TMI Blog2018 (9) TMI 1515X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 12/2003-ST was not an allegation or charge raised in the show cause notice. True, para 4.4 of the notice dated 11.6.2013 did reproduce a portion of the Notification 12/2003-ST, however, without making any reference or connection to the facts of the case or making any allegation that the conditions of the notification have been violated by the department - further, in para 19, the adjudicating authority has made a reference to Circular No.96/7/2007-ST dated 23.8.2008 which had inter alia clarified that where spare parts are used by a service station for servicing of vehicles, service tax should be levied on the entire bill including the value of the spare parts. That however service provider is entitled to take input credit of excise duty paid on such parts or any goods used in providing service wherein value of such goods has been included in the bill. We are unable to fathom why the adjudicating authority has chosen to apply the facts of the case to the said circular dated 23.8.2008, particularly, when the said circular pertains to a period prior to the amendment introduced under Rule 2(e) of CENVAT Credit Rules, 2004 amplifying the definition of exempted service to include “t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ENVAT Credit Rules, 2004 vide Notification No. 13/2011-CE (NT) dated 31.3.2011. In response, the jurisdictional Assistant Commissioner vide letter dated 29.12.2011, informed the assessees to pay an amount equal to 5% on taxable value determined under Section 67 of the Finance Act, 1994 i.e. 5% of the gross value of the franchisee service and servicing of motor vehicles (both value of goods sold and service charges received). The assessees were reminded by the jurisdictional Superintendent vide letter dated 2.3.2012 asking them to follow the procedure as advised. However, in response, the assessee vide letter dated 8.3.2012, reiterated their reply and further added that:- They buy and sell parts as a pure trading activity, which is governed by the definition of exempted services‟ read with explanation to 1(C) to Rule 6(3) they have remitted 5% amount equivalent to duty after working out differences between sale price and the cost of goods sold; They also perform divisible contract of goods and rendition of servicing on motor vehicles. Here again, sale of parts constitute pure trading. They have already remitted a sum equivalent to duty in terms of explanation 1(C) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of providing taxable services) is to be included in the gross value of taxable services under Section 67 of the Finance Act, 1994 and that the assessee are liable to pay an amount of 5% on gross value of exempted services as per Explanation 1(a) to Rule 6(3) and 6(3A) of CENVAT Credit Rules, 2004 read along with Rule 2(e), in addition to payment of 5% on gross profit on trading activity as per Explanation 1(C) to Rule 6(3) and 6(3A of CENVAT Credit Rules, 2004. 1.5 On such basis, the show cause notice proposed demand of an amount of ₹ 95,94,743/- as service tax liability for the period April 2011 to March 2012 with interest thereon and also for imposition of penalties under various provisions of law. For subsequent period, April 2012 to June 2012, statement of demand dated 23.4.2014 was issued on identical grounds proposing demand of an amount of ₹ 30,69,417/- with interest thereon and for imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004. Both the show cause notice and the statement of demand were adjudicated in a common order dated 30.6.2015 (impugned order) wherein the tax proposed in the show cause notice / statement of demand were confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed by the notice, was actually value of goods sold during the course of providing the above services. ii. It could be seen from the notice and the documents available on file that the facts were quite different. It is seen that the notice had sold spares during the course of provision of taxable services namely MRS as is evident from the sample invoices available in the file wherein TVS had indicated the same vehicle registration number which was serviced in the sale invoice also thus connecting the sales to the services provided by them. In respect franchisee service also the franchise was given for servicing of motor vehicles under the brand name of TVS and the spares required for such service were also sold by TVS. Thus in respect of both types, the sales has a direct connection to the services rendered by TVS and so the value of such goods sold would form part of the gross value of service in terms of Section 67. But as there is clear evidence in the invoice to show that the goods were sold and that there was no evidence on record to show that they had availed CENVAT on such goods by TVS, the value of such goods sold during the course of provision of services were eligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty paid on goods and materials sold has been taken under provisions of CENVAT Credit Rules, 2004 and not paid the amount equal to such credit availed before the sale of such goods and materials were not eligible for the exemption provided in the said notification. In the further paras also the adjudicating authority had elaborately discussed citing the instructions of the Board in Circular N0. 96/7/2007 ST acted 23.08.2007, citing examples of invoices raised by the notice and discussing the provisions of Section 67 of the Act and concluded that the Assessee was not eligible for the exemption under No0tification No. 12/2003 ST dated 01.03.2003 and that the values of materials sold by them were to be added to the taxable value of services under MRS/FRA services. (d) The show cause notice itself contains contradictions. On one hand, the notice alleges that traded as sold and exempted, and at the same time, the notice also alleges that the value of service should include value of materials sold also. (e) The notice treats sale as other than trading and accordingly seeks to recover an amount equivalent to 5% of value of sale without giving any benefit of abatement. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n involves only sale of parts, question of levying service tax would not arise at all . (viii) Since Cenvat Credit Rules themselves use the expression trading as synonymous with sale as seen from the explanation 1(c)to Cenvat Credit Rules 6(3D) as referred to earlier, it is clear that the subject activity of sale of spare parts sold in the course of providing of the service to the vehicles is nothing but trading and falls under definition of exempted service prior to 01.07.2012 and that is the reason why the appellants have chosen to pay 5% of the value of exempted service i.e. on the difference between sale price and cost of goods sold or 10% on the cost of goods sold whichever is more. Similarly after 01.07.2012 for the same reason the appellants have treated sale/trading activity as falling under the exempted service and discharged the obligation under Cenvat Credit Rule 6. Therefore, the Commissioner‟s findings on such activity of sale as other than trading and also as other than sale as such cannot be accepted. (ix) The commissioner erred in para 17 of the impugned order in denial of the notification benefit 12/2003-ST dated 10.03.2003 wherever it is applicable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, inspite of various decisions cited before him, Commissioner has not considered any of the said decisions. (xiii) Even otherwise, the whole issue is one of the interpretation of law and rules and Appellants genuinely believed that they had compiled with provisions of Cenvat Credit Rules and provision relating to valuation. (xiv) Therefore for the above reasons the resort to Cenvat Credit Rule 15 for the imposition of penalty is improper, illegal and unsustainable. 3. On the other hand, ld AR Shri A. Cletus reiterates the grounds of appeal. He also made submissions which can be broadly summarized as under:- 3.1 He submits that it is evident that the adjudicating authority instead of providing arguments as to why the method adopted by the assessee for payment of amount under Rule 6(3) of CCR was wrong, has elaborately gave findings to the effect that the value of materials sold by them were to be included in the value of services as per section 67 of the act ibid and that as the Assessee had not fulfilled the conditions stated in the notification No 12/2003 ST dated 01.03.2003 namely credit of duty paid on goods and materials sold has been taken under the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 2 of CCR. The AA has not given any findings either to support this aspect or counter the arguments of the notice and has simply confirmed the demands proposed in the SCN SOD. Therefore the Order of the AA is a non-speaking order. 3.4 Hence it is very obvious that the order passed by the Commissioner is not legal and proper and is not a speaking order and has not apprised the issues actually raised in the relates show cause notice. Hence, the impugned order may be set aside and the appeal remanded to the Commissioner for denovo adjudication. 4. Heard both sides. 5. We first take up the appeal of the department. The main grievance of the department is that the impugned order is a non-speaking order without giving detailed findings either to support or counter the arguments of the noticee but has simply confirmed demands proposed in the notice and the statement of demand. We find that the show cause notice had alleged in para 5.1 that value of goods (sold during taxable service) is to be included in the gross value of taxable service under section 67 of the Finance Act, 1994 . The same paragraph also alleges that assessees are liable to pay an amount of 5% of gross v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to fathom why the adjudicating authority has chosen to apply the facts of the case to the said circular dated 23.8.2008, particularly, when the said circular pertains to a period prior to the amendment introduced under Rule 2(e) of CENVAT Credit Rules, 2004 amplifying the definition of exempted service to include trading . Further, we find that based on the such discussions, the adjudicating authority in para 20 of the order concluded that value of goods sold is to be included in the gross value of services as assessee has not fulfilled the conditions laid down in Notification 12/2003-ST. 5.3 We also find that in para 17 of the impugned order, the adjudicating authority has stated that assessee has taken credit of duty paid on goods and materials sold by them. Ono the other hand, as per the letter dated 5.1.2012 of the assessees to the jurisdictional Assistant Commissioner at point No. 5 relating to sale of parts to franchisees they have averred that no input credit is taken and hence no duty is payable . 5.4 The assessee also, in their grounds of appeal and other contentions made by them, have consistently found fault with the adjudicating authority which have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X
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