity through extranet, internet space, furniture and fixtures, consumables, salary of staff, computers, printers, electronics and electricity ; (iii) the Dealers accordingly raised invoices on the insurance companies in the format provided to them and (iv) the Dealers have not provided the services as mentioned in the description of the invoices. In other words, the description of the services contained in the invoices used for availing Cenvat Credit do not reflect the true description of the services. 6.2 From the above, it can be seen that the case of the Department is that the payout paid by the appellant to the dealers on the OD premium collected by the dealers from the customers is camouflaged as service provided by the dealers to the appellant; that therefore, the services contained in the invoices have actually not been provided by the dealers to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provider was not before the Tribunal, whether the Tribunal can go into the question as to whether the said service provider had provided service to the appellant or not, more so when the said service provider has been assessed to service tax under Business Support Service for the service rendered by them to the appellant. (b) Is the Tribunal not in error in refusing credit to the appellant for service tax paid by them to service provider when payment of service tax by the appellant for the service rendered by service provider is not in dispute and that it is settled, the assessment to tax at the hands of the service provider end cannot be questioned in the hand of service receiver (appellant in this case)? 8.2 The brief facts of the said case are that the appellant therein had availed input service credit on Multi Protocol Label Switching (MPLS) service based on the invoices issued by M/s. Brakes India Ltd., Chennai ( M/s. BIL for short). The appellants were job workers for M/s. BIL. The services were utilized by M/s. BIL for communicating and retrieving the data from the appellant s therein. The Department alleged that the services were rendered by BSNL and Reliance Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, has raised an invoice on the assessees claiming proportionately the costs which they have incurred to BSNL/Reliance. By way of illustration, if Rs. 20/- has been passed on to one of the assessees, a sum of Rs. 2/- is collected as Service Tax and each of the assessees pays Rs. 22/- to BIL, on which Rs. 2/- is the Service Tax paid. The assessees have taken Cenvat credit on the said Rs. 2/- paid by it as Service Tax to BIL. Therefore, the question would be as to whether the department can dispute the nature of transaction at this juncture, more particularly, when the assessment made on the BIL and the collection of Service Tax on them has not been reopened. 15. From the reasons assigned by the Commissioner (Appeals), we find that the Commissioner (Appeals) has travelled beyond the scope of allegation made in the show cause notices. By giving a different interpretation to the nature of transaction, which, in our considered view, could not have been done by the Appellate Authority in the light of the settled position with regard to the Service Tax liability admitted and paid by BIL. Therefore, unless and until, the assessment on BIL had been reopened, the nature of transaction as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... til the assessment made by the dealer is revised, the credit at the recipient's end cannot be denied. 9. Before we part, we must state that we have gone through the several decisions placed by the Learned Authorized Representative for the Department before us; none of these decisions are applicable to the issue or facts under consideration in this appeal. 10. From the foregoing, after appreciation of the facts and following the decision of the Hon ble High Court in M/s. Modular Auto Ltd. (supra), we hold that the impugned order cannot sustain and requires to be set aside, which we hereby do. 4.4 This judgment was followed again by the Tribunal in the case of Cholamandalam MS General Insurance Co. Ltd. [2021 (9) TMI 442 CESTAT Chennai, the relevant para of which is reproduced below:- 5. It is brought to our notice that the issue in this appeal has been analyzed and decided in the appellant's own case for the previous period vide decision reported in 2021 (3) TMI 24- CESTAT Chennai. The Tribunal had followed the decision of the Hon'ble jurisdictional High Court in Modular Auto Ltd. Vs. CCE, Chennai-2018 (8) TMI 1691 Madras High Court. The relevant paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X
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