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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 ..... s no finding that the appellant has not received the input services on the basis of which the appellant has taken the cenvat credit nor there is any finding that the said input services did not suffer service tax. Therefore the appellant had received input services from various input service providers. The provisions of Cenvat Credit Rules do not have any provision wherein the cenvat credit availed lapses. There is no examination as to how the said input services were not eligible for providing output services such as colocation services, hosting services etc. Therefore, the finding of the original authority that cenvat credit of Rs.634.05 crores were not admissible to the appellant has no basis and, therefore, the said finding is set aside. The appellant had received input services from various input service providers. The provisions of Cenvat Credit Rules do not have any provision wherein the cenvat credit availed lapses. There is no examination as to how the said input services were not eligible for providing output services such as colocation services, hosting services etc. Therefore, the finding of the original authority that cenvat credit of Rs.634.05 crores were not admissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit or confirming the demand of service tax sustains the order for recovery of interest on the same and imposition of penalties does not sustain.
Conclusion - CENVAT credit cannot be denied without substantial evidence of misuse or non-compliance with the Cenvat Credit Rules. The advances incorrectly classified due to accounting errors, and subsequently rectified, do not attract service tax Demand of interest and penalties do not sustain. The present proceedings are hit by limitation and that ground alone is enough for setting aside the impugned order.
Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant were huge and the ledger of the other current liabilities for the period 2017-18 indicated other current liabilities to the tune of Rs.3888.40 crores. It appeared to Revenue that the same should be considered as value under Section 67 of Finance Act, 1994 for demand of service tax. On the basis of above stated information, record and submissions by the appellant, a show cause notice dated 22.12.2020 bearing DIN: 20201267VU0000323382 was issued for the period from October 2014 to June 2017 calling upon the appellant to show cause as to why:- (a) Cenvat credit of Rs.634.05 crores should not be held to be ineligible as per Rule 2(l) of Cenvat Credit Rules, 2004 since the same appeared to have been associated with services used for trading of the goods under Rule 14 of Cenvat Credit Rules, 2004 read with proviso to sub-section (1) of Section 73 of Finance Act, 1994; (b) The amount of Rs.299.81 crores reversed suo moto in accordance with the provisions of sub-rule (7) of Rule 4 of Cenvat Credit Rules, 2004 should not be appropriated; (c) Cenvat credit/input tax credit amounting to Rs.122.05 crores reversed by the appellant on 26.09.2020 should not be appropriated; (d) Cenv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of trading, no data regarding quantum of goods sold during the period of show cause notice was stated in the show cause notice; f) In respect of Rs.378.51 crores credit that was carried forward and the same was in respect of services received from Reliance Communication Infrastructure Ltd., Reliance Big TV Ltd. etc. and they were eligible to be carried forward in accordance with the provisions of law that once credit is taken in accordance with law, it does not lapse; g) Cenvat credit pertaining to trading of goods was Rs.122.05 crores and the same was debited through entry No. DI2709200791263 on 26.09.2020 before issue of show cause notice; h) During the period of show cause notice there was no sale of telecommunication equipments except some sale of scrap; i) There is no one-to-one correlation of cenvat credit from input service to output service; j) Though there is time limit for taking cenvat credit after the receipt of input services, there is no time limit for utilisation of cenvat credit taken; k) There was no suppression of fact since the appellant has filed all ST-3 returns showing availed cenvat credit. Therefore extended period of limitation cannot be invoked; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the impugned order-in-original dated 30.06.2022. Learned original authority has taken on record the entire submissions made by the appellant in reply to show cause notice and observed that the difference between cenvat credit of Rs.634 crores and as stated by the appellant, the same is by different ways of calculation and did not appreciate any of the contentions of the appellant and confirmed the demand. Through the said order, the original authority disallowed cenvat credit amounting to Rs.634.05 under the provisions of Rule 14 of Cenvat Credit Rules, 2004 read with proviso to sub-section (1) of Section 73 of Finance Act, 1994. Amount of Rs.299.81 crores which was reversed by the appellant before issue of show cause notice was appropriated. Cenvat credit reversed by the appellant on 26.09.2020 amounting to Rs.122.05 was appropriated. Cenvat credit of Rs.49.26 crores is ordered to be recovered in cash under proviso to sub-section (1) of Section 73 of Finance Act, 1994 read with Rule 14 of Cenvat Credit Rules, 2004. Demand of service tax of Rs.78.08 crores was confirmed under the provisions of proviso to sub-section (1) of Section 73 of Finance Act, 1994. Service tax of Rs.58 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department and the show cause notice was issued on 22.12.2020, after an undue delay from the visit of the Audit on 16.07.2019. The normal period of limitation was 30 months. The relevant date for the last period for filing ST-3 returns for the period from April to June 2017 was 15.08.2017 and the normal period expired on 15.02.2020 and the show cause notice was issued on 22.12.2020 after expiry of normal period by invoking extended period of limitation. The normal period of limitation for issue of show cause notice expired much earlier than the date of implementation of lockdown and other measures in response to Covid-19 pandemic. The information being within the knowledge of the department and declared in the returns, none of the ingredients of fraud, collusion, wilful misstatement or suppression of fact exist in the present case. Therefore, the show cause notice is hit by limitation and is time barred and is liable to be set aside on this ground alone; b) However, on merit also the appellant has a strong case. The finding of the original authority is that the input services were availed for the purpose of trading of telecom equipments is not established through the record since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot tallying with the cenvat credit availed by the appellant as stated in ST-3 returns filed for the entire period of show cause notice. The show cause notice relied on all the four ST-3 returns filed during the period of show cause notice and they are available on record and if the cenvat credits availed are added together as reflected in the four ST-3 returns covering the entire period of show cause notice, they do not add to the figure of Rs.634 crores; d) Neither in the show cause notice nor through the impugned order, it is established as to how the input service on which cenvat credit was availed was utilized in providing trading since there was no sale of the equipments; e) Appellant placed reliance on Chartered Accountant's certificate dated 23.08.2024 wherein the learned C.A. after due examination of the records has certified that the appellant has availed cenvat credit of eligible input services only; f) Appellant has voluntarily reversed cenvat credit of Rs.122.05 crores of input tax credit which corresponded to the cenvat credit availed on the input services and subsequently transited to GST; g) Learned original authority has erred in disallowing the credit pertainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial year 2016-17 pertained to unsecured loan availed by the appellant for fulfilling its working capital requirements. The said loan cannot be considered as advances from the customers. The record indicates that the said amount was not related to any provision of service in any manner. Subsequently vide transfer entry dated 31.03.2017, the said amount was inadvertently transferred from the heading 'unsecured loans to advance from customers'. The said transfer had taken place only due to an inadvertent error. In support of the same, appellant also placed reliance on a CA certificate dated 23.08.2024 certifying that the said amounts were inadvertently transferred to the heading 'advance from customers'. Subsequently on 04.04.2017, the said amount of Rs.515 crores was paid back. The said amount was never received against any provision of service. The fact is that the appellant had availed unsecured loan of Rs.755 crores on 03.04.2014 and the balance of Rs.515/- crores was transferred under the head 'advance from customers' by way of a transfer entry. The Tribunal in the case of Reliance Infratel Ltd. vs. Commissioner of Service Tax, Mumbai-II [2015 (39) STR 829 (Tri.-Mumbai)] was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gineering Pvt. Ltd. cannot be considered as advance received against the services to be provided in future for the reason that through an order-in-original No. 93/MA/Commissioner/Belapur/2020-21 dated 31.03.2021, it has been adjudicated and held that the said amount could not be treated as advance against provision of payment of service and was held to be unsecured loans. Therefore , the order passed by the original authority to pay interest on service tax already paid to the tune of Rs.52.45 crores is not sustainable because it was ordered with an understanding that the unsecured loan was advance for service to be provided in future; o) In view of the above submissions, the cenvat credit amount availed during the relevant period was transited to GST by filing Form GST Tran-1 and the same has not been utilized against any output tax liability and continues to appear as a balance of input tax credit. In view of the above submissions, no penalty is imposable on the appellant. Further, since no service tax was to be paid by the appellant, interest also cannot be directed to be paid. Further, no penalty is imposable on the appellant; p) In view of the above submissions, appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The accounting of the advance payment received by the appellant under the head of 'borrowings' does not affect its character i.e. advance payment received against the services to be provided in future. Such an advance payment has to be reflected as advances or loans or borrowings in the final accounts until the service is provided and the receipts are eligible for being recognized as revenue; e) The judgment of Reliance Infratel Ltd. quoted by the appellant is distinct from the present case on two counts, viz. the quantum of loan and its treatment was clearly spelt out in advance as per the term sheet/agreement and part amount had already been disbursed even before the recipient had come into existence, which was also repaid during the said financial year; f) As per the annual report 2017-18 Note 2.04 "other current liabilities" reveals that an amount of Rs.701.67 crores was balance as on 31.03.2017 which had increased to Rs.3893.15 crores as on 31.03.2018. The appellant has neither provided nor brought on record the outstanding balance under the different heads of accounts as on 30.06.2017. By changing the nomenclature/head of accounts the implication under Finance Act does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, written submissions dated 29.11.2024 submitted by Shri Shambhoo Nath, special counsel and the remaining record. The issues for determination in this appeal include limitation, taxability, valuation, admissibility of cenvat credit and jurisdiction of officers to issue show cause notice under certain circumstances. We take up the issues one by one. 8.2 From the show cause notice we note that show cause notice was issued by invoking proviso to sub-section (1) of Section 73 of Finance Act, 1994 which empowers the officers to invoke extended period of limitation under the circumstances such as when there is suppression of fact, wilful misstatement, fraud, collusion etc. During the relevant period, normal period of limitation was 30 months. The show cause notice was issued by invoking extended period of limitation under the above stated proviso. The original authority in his impugned order has stated that there was suppression of fact by the appellant. Learned special counsel in his written submissions has argued that the appellant had suppressed the facts from the department relating to availment of cenvat credit. On the contrary, learned counsel for the appellant has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the record we note that sales register submitted by the appellant was one of the documents relied upon for issue of show cause notice. We note that neither the show cause notice nor the order-in-original impugned have given any details of any sales undertaken by the appellant during the period of show cause notice. From the record we note that the appellant was under contract for providing colocation services, hosting services, marketing and sales promotion of telecom services, business and technology consulting and other business support services. There is no finding that the appellant has not received the input services on the basis of which the appellant has taken the cenvat credit nor there is any finding that the said input services did not suffer service tax. Therefore we conclude that the appellant had received input services from various input service providers. The provisions of Cenvat Credit Rules do not have any provision wherein the cenvat credit availed lapses. There is no examination as to how the said input services were not eligible for providing output services such as colocation services, hosting services etc. Therefore, the finding of the original authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods. The appellant in their reply to show cause notice in para 4.15 has stated that the said credit was pertaining to trading of goods and, therefore, they have reversed the same. The said amount was reversed on 36.09.3030 before issue of show cause notice. Therefore, as stated earlier, in view of the provisions of subsection (3) of Section 73 of Finance Act, 1994, show cause notice could not have been issued in respect of the said amount and, therefore, order by the original authority appropriating the said amount of Rs.122.05 crores is not sustainable. 8.6 The original authority has held that cenvat credit of Rs.49.26 crores was used by the appellant for payment of service tax and that it was a part of the disallowed cenvat credit of Rs.634.05 crores and that therefore, it needs to be confirmed and recovered and he has accordingly ordered so. On this issue, learned counsel for the appellant has submitted that if the amount is recovered, then it will be double recovery of the said amount. We note from the record that the original authority has held that service tax of Rs.49.26 crores was paid by debiting cenvat credit out of the disallowed cenvat credit of Rs.634.05 crores. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abilities which stood as on 31.03.2018 whereas the present show cause notice is for the period ending 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 available for providing service under Section 67 of Finance Act, 1994 since operation of Chapter V of Finance Act which empowered levy and collection of service tax ceased to exist with effect from 01.07.2017 as provided by Section 174 of CGST Act, 2017. We note that the issue of valuation and taxability both are involved in the present issue. As can be seen from the record, the current liability which stood as on 31.03.2018 was Rs.3888.40 crores. The operation of Chapter V of Finance Act, 1994 which included charging section for charging of service tax and Section 67 for determination of value for assessment of service tax ceased to exist prospectively with effect from 01.07.2017. Therefore, both the provisions, viz. charging section i.e. Section 66B and Section 67 on valuation of taxable services for charging service tax were not operational for levy and collection of service tax as on 31.03.2018 and, therefore, confirmation of demand of Rs.583.26 is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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