TMI Blog2017 (7) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... issue - appeal allowed. CENVAT credit - duty paying invoices - credit denied as the documents contained alterations - Held that: - it transpires that C.P. Systems Pvt. Ltd. had provided services to the appellants and said invoices were indeed issued by C.P. Systems Pvt. Ltd. Difference in format was because of different places where the copies were generated. In these circumstances the fact of genuineness of the transaction cannot be questioned. The fact that the appellant received services and service tax was paid by the service provider for those service is not in dispute. It is seen that during this exercises duplicate copies of the documents have been obtained and transaction has been verified. Provision of service payment of service tax have already been confirmed and duplicate copies of invoices obtained from the service provider, the credit of such invoices in respect of services undisputedly received by the appellant cannot be denied - appeal allowed. Classification of services - works contract service or erection, commissioning and installation services? - Held that: - It is apparent that the responsibility of providing of materials except raw materials is that of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility of the Director of the service provider under the act or the rules. All the liabilities/ responsibilities are of the service provider. In these circumstances, penalty under Section 77 (2) cannot be imposed on the Director, the second appellant - appeal allowed. Appeal allowed - decided in favor of appellant. - ST/85373 & 85379/13 - A/88355-88356/17/STB - Dated:- 13-7-2017 - Mr.Ramesh Nair, Member (Judicial) And Mr. Raju, Member (Technical) Shri.Prasad Paranjape, Advocate for appellant Shri.D.V.Nagvenkar, Addl. Comm. (AR), for respondent ORDER Per: Raju 1. The appellants, M/s.Sunil Hi-Tech Engineers Ltd. and Shri Sunil Gutte, Joint Managing Director of M/s.Sunil Hi-Tech Engineers Ltd. are in appeal against confirmation of demand and imposition of penalties. 2. Ld. Counsel for the appellants informed that there are five different issues raised in these proceedings. 2.1 The first issue raised in the proceedings relates to Cenvat Credit availed fictitious invoices generated by them and on which credit was availed by them. The appellants accepted and admitted their liability to pay said service tax of ₹ 6,68,41,327/- along with interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Gutte, Joint Managing Director. Therefore at the time of taking credit there were unaltered invoices. In support of this argument he pointed out that they were audited for the period March 2008 to March 2009 when they had availed the credit on these documents and in the audit report no such objection was raised. He further argued that the fact that the said services were received and service tax was reimbursed to the vendor has not been disputed. He argued that during investigation, they have produced another copy of impugned invoices by obtaining the same from the vendor's record to establish when the total assessable values as well as service tax amount on the said invoices have not been altered. He further argued that Rule 4A of the Service Tax Rules requires only following details in the invoices: i) The name, address and the registration number of person providing taxable service ii) The name and address of the person receiving taxable service; iii) Description and value of taxable service provided or agreed to be provided; and iv) The service tax payable thereon. He pointed out that no alterations whatsoever was made in these details on the invoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 25/2007-ST dated 22/05/2007. Ld. Counsel argued that the benefit of works contract service was denied solely on the ground that the items included in the contract are only (i) paint (ii) MS Grills (iii) welding electrodes. Ld. Counsel further argued that the consideration received for execution of this contract has been included in the return filed by them to VAT authorities, considering the transactions as works contract and they have attached the VAT returns in their appeal before the Tribunal. He pointed out that the contract price of ₹ 12.60 crores, as per clause 3 of the contract dated 22/08/2008 specifies that the same is including all taxes and duties, VAT/WCT. Ld. Counsel argued that in these circumstances, the service provided by them qualifies as works contract service and is therefore exempted vide Notification No.25/07-ST dated 22/05/2007. 2.4 The next issue relates to Cenvat Credit of ₹ 3,43,799/- taken on input allegedly used in respect of services on which benefit of works contract composition scheme was availed. Ld. Counsel argued that the said credit was in respect of items, like paints, grills and welding electrodes and the documents were in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act, 1994. Ld. Counsel argued that at the material time there was no Section 77 (2) in the statute or rules made there under for levying penalties on the person. In these circumstances, penalty under Section 77 (2) cannot be imposed on the second appellant. 3. Ld. AR relies on the impugned order. He particularly relied on the cross examination of Shri Amar Nayak, Executive Director of M/s.CP Systems Pvt. Ltd. where he has compared the invoices on which the appellant had taken the credit with duplicate copies of invoice. 4. We have gone through the rival submissions. Each of the issues raised in the show-cause notice are discussed below: 4.1 The appellants have availed credit on fictitious invoices and on being caught the appellants have paid the entire Cenvat Credit demanded along with interest and 25% of penalty within one month of issue of the show cause notice. The appellant has sought relief under Section 73 (1A) of the Act which reads as under: 73. Recovery of Service tax not levied or paid or short levied or short paid or erroneously refunded (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notices are served under sub-section (1) shall be deemed to be concluded. Provided further that where such person has paid service tax in part along with interest and penalty under sub-section (1A), the Central Excise Officer shall determine the amount of service tax or interest not being in excess of the amount partly due from such person. 4.2 The benefit of Section 73 (1A) has been denied on the ground that the appellants have not accepted all the charges made in the show cause notice and consequently they have not paid the service tax in full . The Commissioner has relied on the proviso to sub-section (2) of Section 73, which states that the proceedings against the person depositing dues in terms of Section 73 (1A) would be concluded against him as well as other noticees only when the service tax in full together with interest and penalty is deposited. A perusal of sub-section (1A) of Section 73 shows that it is an option to a person to admit liability in full or in part and proviso to sub-section (2) relates to the liability admitted under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the documents are just an evidence of the fact of receipt of duty paid services. It is the fact that the show-cause notice itself in para 16.2 clearly admits that the appellants had received services. However, it says, the appellant had not availed credit on invoices issued by the input service provider, M/s.CP Systems Pvt. Ltd. The allegation is that Cenvat Credit was availed on the basis of new set of fabricated copies of invoices which were prepared by the appellant themselves. On the other hand, the appellants have contended that they have taken credit on unaltered documents before they were altered. They, however, admit to have altered certain portion of the said invoices on a later date to accommodate certain other fictitious invoices on which they have already reversed the credit along with the interest and penalty (para 4.2 ref). They have argued that the alteration was only in the quantity of service received and the rate of services. They had not altered the total assessable value or the total service tax paid. Another argument of the appellant is that the alteration was not made in any of the mandatory details prescribed under Rule 4A of the Service Tax Rules, 1994. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ans. Yes. We are registered and paying service tax. Q.3 Please see the statement given by you on 27/07/2011 before the Superintendent (Prev), Nagpur and the affidavit filed by you before the said Supdt on 28/07/2011 and identify the same. Also go through the same. Ans. He has seen the statement dated 27/07/2011 and affidavit dated 28/07/2011 and confirms that they have been given by him. Q.4 Under para 5 of the statement dated 27/07/2011, 12 invoices (Annexure 311 of the SCN) of M/s.CP Systems Pvt.Ltd. and recovered from M/s.Sunil Hi Tech Engineers Ltd. were shown to you by the department and you have stated that these invoices are not issued by M/s.C.P. Systems at all, in para 8 of your statement. Under para 6 of the statement dated 27/07/2011 invoices (1 to 17 Annexure 310 of the SCN) issued by M/s.CP Systems Pvt. Ltd. and submitted to the department by Shri Sachin Jain, CA of M/s.CP systems Pvt. Ltd were shown toyou and in para 6 of the statement you have confirmed them as invoices issued byM/s.CP Systems Pvt. Ltd. You have also submitted the remaining invoices (18 to 24 Annexure 314 of the SCN) to the department as recorded in para 4 of your statement. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transaction has been verified. Provision of service payment of service tax have already been confirmed and duplicate copies of invoices obtained from the service provider, the credit of such invoices in respect of services undisputedly received by the appellant cannot be denied. Appeal on this count is consequently allowed. 4.5 The next issue raised regarding classification and consequent liability to service tax of the services provided to JSW Jaigad Port Ltd. Revenue has sought to classify the said services under erection, commissioning and installation services. While the appellant seek to classify the same under commercial or industrial construction services/works contract service. The appellant seek full exemption under Notification No.25/2007 in respect of works contract services and Notification No.16/2005-ST in respect of commercial or industrial construction service. Notification No.25/2007 dated 22/05/2007 exempts services provided commercial or industrial construction/works contract services in relation to construction of port or other port from whole of service tax leviable thereon. Prior to this notification. Notification No.16/2005 exempted commercial or indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/2007. It is seen that the impugned order relies on the fact that the appellants has deposited the service tax at the time of visit of officers. We find that such fact cannot be held against the appellant. The fact that the appellant had sought Notification No.16/2005 has also been held against the appellant. From the above records, it is apparent that the appellants are engaged in the activity in the provision of works contract service and would be entitled to benefit of notification No.25/2007. In these circumstances, the demand and penalties on this count cannot be sustained. 4.6 The fourth issue pertains to availment of credit on documents where the billing address has been shown as JSW Ratnagiri and the appellants have claimed the material has been used in their site at JSW and not at JSW Energy. At JSW Energy the appellants were engaged in provision of works contract service and were availing composition scheme under works contract. Consequently, at JSW Energy, the appellants were not entitled to avail credit on Cenvat on inputs. The appellants have challenged the conclusion drawn on the strength of the address printed on the invoices. The appellants have produced all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in the appeal memo and referred by both sides during the hearing, regarding the payment terms are reproduced below : 11. Payment Terms To facilitate Owner plan the funds allocation efficiently and release payments from time to time, the Contractor shall submit a detailed billing break up to the Owner in due course of time. This billing break up shall be discussed and approved by the Owner and shall form the basis for opening the Letter of Credit and for the Contractor to raise his invoices. 11.1 ADVANCE PAYMENT 11.1.1 The Contractor shall deliver to the Owner a payment security in the form of a bank guarantee for 10%, i.e., ₹ 80.50 lacs (Rupees Eighty Lacs Fifty Thousand Only) of the Contract price valid until the completion of Scope of Work ( payment security ). Upon receipt of the payment security, the Owner shall pay to the Contractor 10% of the Contract Price as an advance payment (Initial Advance) amount to ₹ 80.50 lacs (Rupees Eighty Lacs Fifty Thousand Only). 11.1.2 The value of the payment security shall be reduced on a quarterly basis in proportion to the amount of advance adjusted in the invoices of the Contractor. 11.1.3 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial advance payment received 80.50 5 Less : 10% mile stone payment to be received 80.50 6 L/C Value to be opened 726.9150 We have seen a sample invoice in the appeal memo as shown below Invoice Bill No. RAB 001 To, M/s. Madras Cements Limited R.R. Nagar Works, Virudhunagar Dist. L/C No. : 462030101300001 dated 10th May 10 Erection Commissioning Work for the Captive Thermal Power Plant of 1X25 MW capacity at Madras Cements Ltd., R.R. Nagar Works. S. No. Description This Bill Amount (Rs.) 1 Value of work completed 31,05,160.00 2 Add : Service Tax @ 10% 310,516.00 3 Add : Education Cess @ 2% 6,210.32 4 Add : S H Cess @ 1% 3,105.16 5 Total (1+2+4) 3,424,991.48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect. The advance is only an amount given as kind of earnest money and for which the appellant gives a bank guarantee to the customer of equal amount. It is more in the nature of a deposit. As defined in Borrows, in Words and Phrases, Vol. II. An earnest must be a tangible thing... That thing must be given at the moment at which the contract is concluded, because it is something given to bind the contract, and, therefore, it must come into existence at the making or conclusion of the contract. The thing given in that way must be given by the contracting party who gives it, as an earnest or token of good faith, and as a guarantee that he will fulfil his contract, and subject to the terms that if, owing to his default, the contract goes off, it will be forfeited. K, on the other hand, the contract is fulfilled, an earnest may still serve a further purpose and operate by way of part payment . In the present case the advance is like earnest money for which a Bank Guarantee is given by the appellant. It is a fact that the customer can invoke the Bank Guarantee at any time and take back the advance. Hence the appellant does not show the advance as an income, not having compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjusted in due course as and when the service was provided coupled with the fact that unless the service was provided the rate at which the Service Tax was to be paid would not be known, it is not possible difficult to sustain the order with regard to confirmation of the impugned interest . Reliance is also placed on the case of CCE, Ludhiana v. J.R. Industries, - 2009 (16) S.T.R. 51 (Tri.-Del.). 5. It appears that levy was premature without the service being provided. The authority below has proceeded on the conception that 33% of the advance received shall be value of taxable service. When the work order relied by the ld. DR does not demonstrate that the receipt was the consideration for service provided, this does not provide a basis to appreciate that taxable event had arisen and levy was made properly. Once it is demonstrated by SCN that the levy was arrived treating advance receipt as measure of taxation. Resulting a levy of ₹ 3,15,253/-, that shall not be approved to be taxed without service being provided. On the above reasoning, we dismiss the appeal of Revenue without accepting the reasoning given by the ld. Commissioner (Appeals). We have shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute or rules made there under for levying penalties on the person. Penalty of ₹ 5000 has been imposed on the Director of the service provider. It is seen that out of five charges against the service provider two (para 4.2 and 4.7 above) have been compounded in terms of section 73(1A) read with proviso to subsection 73(2). As a result proceedings against the co noticees would not survive in respect of these charges. In respect of two charges the proceedings have been set aside and appeal allowed (para 4.4 and 4.5 above). No penalty in respect of these charges can be imposed. In respect of fifth charge the demand has been set aside and matter remanded (para 4.6 above). Thus no cause exist for imposition of penalty on the Director. Moreover it is seen that section 77(2) prescribes that - Any person who contravenes any of the provisions of this chapter or any rules made thereunder, for which no penalty is separately provided in this chapter, shall be liable to a penalty which may extend to five thousand. It is seen that Tribunal in the case of Diwan Rahul Nanda (2012-TIOL-688-CESTAT-Mum) has held that there is no provision for imposition of personal penalty on the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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