2023 (4) TMI 440 - AT - Service Tax

Reversal of CENVAT Credit - alleged improper documents on telephone bills, mobile bills etc. - CENVAT credit used exclusively in the manufacture of electricity - liability to pay 10%/6%/5% on the value of electricity, as common input services used both for taxable services and exempted goods - eligibility of CENVAT credit on certain ineligible input services - liability to pay service tax on annual accreditation charges, one-time accreditation charges and forfeiture of security deposit in relation ‘BAS’ - Whether the appellant has filed a false declaration under the Voluntary 2013 Scheme?

HELD THAT:- The first contention advanced by the learned counsel for the appellant is that as the entire CENVAT credit availed by the appellant stood reversed, it would amount to non availment of CENVAT credit. It needs to be noted that the appellant had through three challans paid in cash the amount of CENVAT credit earlier availed by it. The Supreme Court in CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR [1995 (12) TMI 72 - SUPREME COURT] held that if the credit has been reversed after availing the same, it would mean that credit had not been availed at all - it has to be held that when the entire CENVAT credit availed by the appellant had been reversed, it would amount to non availment of CENVAT credit and the demand for recovery of the CENVAT credit cannot be sustained.

Applicability of rule 6 of the Credit Rules - demand on the ground that appellant was producing electricity, which is an exempted product and, therefore, the appellant could not have availed CENVAT credit on common services as the rigours of rule 6 of the Credit Rules would apply - HELD THAT:- When CENVAT credit has been reversed it would amount to non availment of CENVAT credit and, therefore, the confirmation of demand on ground that since the appellant had availed CENVAT credit on services without maintaining separate accounts it would be liable to pay 10%/5%/6% in terms of rule 6(3)(i) of the Credit Rules cannot sustain. The provisions of rule 6(3) of the Credit Rules would apply only when an assessee desires to avail and utilize CENVAT credit pertaining to common input services but as the appellant had reversed the entire CENVAT credit, the options contemplated in rule 6(3) of the Credit Rules would not be applicable.

Electricity is an ‘exempted’ and ‘excisable’ good or not - demand on the ground that the appellant was manufacturing ‘electricity’ which is an exempted good and, therefore, should have reversed 10%/6%/5% of the value of exempted goods i.e. electricity as the appellant had failed to follow the other options provided under rule 6 of the Credit Rules - HELD THAT:- 'Excisable goods' has been defined in section 2(d) of the Central Excise Act, 1944 to mean goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise. Thus, to be considered as excisable goods, the same must be specified in the First or Second Schedule as being subject to a duty of excise - Chapter Heading 2716 00 00 specifies ‘electrical energy', but the same is not subject to any rate of duty, not even ‘nil'. The rate of duty in the said Chapter Heading has been left blank and thus, electricity cannot be considered to have been specified in the First Schedule of the Act of 1985 as being subject to a duty of excise. In such a case, it cannot be considered as excisable goods.

It would be useful to place reliance upon the decision of the Allahabad High Court in GULARIA CHINI MILLS AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2013 (7) TMI 159 - ALLAHABAD HIGH COURT]. It was held that electrical energy is not an excisable goods nor it is exempted goods as defined in rule 2(d) of the Credit Rules. Thus, as electricity is not excisable goods under section 2(d) of the Central Excise Act, 1944, rule 6 of the Credit Rules would not be applicable.

Service tax liability - no short-payment - HELD THAT:- The appellant received charges in the form of one time accreditation charges for accrediting the applicant for lifetime and in the form of annual accreditation charges for accrediting the applicant for one year. Where a party permitted by the appellant to set up power plants, does not set up the same within the prescribed time period, the security deposit made by such party is forfeited. This amount is shown as 'forfeiture of security deposit' in books of account of the appellant. However, where the project is successfully completed, the said deposit is returned back to the party. The amount collected towards forfeiture of security deposit is not towards any service and, therefore, no service tax is payable.

Demand of service tax for the period till 30.6.2012 on the ground that such charges were received towards BAS rendered by the appellant - HELD THAT:- The definition of BAS under section 65(19) of the Finance Act includes a variety of activities, but the charges received by the appellant are not towards any of the activities specified is section 65(19) of the Finance Act. The appellant does not promote or market the goods produced or provided by the person paying the same. The appellant also does not promote or market the services rendered by the person paying the same. These charges are not towards any promotional or marketing activities carried out by the appellant. In such a case, these charges are not covered under section 65(19)(i) or 65(19)(ii) of the Finance Act. The appellant does not provide any customer care services on behalf of the person paying the said charges. The appellant does not engage itself in either production/ processing of goods on behalf of such persons or provision of services on their behalf. The appellant also does not procure any goods or services for these persons. In such a case, these charges cannot be said to be covered under sub-clauses (iii), (iv), (v) and (vi) of section 65(19) of the Finance Act - reliance can be placed on the decision of the Tribunal in MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VERSUS CCE, NASIK [2014 (11) TMI 311 - CESTAT MUMBAI]. It was held that no service tax is payable on the fee collected by the appellant towards service charges collected for maintenance of roads, street lights etc, as against these charges the appellant was discharging statutory functions under the Maharashtra Industrial Development Act, 1961 and the Rules made thereunder.

Thus, it would not be necessary to examine the contention raised by the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the case nor penalty and interest could have been invoked.

The impugned order dated 22.01.2015 passed by the Commissioner confirming the demand of service tax proposed in the show cause notice dated 24.04.2014 cannot be sustained and is liable to be set aside - Appeal disposed off.