TMI Blog2018 (2) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No.ST/100-2016-SC - Final Order No.63/2017-ST - Dated:- 29-9-2017 - S/Shri C. Rajendiran, Vice-Chairman And R.D. Negi, Member S/Shri S. Ravi, Advocate and S. Sivaganesh, Consultant, for the Appellant. None, for the Respondent [Order]. - M/s. Pyro Telecom Solutions Private Limited (Formerly known as Pyro Networks Private Limited), 8-2-269/A/2/1 to 6, Sri Nilaya Cyber Spazio, Road No.2, Banjara Hills, Hyderabad-500034 (hereinafter referred to as the applicant ) has filed an application before the Additional Bench of Settlement Commission, Chennai for settlement of the case arising out of the Show Cause Notice OR No.16/2016-Adjn (ST) (COMMR) (HQPOR No.19/2015-S.T. (AE VIl), dated 4-2-2016 issued by the Commissioner of Service Tax, Hyderabad demanding Service Tax of ₹ 2,22,56,061/- along with interest thereon and proposing to impose penalties under Sections 77, 78 78A of the Finance Act, 1994 and Rule 15A of Cenvat Credit Rules, 2004. The SCN also demands late fee of ₹ 1,33,900/- under Section 70 read with Rule 7C of Service Tax Rules, 1994. Brief Facts : 1.2 Briefly stated the facts of the case are as under : The applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices and rent-a-cab services during the period from 10/2013 to 3/2015. The applicant had also availed input service credit on hospitality services which mainly related to providing lunch to the employees covered under the category of outdoor catering service. Further rent-a-cab service if not used as capital goods, service tax paid on the said services is not eligible as input service credit. Hence as per Rule 2(1) of Cenvat Credit Rules, 2004, the input service credit availed by the applicant on hospitality services and rent-a-cab services is not correct. Such ineligible credit worked out to ₹ 25,17,977/- which was liable to be recovered in terms of Rule 14 of CCR, 2004. C. Service tax not discharged under partial reverse charge mechanism : In terms of Notification No.30/2012, dated 20-6-2012 as amended, the applicant has to discharge service tax liability under reverse charge mechanism on renta-cab services availed by them as receiver of service. The service tax liability under reverse charge mechanism worked out to ₹ 24,15,945/- for the period 1-42014 to 31-3-2015 and the same was liable to be paid by the applicant. D. Non-fulfilment of obliga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on such commission received for services rendered in the State of Jammu Kashmir. The applicant had received an amount of ₹ 20,73,125/- as commission for the period 1-7-2012 to 31-3-2015 and the Service Tax on the same worked out to ₹ 2,56,238/-. The applicant did not disclose to the department at any time or in any manner that they were rendering taxable services and were liable to pay Service Tax. The fact of non-payment of Service Tax came to light only after investigation by the officers of the jurisdictional Commissionerate. It, therefore, appeared that the applicant had suppressed material facts from the department with intent to evade payment of service tax. Hence, extended period of 5 years is invocable in terms of proviso to Section 73 of the Finance Act, 1994 for demand of Service Tax. 1.3 Based on the above, the applicant was issued with the aforesaid show cause notice by the jurisdictional Commissioner of Service Tax, Hyderabad. The show cause notice proposed to : (i) Demand Service Tax of ₹ 1,67,02,830/- for rendering taxable services of Development and Supply of Content Services for the period 1-4-2011 to 31-3-2015 under proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d paid the same through input service credit; However department denied the Cenvat credit on the ground that applicant had not disclosed the input service credit in the ST-3 returns for the said period. The applicant submitted that they were eligible to avail the said input service credit which was taken based on proper documents and enclosed a statement showing the invoices based on which such input service credit was availed. Hence they admitted the demand of ₹ 1,67,02,830/- out of which ₹ 35,40,925/- was paid through cash and ₹ 1,31,61,905/paid through input service credit. Out of demand of ₹ 25,17,977/-, the applicant admitted ₹ 1,02,032/- in respect of credit taken for M/s. ABC Hospitality Services. With regard to the balance service tax credit of ₹ 24,14,675/pertaining to rent-a-cab services, it was submitted that the rent-a-cab services were used for main business of transporting the equipments to check the signal strength etc. from the Mobile Tower. From the write-up submitted on the above service, it could be seen that the applicant was required to keep the special kits in the car which was rented for this purpose and the car had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding all the relevant records required by the offices for conducting the investigation. In view of the above, the applicant prayed that the Hon'ble Settlement Commission may settle the Service Tax liability and interest liability at ₹ 1,74,24,171/- and ₹ 11,90,075/- respectively and grant waiver of penalty and immunity from prosecution in the present case. Jurisdictional Commissioner's Report 3.1 A copy of the application was forwarded to Jurisdictional Commissioner for his report/ comments on the application. The Commissioner of Service Tax, Hyderabad Commissionerate submitted his report vide O.R. No.16/2016- Adjn (ST) (Commr), dated 10-4-2017 . The Jurisdictional Commissioner in his report, inter alia, submitted the following : With regard to demand of Service Tax of ₹ 1,67,02,830/-, applicant had claimed that having paid ₹ 35,40,925/- in cash for the period 2014-15, they were eligible for Cenvat credit of input services of ₹ 1,31,61,905/- for the period from 2011-12 to 2013-14 as they had taken credit based on proper documents; though the applicant had submitted list of input service invoices, no evidence with reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem including the service tax component to the rent-a-cab service providers like M/s. A3 Associate Travels and Events, M/s. Abhishek Enterprises, M/s. Amma Travels who are proprietary concerns. This contention of the applicant cannot be accepted inasmuch as Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-S.T. casts the liability on the service recipient to pay Service Tax on rent-a-cab services. Further the applicant also did not submit any evidence to show that the Service Tax on rent-a-cab service was paid by the service providers although the tax liability had to be actually discharged by the applicant. Accordingly, the applicant are liable to pay service tax of ₹ 16,70,965/- notwithstanding the fact they reimbursed/paid Service Tax component to their service providers of rent-a-cab services. The applicant filed the periodical ST-3 returns belatedly and applicable late fee of ₹ 1,13,900/- was correctly paid by them. Hearing 4.1 The case was heard on 20-6-2017. Shri S. Ravi, Advocate and Shri S. Sivaganesh, Consultant represented the applicant and no one represented the jurisdictional Commissioner. 4.2 It was submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice provided by cabs rented by them, they are entitled for taking the credit and, they are not liable to pay the remaining amount. 4.5 With regard to the demand of ₹ 24,15,945, (para 22(iii) of the SCN), that as per the documents filed along with the application, the said amount has already been paid by them to various input service providers; that though the tax liability is on them to pay the service tax, under the Reverse Charge Mechanism, they having paid the same to the service providers are not again liable to pay the same to the Government; and that the issue is revenue neutral. 4.6 Commissioner vide his report OR No. 16/2016-Adjn (ST) (Commr.), dated 10-4-2017 has submitted that the case may be decided based on merits; that the applicant is not eligible for Cenvat credit; as no evidence with regard to maintenance of proper records for receipt and consumption of services of discharge burden of proof regarding admissibility of Cenvat credit was provided by the applicant as required under Rules 9(6) and 9(9) of CCR 2004. With regard to ineligible Cenvat credit of ₹ 25,17,977/- on rent-a-cab services, Commissioner has contended that Rule 2(e) of CCR, 2004, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15,675/- pertaining to Rent-a-cab service, it was contended that the rent-a-cab services had been used for main business of transporting the equipments to check the signal strength of the Mobile Towers. Further, the main part of the definition for input service says that input service means any service used by a provider of output service for providing an output service. In this case, the provision of output service would not have been possible with engaging the services of cabs. Thus when the main part of the definition says that any input service used for providing output service should be deemed as input service, any further interpretation restricting credit so as to nullify the main part of the definition thereby making provision of output service impossible appears to be not based on sound reasoning. Reliance was placed on the Division Bench judgment of the Hon'ble Punjab Haryana High Court in the case of Commissioner of Central Excise, Delhi-Ill v. Maruthi Suzuki Ltd. 2017 (49) S.T.R. 261 (P H). They also relied on the judgment of Hon'ble CESTAT in the case of M/s. Marvel Vinyls Ltd. v. Commissioner of Central Excise, Indore [2017 (49) S.T.R. 424 (Tri. - Del. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of output service while the department has argued that the 'rent-a-cab services' were specifically excluded from the definition of 'input service' in terms of Rule 2(1) of Cenvat Credit Rules, 2004. Thirdly with regard to demand of Service Tax of ₹ 24,15,945/- on 'rent-a-cab services' under reverse charge mechanism, applicant's plea was that Service Tax under reverse charge mechanism was not leviable on rent-a-cab services provided by a private limited company in terms of Notification No.30/2012, dated 20-6-2012 and that as the service charges along with service tax element for such services received were paid to their rent-a-cab service providers, demanding the same from them would amount to double taxation. Department while accepting the contention of the applicant with regard to demand of Service Tax of ₹ 7,44,980/- on rent-a-cab services provided by a private limited company as not sustainable, still holds that in respect of service providers other than private limited companies, Section 68(2) of the Finance Act, 1994 read with Notification No.30/2012-S.T. casts the liability on the service recipient to pay Service Tax on rent-a-cab s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the dispute and is meant for a person who is sorry about his conduct and wants to make amends. It is not an alternative adjudicating forum. A person approaching the Settlement Commission must show utmost good faith. 6.6 In the Dharampal Satyapal case [2013 (298) E.L.T. 653], the Delhi High Court lucidly stated the scope of Settlement Commission, when the Hon'ble Court observed : 49. The other principle which has been set down in several judgments of this Court is that the Settlement Commission is not a substitute for adjudication proceedings before the Central Excise authorities and where complex issues of fact and law are involved for which a detailed inquiry is necessary, settlement proceedings cannot act as a proper substitute for the adjudication proceedings . In Picasso Overseas and Others v. Director General of Revenue (Intelligence) and Another (W.P. (C) No.1495 of 2007 and w.p. (C) No.4401 of 2007) decided on 3-82009 the issue posed before this Court was : can the Settlement Commission substitute itself for the adjudicating officer and arrive at a decision on highly contentious issue requiring detail and complex investigation for arriving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of whether Section 4 or Section 4A of the Central Excise Act. Though the assessee has admitted the short levy on dough and paid the duty thereof since he is raking up the plea that he is eligible to claim benefits under Section 4A instead of Section 4, that point goes out of the jurisdiction of the Settlement Commission, since it has not been vested with the power to decide such a question of direct assessment. By such an act, the Settlement Commission has usurped the jurisdiction of the adjudicating authorities and as had been rightly commented on the part of the Revenue, by the impugned order, the Settlement Commission has set a bad precedent. 6.9 In view of the foregoing discussions, the Bench observes that the case is not one that can be settled in this Forum in view of rival claims, leading to total divergence on facts and on law, which are essential for settling this case. The Bench observes that the issue of analysing the facts, interpretation of legal provisions and consequently determining the tax liability or otherwise of services merely on the basis of claims made by the applicant vis-a-vis the counter claims made by the department cannot be decided in this forum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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