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TMI Blog2025 (1) TMI 1211X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance IDC Ltd., M/s. Reliance Tech Services Pvt. Ltd. and M/s. Reliance Webstore Ltd. Appellant had entered into contracts including a contract dated 01.04.2013 with M/s. Reliance Telecom Ltd. for providing colocation services, dedicated hosting services, managed hosting services and shared hosting services in internet data centre. Further, the appellant also through the said contract was obliged to provide marketing and sales promotion of telecom services and business technology consultancy services. It was further noticed by Revenue through the said audit and further investigations that the appellant was also involved in trading of telecom equipments. It appeared to Revenue that cenvat credit availed by the appellant on input services provided by the above stated input service providers was being used for trading of telecom equipments. Therefore, cenvat credit availed to the tune of Rs.634.05 crores during the period from October 2014 to June 2017 was not admissible to the appellant since the input services were used for providing assistance in trading of the goods. On persuasion by Revenue, appellant vide entry dated 26.09.2020 had reversed input tax credit amounting to Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances of Rs.520.81 crores as assessable value should not be demanded under proviso to sub-section (1) of Section 73 of Finance Act, 1994; (f) by treating the amount of Rs.3888.40 crores which was other liabilities in the books of account treating the same as assessable value, why service tax amounting to Rs.583.26 should not be demanded and recovered under proviso to sub-section (1) of Section 73 of Finance Act, 1994; (g) why resorting to Point of Taxation Rules interest should not be demanded on service tax of Rs.52.45 crores paid during the financial year 2016-17; (h) Why interest should not be recovered on the service tax; (i) Why penalty should not be imposed. 2. Appellant submitted their reply dated 14.03.2022 to the above stated show cause notice. In their reply, appellant has submitted as follows:- a) The show cause notice is issued without allocation of mind and the input cenvat credit proposed to be denied to the tune of Rs.634 crores does not tally with cenvat credit availed reported in ST-3 returns filed for the period and ST-3 returns are relied upon documents for issue of subject show cause notice; b) Appellant has reproduced month wise cenvat credit availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, cenvat credit of Rs.122.05 crores was debited as stated earlier and balance of cenvat credit of Rs.256 crores is eligible cenvat credit; n) In respect of demand of service tax of Rs.78.08 on the advances of Rs.520.81 received from customers, it is to be stated that it was a transfer entry from unsecured loan from advance from customers as on 31.03.2017 and there was not actual receipt of money as evident from the bank account and screenshot of journal entry was enclosed and that since this is a notional account entry, the said amount cannot be treated as available for demand of service tax and that the said amount has been returned back to Reliance Communication Infrastructure Ltd. on 04.04.2017 before issue of show cause notice; o) As per the audit and balance sheet of Reliance Infocom Infrastructure Ltd. for the period ended on 31.03.2017, there is no advance to the present appellant and, therefore, there is no question of payment of interest on service tax of Rs.52.45 crores paid during 2016-17 by invoking the provisions of Point of Taxation Rules; p) In respect of demand of service tax of Rs.583.26 crores on other current liability of Rs.3888.40 crores, it is to be stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.52.45 crores during the financial year 2016-17 under Section 75 of Finance Act, 1994. Penalty of Rs.10,000/- was imposed under Section 77 of Finance Act, 1994. Penalty of Rs.1344.66 crores was imposed under Section 78 of Finance Act, 1994 / Rule 15 of Cenvat Credit Rules, 2004. Aggrieved by the said order, appellant is before this Tribunal. 4. Appellant had filed a miscellaneous application bearing No. ST/85960/2024 in this appeal. The same was heard and allowed through Miscellaneous Order No. 85717/2024 dated 19.11.2024 holding that the said application was for addition of prayer by way of amendment since the same relates to consequential effect of the final order. The appellant stated in the said application that the appellant had reversed credit of Rs.10,40,99,096/- in December 2017 and January 2018 pertaining to cenvat credit transitioned to GST. Further, the appellant stated that during the pendency of this appeal, appellant under protest had reversed credit of Rs.246,04,51,933/- out of credit transitioned to GST vide letter dated 17.07.2024 and Form GST DRC-03 dated 17.07.2024 and that appellant had totally reversed credit of Rs.256,45,51,029/- being part of disputed cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices was in respect of such services which were used for the purpose of trading of telecom equipments. The input services were availed for the purpose of providing output services to Reliance Telecom Ltd. in terms of agreement dated 01.04.2013 and the output services were such as colocation services, hosting services, marketing and sales promotion of telecom services, business and technology consulting and other business support services; c) Since the output services were reduced due to market condition, there was accumulation of cenvat credit. There is no restriction in law for time limit for utilization of accumulated cenvat credit. Further, there is no one-to-one correlation between input service and output service for utilization of cenvat credit. In an organization covered by a single Service Tax registration, cenvat credit taken on any input service can be used for payment of service tax on any output service. Through circular bearing F.No. 137/72/2008-CX.4 dated 21.11.2008, CBIC has explicitly clarified that there is no lapsing provision in Cenvat Rules barring utilization of accumulated credit. Even though the credit was taken with an intention to provide taxable services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments since during the course of audit and investigation. Vide its letter dated 11.09.2020 the appellant had produced the relevant agreements entered into with the input service providers and other relevant documents pertaining to the same. Further, vide its letter dated 17.06.2022, the appellant had produced the relevant sample invoices issued by the said input service providers. At para 29 of the impugned show cause notice, the relied upon documents included the cenvat credit register as well as vendor contract agreements. Therefore, it is beyond doubt that all the required documents were always produced by the appellant. Therefore, all such allegations and finding that the required documents were not submitted are not supported by facts; i) As provided under sub-rule (7) of Rule 4 of Cenvat Credit Rules, 2004, the appellant had reversed cenvat credit of Rs.299.81 crores since the payment to the service providers could not be made within 90 days. Reversals made in June 2015 and July 2015 amounting to Rs.24 crores and Rs.36 crores do not correspond to any availment of credit within three months prior to such reversal. This can be clear from the ST-3 returns filed by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any connection with the provisions of any service by the appellant to Reliance Infocom Infrastructure Pvt. Ltd., the said amount cannot be treated as advance and no service tax is chargeable on the same. Rest of the balances appearing under the head 'advances from customers' pertains to security deposit given by scrap dealers. The advances of Rs.5 crores received from the scrap dealers were not in any way received in connection with the provision of any service; l) Learned original authority has confirmed the demand of service tax of Rs.583.26 crores on the other current liabilities which stood as on 31.03.2018 whereas the present show cause notice is for the period from October 2014 to June 2017 and that the other current liability that stood as on 31.03.2018 which was Rs.3888.40 crores could not be considered as value for providing service under Section 67 of Finance Act, 1994 since operation of Chapter V of Finance Act, 1994 which empowered imposition and collection of service tax ceased to exist with effect from 01.07.2017 as provided by Section 174 of CGST Act, 2017. Therefore, the said finding by the original authority is not in accordance with law; m) The demand for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es involved in the appeal. 7. On 19.11.2024 learned AR Ms. S. Varalakshmi, Additional Commissioner, appeared and did not make any submissions in court. Shri Shambhoo Nath, Special Counsel, through his written submissions dated 29.11.2024 received on 02.12.2024 has made the following submissions:- a) On perusal of sample copy of agreement with Reliance Telecom Ltd. (RTL), it can be revealed that the appellant's principal activity is majorly trading. Operations of RTL had been severely diminished from 2016 onwards. However, credit availment had shown a multiple jump in quantum from October 2015 onwards. Availment of cenvat credit on taxes paid on input services is not the matter of right. It is a benefit/concession given only if the conditions, procedures and safeguards prescribed under Cenvat Credit Rules have been complied. The onus to discharge the obligation is on the person who avails the cenvat credit. The inevitable conclusion that follows is that the appellant is not in possession of valid cenvat documents for availment of credit. The adjudicating authority has correctly held that the availment of cenvat credit of Rs.634 crores in contravention of Rule 9 is recoverable unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch amount in money as, with the addition of service tax charged is equivalent to the consideration." h) The sales ledger for the period 2016-17 reflects the payment due against three invoices issued by the appellant to Reliance Infocom Engineering Pvt. Ltd. totally valued at Rs.349.70 crores involving service tax of Rs.52.45 crores. The receipt against the referred invoices was adjusted by the appellant in their books of account against the loan received earlier from Reliance Infocom Engineering Pvt. Ltd. dated 27.08.2014 and 19.01.2016. Such adjustments in the absence of credible explanation supported by documentary evidence is to be construed as advances received for services provided by the appellant as provided by Rule 3(b) of Point of Taxation Rules, 2011 and sub-section (3) of Point of Taxation Rules, 2011 of Section 67 of Finance Act, 1994. i) Appellant has tried to scuttle the verification and investigation process by denying/delaying and resorting to dilatory tactics. They have tried to block the relevant information and suppressed the facts from the department relating to availment of cenvat credit, the services on which tax under reverse charge mechanism was payable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment. Learned counsel for the appellant further submitted in his written submissions that the normal period of limitation of 30 months expired on 15.02.2020 and the show cause notice was issued on 22.12.2020 and that all the measures in response to Covid-19 pandemic were set into motion after expiry period of normal period of limitation and that there were no ingredients like fraud, collusion, wilful misstatement or suppression of fact and, therefore, the show cause notice is hit by limitation and that ground alone is sufficient to set aside the impugned order. WE note that all the ST-3 returns were filed by the appellant. We note from the relied upon documents for issue of show cause notice that copies of ST-3 returns filed by the appellant for the entire period of show cause notice were relied upon. The original authority nor the show cause notice indicates as to which information was required by Revenue in accordance with which provision of law that was not filed or submitted by the appellant and how there was wilful misstatement or suppression of fact to invoke extended period of limitation. In the absence of any such finding by the original authority, we hold that the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation can only be made after demand is raised for wrongly availed cenvat credit. From the record we note that the said amount was reversed by resorting to the provisions of sub-rule (7) of Rule 4 of Cenvat Credit Rules, 2004 for the reason that the payment to the service providers could not be made within 90 days. For appropriation of any amount, initially the demand is to be confirmed. For confirmation of demand, there has to be a provision in law authorizing the adjudicating authority to confirm such demand. On perusal of the provisions of sub-rule (7) of Rule 4 ibid, we note that there is no such provision for confirming the said amount and appropriating the same independent of Rule 14 of Cenvat Credit Rules. The said Rule 14 was not invoked in show cause notice for proposing appropriation of the said amount which was already reversed by the appellant before issue of show cause notice. Rule 14 ibid is to be read with Section 73 of Finance Act, 1994. Section 73 of Finance Act, 1994 under sub-section (3) does not allow issue of show cause notice when the duty or the amount is already paid before issue of show cause notice except for the circumstances leading to invocation of exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .49.26 crores service tax was not paid out of the opening balance of Rs.93.19 crores. Therefore, we hold that the order of the original authority confirming the demand of service tax of Rs.49.26 crores is not sustainable. 8.7 The original authority has confirmed demand of service tax of Rs.78.08 crores on the advances received from customers. In this respect learned counsel for the appellant has submitted that out of the amount of Rs.520.81 crores booked under advances from customers, an amount of Rs.515 crores was booked during the financial year 2016-17 and the said amount pertained to unsecured loan availed by the appellant for fulfilling its working capital and the said loan cannot be considered as advances from customers and that the said amount was not related to provision of any service and due to a wrongful entry on 31.03.2017, the said amount was transferred from unsecured loans to advances from customers. He has further submitted that a C.A. certificate dated 23.08.2024 certified that the said amount was inadvertently transferred to the heading of 'advances from customers'. He has further submitted that subsequently on 04.04.2017 the said amount of Rs.515 crores was paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-17. An adjustment was made in balance of unsecured loans amount availed from M/s. Reliance Infocom Engineering Pvt. Ltd. for receipt of payment in respect of the invoices raised for provision of servie and the said loan was received by the appellant in 2014 and, therefore, learned original authority ordered for recovery of interest from the earlier period. From the record and from the submissions by both the sides we note that through an order-inoriginal No. 93/MA/Commissioner/Belapur/2020-21 dated 31.03.2021 it has been held that the said amount which was treated as unsecured loan could not be treated as advance against provision of payment of service and was held to be unsecured loan. Therefore, the provisions of Rule 3 of Point of Taxation Rules are not applicable in the present case. Therefore, the order by the original authority for recovery of interest on payment of service tax of Rs.52.45 crores does not sustain. 8.10 Since no part of the order-in-original either disallowing cenvat credit or confirming the demand of service tax sustains the order for recovery of interest on the same and imposition of penalties does not sustain. 8.11 We, therefore, hold that the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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