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TMI Blog2024 (6) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Telephone Exchange, Meerut-250002 under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994. (ii) I order recovery of interest on the above said amount of demand from the Noticee under Rule 14 of CENVAT Credit Rules, 2004 read with Section 75 of the Finance Act, 1994. (iii) I impose a penalty of Rs. 44,94,672/- (Rupees Forty Four Lakh Ninety Four Thousand Six Hundred Seventy Two only) on M's Bharat Sanchar Nigam Limited 0/o G.M. (Cellular Mobile Telecom Services), U.P. (West) Telecom Circle, 3rd Floor, Brahampuri Telephone Exchange, Meerut-250002 under Rule 15(1) of CENVAT Credit Rules, 2004 read with Section 76(1) of the Finance Act, 1994" 2.1 Appellant is registered for providing "Telecommunication Services". They are availing the CENVAT credit of Central Excise duties and Service tax under the provisions of CENVAT Credit Rules, 2004 2.2 Based on Internal Audit (IAR No. 36/ST/2011-12 dated 22.03.2012) a Show Cause Notice dated 17.10.2013 for the period Oct.'2009 to March'2011 was issued to them for demand and recovery of CENVAT credit of Rs.3,96,27,422/- on following grounds: (i) they wrongly availed full CENVAT cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative for the revenue. 3.2 Arguing for the appellant learned counsel submits: * Cenvat credit cannot be denied at the user end as has been held in the following cases: * Laxmindco Steel P Ltd [2006 (202) ELT 629] * Creative Enterprises [2009 (23% ELT 785 (Guj)] * J K industries [2008 (223) ELT 372 (Raj)] * Sterlite Industries Ltd. [2004 (173) ELT 28] * Eveready Industries [2000 (120) ELT 379] * CENVAT and Penalties charges are two different things. 3.3 Authorized representative reiterates the findings recorded in the impugned order 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments 4.2 Impugned order records the findings as follws: "6. ..... In the present case the following issues are required to be decided by me:- (i) Whether the Noticee (M/s BSNL) had wrongly and irregularly availed and utilized Cenvat Credit of Service tax amounting to Rs. 2,08,47,037/- on account of Liquidation Damages: LD penalty on the basis of the invoices of service providers pertaining to AMC to whom payments were made after deducting certain amount as 'penalty' and if so, whether the above said amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that Cenvat Credit shall be allowed on or after the day on which invoice, bill or challan of service provider, as specified in rule 9 of the Cenvat Credit Rules, 2004, is received. The second proviso to Rule 4(7) further states that if payment of value of service and tax thereon is not made to the service provider within three months from the date of invoice, bill or challan, the Cenvat credit already taken should be reversed by paying 'amount" equal to Cenvat Credit availed on such input service. If at a later date, payment is made to the service provider by the manufacturer or output service provider who had reversed the Cenvat credit, he can take credit of the amount equal to Cenvat credit reversed earlier. I further find that if service is not provided fully or partly or if the amount of invoice is renegotiated due to deficiency in service or in terms of contract, the service provider may refund the amount fully or partly, to the service provider or issue a credit note as per rule 6(3) of the Service Tax Rules, 1994 and the third proviso to Rule 4(7) of the Cenvat Credit Rules, 2004 states that if such amount is refunded or Credit Note is issued by the service provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice providers and on the basis of which Ms BSNL had actually availed and utilized the 100% Cenvat credit of Service tax. Therefore, I hold that M/s BSNL is not entitled to Cenvat credit of Service Tax attributable to the penalty amount which was deducted by Ms BSNL from the billed amounts of the service providers and was never paid to the said service providers and consequently, I hold that M/s BSNL had wrongly and irregularly availed and utilized Cenvat credit of Service Tax amounting to Rs. 2,08,47,037/- on account of Liquidation Damages: LD penalty on the basis of the invoices of service providers pertaining to AMC to whom payments were made after deducting certain amount as "penalty‟ and the above said amount of Cenvat credit is required to be recovered from Ms BSNL under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994. 10. So far as the issue No. (ii) above i.e. ..., is concerned, I find that it is an admitted fact on record that the Noticee while receiving the infrastructure support services from their AMC service providers, had reimbursed the cost of diesel and electricity to the said service providers. I find that AMC ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, no credit of service tax is available as input, in respect of electricity. Therefore, the input service performed through consumption of diesel or electricity cannot be construed as a valid input service and I hold that the credit of service tax availed by the Noticee against the invoices issued by their infra service providers, on account of reimbursement cost of diesel/power and fuel expenditure, is not admissible to them in terms of Rule 2(k) and Rule 3 of the Cenvat Credit Rules, 2004. 11. The Noticee has contended that as per the agreement, they had not per-se procured the diesel or electricity as such from the Tower companies but the payment made in this connection was in the form of reimbursement of cost incurred by the Tower Companies for providing the infrastructure support services. So far as this contention of the Noticee is concerned, I find that it is an undisputed fact on record that the Noticee had availed the Cenvat credit of service tax paid on the diesel charges and electricity-charges for which the AMC service providers had issued invoices to the Noticee and in terms of Rule 2(k) of the Cenvat Credit Rules, 2004, diesel was not an eligible input f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of merits, has no credence. I find that the cenvat credit of duty/tax is admissible in respect of only tnose inputs/input services whick are covered under the provisions of the Cenvat Credit Rules, 2004 and in the present case since diesel was not an eligible input for availing Cenvat credit under the Cenvat Credit Rules, 2004 and similarly "electricity", was not an excisable commodity, therefore, no credit of service tax is admissible to the Noticee on the diesel and electricity in terms of Rule 2(k) and Rule 3 of the Cenvat Credit Rules, 2004. So far as the contention of the party that without use of diesel and electricity it was not possible for the service providers to provide the uninterrupted infrastructure support services and that the diesel and electricity were the integral parts of the said infrastructure support services, is concerned, I find that the same formula applies to a manufacturer also whose machineries installed in his factory cannot function/work without DG sets and electricity connections but it does not mean that the said manufacturer is eligible to avail Cenvat credit of duty/tax paid on diesel and electricity when the said diesel is not an eligible input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of impugned service - Sections 4 and 35F of Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance Act, 1994. [paras 5, 6] Similarly, the Hon'ble CESTAT, Mumbai in the case of Reliance Infratel Ltd vs Commissioner of Service Tax, Mumbai-I reported as 2015 (38) STR 984 (Tri-Mumbai) while allowing the Cenvat credit on inputs or capital goods for providing passive telecom infrastructure by way of Telecom towers, has held that the cenvat credit on inputs or capital goods was admissible to the appellants except for oil and petrol in Rule 2(k)(ii) of the Cenvat Credit Rules, 2004 The relevant portion of the above judgement is reproduced below :- Cenvat credit- Inputs - Assessee providing passive telecom infrastructure by way of Telecom towers, to various cellular telecom operators - Discharge of Service Tax liability under Business Support Service category - Utilization of Cenvat credit on steel structural's viz. Bracket, Mounting Pole, Mount Clamps, Cable, Pre-fabricated Buildings/Shelter/Panel used in erection/fabrication of Telecom Towers - Revenue alleging goods not covered in ambit of Capital Goods definition provided under Rule 2(a)(A)(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days from the date on which Section 112 of the 2000 Act got the President's assent, that assessee had not to pay any interest on the amount of duty availed by him wrongly. But those who had availed the MODVAT credit on the HSD oil used as an input and did not return the said amount even within 30 days from the date on which the President had given assent to the enactment of Section 112 of the 2000 Act, had to return the amount wrongfully retained by them with interest at the rate of 24% p.a. In our opinion, such a course, adopted by the Revenue for recovery of the amount which was legitimately claimed by the Revenue, cannot be said to be bad-in-law." 15. I find that as per the provisions of Rule 9(5) and Rule 9(6) of the Cenvat Credit Rules 2004, the burden of proof regarding the admissibility of the Cenvat credit lies upon the manufacturer or provider of output service taking such credit and in the instant case, Cenvat credit availed by the Noticee on the amount of penalty (Liquidation damages), which was retained by them and was never paid to the AMC service providers as well as on account of reimbursement cost of diesel/ power and fuel expenditure, was not admissible to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard, they have also relied upon several judgements. So far as this contention of the Noticee is concerned, I find that the Noticee had earlier been issued a show cause notice dated 17.10.2013 amongst others on these issues also and inspite of the said show cause notice, the Noticee continued to avail and utilize inadmissible Cenvat credit of Service tax on the amount of penalty as well as on account of reimbursement of fuel expenditure. Therefore, the Noticee is liable to penal action, as rightly charged in the impugned show cause notice." 4.3 Impugned order has framed the issues for decision in para-6. 4.4 In respect of issue at Sl No 1, admittedly the appellant ahs not paid the amount indicated in the invoices of the service provider. The invoice value has been reduced by the amounts which appellant has claimed to be deductions as "penalty" on the service providers as per the agreement entered between them and the service provider. The value of the service received as rightly observed in the impugned order is relatable to the amount paid as consideration by the service recipient to the service provider. With effect from 2011, the scheme of taxation of services was altered and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receiver is entitled to take credit provided he has also paid the amount of service tax, (whether proportionately reduced or the original amount) to the service provider. The Invoice would in fact stand amended to that extent. The credit taken would be equivalent to the amount that is paid as service tax. However, in case of subsequent refund or extra payment of service tax, the credit would also be altered accordingly." In terms of the above Rule as clarified by the Board, the quantum of credit availed has to be limited to actual amount of service tax paid in respect of such invoices evidencing the payment of service tax. The fact that invoices were issued indicated particular taxable value and service tax payable, needs to be verified from the end of service provider as to whether he has in actual paid the service tax on invoice value or on the reduced value after taking into account the deductions made by the appellant towards penalty. Impugned order do not refers to any verification that was essentially required to be made at the end of service provider. 4.5 Explaining the above rule and the board circular, Delhi bench has in the case of Hindustan Zinc Ltd [2014 (33) STR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value for service/service tax to the provider of services. It is very clear that at least in respect of some of the bills the respondent have availed and even utilized credit before the service tax was paid by them by cheque. In terms of the above legal position, it is necessary for the respondent to establish with documentary evidence that they have availed Cenvat credit on input services after the date on which they made payment of value for such services and also service tax has been paid to the provider of services before that date. This obligation has clearly been stipulated under sub-rule (6) of Rule 9. Accordingly, we find that it is necessary to establish the payment of value as well as tax before availing the credit by supporting documentary evidence, as we have seen at least a few instances of availing credit before actual payment. The case has to go back to the original authority for verification of all entries to arrive at a proper decision about the eligibility of respondent for this credit. If the credits are availed prior to payment then necessarily the question of interest liability is to be examined, if otherwise, the credit become eligible on a later date (after p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as inputs. It is not even the claim of the appellant that the CENVAT Credit should be allowed to them on the diesel/ electricity by treating them as input under Rule 2 (k) of the CENVAT Credit Rules, 2004. The fact that service provider has paid service tax on the service provided by him consuming these inputs is not in dispute. We do not find any merits in the findings recorded by the adjudicating authority in respect of this demand and set aside the same. As this demand is set aside the interest and penalty imposed in respect of this demand is also set aside. 4.9 On the third issue framed in the impugned order, we keep the issue of penalty open and to be determined by the adjudicating authority after determining the issue that is remanded back to him as per para 4.7. 5.1 Appeal is partially allowed to extent of - (a) Remanding the issue for redetermination of admissibility of CENVAT Credit on the amount indicated in invoice but not paid by the appellant to service provider after verifying from the end of service provider. Issue of penalty is also remanded to the original authority. (b) Demand and penalty imposed in respect of the CENVAT Credit sought to be denied against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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