Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2019 (5) TMI 1045

period October 09 to March 10, April 10 to September 10 & October 10 to March 11 - penalty u/r 76 and 77 of FA. HELD THAT:- CENVAT Credit Rules, 2004 are rules prescribing the procedure for payment to Central Excise duty/ Service Tax on the finished products/ output taxable services. These rules are self contained and provide for the mechanism to avoid tax pyramiding/ cascading effect of the tax paid on input/ input services. We do not agree with the approach of the commissioner that just because appellants had failed to comply with certain procedural requirements, the entire credit should be denied to them. The purpose of adjudication in such cases is to find out the truth and determine the actual credit that is admissible. In our view there is no doubt in respect of eligibility to taxable services received by the appellant getting qualified as “input services” under Rule 2(l) ibid. Applicability of Rule 6 of CENVAT Credit Rules, 2004 - major service provided by the appellant i.e. providing/ imparting education is exempted service - HELD THAT:- Undisputedly appellants have not followed the procedure prescribed for availing the options provided under Rule 6(3A) of t .....

X X X X X X X

Full Text of the Document

X X X X X X X

eals are identical they are taken up for disposal together. 2.1 Appellants are a Institute of repute and are rendering taxable services under the category of Technical Consultancy Service as defined by Section 65(105)(za) of Finance Act, 1994. They are also providing non taxable/ exempted services (education services). 2.2 Appellants while providing the services took the CENVAT Credit of Service Tax paid various input services. These input services were used for providing both taxable and non taxable/ exempted services. Since appellant were not maintaining the separate account for input services used for providing taxable and non taxable/ exempted services as mandated by Rule 6(2) of CENVAT Credit Rules, 2004, they were required to follow the procedure as prescribe rule 6(3) ibid and reverse the credit attributable to the input services used for providing non taxable/ exempted services. 2.3 Show Cause Notice dated 08.04.2011, 18.10.2011 and 14.03.2012 have been issued to the appellant, seeking to deny them the credit of common input services taken by them during the periods October 09 to March 10, April 10 to September 10 & October 10 to March 11. 2.4 These show cause notices h .....

X X X X X X X

Full Text of the Document

X X X X X X X

ring all such contentions the credit in respect of the input services has been disallowed stating that the input services were not used for providing the output services. vi. The aforesaid input services are directly or indirectly used in providing the output services and as per the principles laid down by Hon ble Bombay High Court in case of Coca Cola India Pvt Ltd [2009 (242) ELT 168 (BOM)} and various other decisions the credit should not have be disallowed. vii. A large portion (₹ 73,29,468/- out of ₹ 92,43,375/-) of the credit disallowed is in respect of services specified in Rule 65) and is eligible to be considered as input services as long as they are not used in admittedly exempted output services. viii. On application of principles underlined in Rule 6(3A)- Option II, the CENVAT Credit taken by them meets or comes within the parameters of the said Rule and impugned proceedings need to be set aside. ix. Since the issue is a bonafide interpretational issue penalties are required to be set aside by invoking Section 80. 3.3 Arguing for the revenue learned authorized representative while reiterating the impugned order submitted that appellants are having service ta .....

X X X X X X X

Full Text of the Document

X X X X X X X

made during the course of arguments of appeal. 4.2 Issue for consideration before us can be summarized as follows: i. Whether the CENVAT Credit in respect of various input services availed by the appellant is admissible to them? ii. Whether the appellants can be allowed the benefit of Rule 6(3) Option II, when they have not followed the procedure as laid down by the said rule. iii. Whether penalties under Section 76 and Section 77 of The Finance Act, 1994 justified upon the appellants? 4.3 Undisputed facts are that Appellants are reputed Technical Institute, engaged in providing technical education. Apart from providing technical education they are engaged in research and also are providing technical consultancy services. While the services of education and research are non taxable / exempted from payment of service tax, technical consultancy services are taxable and are covered by the definition as provided by Section 65 (105)(za) of Finance Act, 1994. Appellants are registered as provider for the said taxable services. They are paying the service tax in respect of the services provided by them under the said taxable category. They are also availing the CENVAT Credit in respect o .....

X X X X X X X

Full Text of the Document

X X X X X X X

s regarded as input service. The category is also covered under Rule 6(5). 4. Maintenance or Repair Services These services are required by the Noticee for the upkeep and maintenance of various equipments including computer hardware, software, other various technical equipments, laboratory equipments & instruments as well as the infrastructure such as elevators, EPABX systems in various buildings and again a service being covered under Rule 6(5) qualified to be input service. 5. Management Consultancy Service Some of these services were obtained for patent registration of products designed by R&D division of IIT. The other part of services relate to services obtained for design and implementation of software for the institute. These services were provided by Tata Consultancy Services. The service being of infrastructural nature is covered by Rule 6(5) and is eligible to be considered input services. 6. Scientific & Technical Consultancy Services These services were obtained for execution of the project undertaken by IIT and as such, is directly forming part of the output service and therefore is an input service. 7. Technical Inspection & Certification services Whil .....

X X X X X X X

Full Text of the Document

X X X X X X X

ng part of the business activity of the Institute. 14. Cargo Handling Service The Institute Imports various equipments from abroad for its research activities and this being the core function base on which extensive consultation is provided, they are treated as input services for output services. 15. Online Information Data Services This service is obtained for getting Bandwidth/accessing internet services and it being an infrastructural need of the business activity of the Institute, it is an input service for output service. The vendors of this service are Reliance, VSNL and Verizone. 16. Rent-a-Cab Scheme Operator s Services Often cared are hired by faculties for their official assignments of consultancy and academic purposes. As such, they are directly related to output service activity and therefore are input services. 17. Telecommunication Services These services are essential part of business, academic and administrative work of the Institute and as such, a business expenditure of the Institute and therefore qualify to be input service. 4.6 Commissioner has in her order in para 24 and 24.1 held as follows, for holding that the services against which the appellants have claim .....

X X X X X X X

Full Text of the Document

X X X X X X X

es of provider of output service or an office relating to such premises, advertisement, market research, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry. As can be seen, whereas setting up, modernization etc., of the premises of a service provider is covered in the inclusive portion of the definition of input service, other activities/services like say, original construction of complex, is not covered by input service as construction of complex is not claimed as having any nexus to provisions of Scientific and Technical Consultancy Service. This would be so even if these are used for providing education and this education comes into indirect use while providing taxable service. Moreover, I find that the host of judgments referred to by the Noticee in support of their claim that the input services in which credit is claimed as eligible under Rule 2(l) of the CCR, 2004 are not directly applicable to the facts and circumstances of the present case. Thus the Noticee has not been able to establish that the inputs on which CENVAT is claimed for rendering th .....

X X X X X X X

Full Text of the Document

X X X X X X X

for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A). Explanation I.- If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II.-For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:- (i) name, address and registration No. of the manufacturer of goods or provider of output service; (ii) date from whi .....

X X X X X X X

Full Text of the Document

X X X X X X X

tured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, M denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and N denotes total CENVAT credit taken on input services during the financial year; (d) the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods .....

X X X X X X X

Full Text of the Document

X X X X X X X

ue date till the date of payment. Explanation I.- Value for the purpose of sub-rules (3) and (3A) shall have the same meaning assigned to it under section 67 of the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder. Explanation II.-The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III.- If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3) or as the case may be sub-rule (3A), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. . (4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt fro .....

X X X X X X X

Full Text of the Document

X X X X X X X

at Credit lying in balance on the date of exercising option. 22.3.2 The service provider shall also determine and pay provisionally on a monthly basis, the amount equivalent to the Cenvat Credit attributable to the inputs used in exempted services as per formula laid down in the Rule. The final credit attributable to exempted services for the whole financial year is also to be determined as per laid down formula and the differential amount if any paid on or before 30th of the succeeding financial year along with the prescribed rate of interest if paid beyond the prescribed date. Alternatively the service provider may adjust the excess amount on his own by taking credit of such amount. In either case the service provider shall intimate the details to the jurisdictional Superintendent within a period of 15 days from the date of such adjustment. The amounts mentioned in sub-rule 3 & 3(a) unless specified otherwise are payable on or before the 5th of the following month except for the month of March when the due date is 31st March. If the service provider fails to pay the amount, it is recoverable in the manner as provided in Rule 14 of CCR, 2004. 22.4 There have been some changes .....

X X X X X X X

Full Text of the Document

X X X X X X X

e to exempted outputs. 4.9 After recording as above in para 22.5.1 she observes Schemes under rule 6(3) are optional and each individual scheme is comprehensive and self contained. An assessee can exercise the option in relation to all his activities as an assessee and the option is not available only in relation to a part of his activity and the option once exercised cannot be withdrawn during the said financial year. 4.10 Commissioner has in para 25.1 observed that Appellants have failed to comply with the legal obligations casted stating as follows: 25.1 Therefore, in spite of being aware of the legal requirements (as they have been receiving SCN s since 2008), the Noticee has failed to meet its obligation as under: The Noticee has not exercised any option under Rule 6(3A) of The CENVAT Credit Rules, 2004, by intimating in writing to the jurisdictional superintendent giving the particulars as specified under the aforesaid rule nor have stated any date from which the option under said rule was exercised or was proposed to be exercised. The Noticee has not given details of CENVAT Credit on input services lying in balance as on date of exercising the option, for the obvious reason .....

X X X X X X X

Full Text of the Document

X X X X X X X

le 3 and the restriction on availment of credit imposed under Rule 6(1) of the said rules. When the Noticee has not bothered to maintain any separate account or give any option or reverse any credit from time to time as specified in the Cenvat Credit Rules, they cannot unilaterally stake claim to any amount of credit as being eligible to them under Rule 6(3) and Rule 6(5) of the Cenvat Credit Rules, 2004. They were first of all required to show that the credit has been taken of service tax paid on services which qualify to be input services as per definition provided under the said Rules. Thereafter, the question of claiming any credit in terms of Rule 6(3) would arise only when they maintain separate record in respect of input services used for providing nontaxable services and also show to the department at least now, that they have not taken credit on such input services. The other option regarding reversal of credit attributable to input services used for providing exempted/ non-taxable services is also not available to the Noticee as they have miserably failed even remotely showing compliance to the provisions of Rule 6(3A). As regards their claim of credit under Rule 6(5) ibi .....

X X X X X X X

Full Text of the Document

X X X X X X X

eriod they had reversed the CENVAT Credit attributable to exempted services. During the course of argument they had submitted following charts showing the reversal of credit by them: Particulars Credit taken on input services Credit Reversed under 6(3)(ii) Credit availed on services not specified under 6(5) Total CENVAT Credit availed Ratio of amount paid under 6(3) (ii) Specified under 6(5) Other than 6(5) A B C D E=C-D F=B+E G=D/C* 100 Apr-Sep 10 2793809 3748793 3523865 2,24,928 30,18,737 94.00 Oct-Mar 11 4535659 10701646 10154426 5,47,220 50,82,879 94.89 Apr-Sep 11 0 12036760 10895001 11,41,759 11,41,759 90.51 Total 7329468 26487199 24573292 19,13,907 92,43,375 4.14 During the course of arguments appellants submitted that they had been reversing the CENVAT Credit attributable to input services other than those specified under Rule 6(5) regularly in their books of account. However the fact of reversal under 6(3) was not correctly recorded in ST-3 returns. They also produced charts reproduced below showing the erroneous depiction made by them in their ST-3 return. 4.15 From the perusal of the said charts the errors/ mistakes in depicting the amounts reversed while filing the ST-3 .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||