TMI Blog2019 (7) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of the Original Adjudicating Authority that if the credit is taken for an activity which does not constitute service, payment of service tax will not amount to reversal of the credit . demand deleted Validity of SCN - Penalty u/s 78 - HELD THAT:- If there is no suppression or collusion or willful misstatement with an intent to evade service tax and the required amount of the service tax is paid before the issue of show cause notice in that case, there is no need of issuing of any SCN - since all the facts and details of the Cenvat credit and output services have been recorded in the books of accounts of the assessee and during the enquiry itself, the assessee has made a payment of ₹ 5 crores as details given above, we feel that there are no valid ground of issue of show cause notice for demanding of service tax amounting to ₹ 87,35,678/- and for imposition of penalty under Section 78 of Finance Act, 1994 - Demand set aside. CENVAT Credit - capital goods lost before put to use - Consumer Premises Equipment (CPE) which were lost in transit or lost at the distributor s premises before same being put for use in providing the output service - interest - Penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant in this case, has taken the Cenvat credit on the CPEs which are the capital goods for providing output service at the premises of the subscribers and as per the provisions of the above-mentioned proviso to Rule 3 (5) the appellant are entitled for availing the Cenvat credit on the CPEs under the capital goods credit and they can also remove such CPEs for installation at the premises of the subscribers for providing the output service - The provisions of Rule 3 (5A) covers the situation where the goods are cleared after being put for use at the premises of the manufacture or output service provider. Since the goods are not removed after being used from the premises of the manufacturer or output service provider in the given situation in the present case and, therefore, the provisions of Rule 3 (5A) are not applicable in the present case. Extended period of limitation - Section 73 (1) of the Finance Act, 1994 - HELD THAT:- As the Department has already been aware about the facts of the matter and therefore we feel that the element of fraud, mis-representation, collusion, mis-statement with an intent to evade service tax are not present in the given circumstances in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demand has been raised in the above-mentioned show cause notice pertains to the matter that the appellant need to reverse back the Cenvat credit on the CPEs (Consumer Premises Equipment) installed on complementary basis at the premises of certain customers/subscribers. A demand of ₹ 8,71,650/- has been raised on this issue as per the provision of Section 73 (1) of the Finance Act, 1994, (iii) a demand of ₹ 62,66,437/- has also been demanded for wrong availment of the Cenvat credit on the CPEs lost in transit or lost at the distributors premises before same being put for the final utilization; (iv) and a demand of ₹ 9,84,62,871/- has also been made under Rule 14 of the Cenvat Credit Rules, 2004 readwith Section 73 (1) of the Finance Act, 1994 for not reversal of the Cenvat credit on CPEs such as set-top box, cables, antenna etc. which were installed at the consumer/subscribers premises and such CPEs, which were not in use for providing the output service because of the fact that the subscription of the cable connection have been cancelled/de-activated by the subscriber and such CPEs have also been written off fully in the financial account of the appellant for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,141,968,929/- 74,081,280/- April September 2009 23/10/2009 October March 2010 23/07/2010 2010-2011 1,589,642,450/- 1,548,505,832/- 41,136,618/- April - September 2010 26/10/2010 October March 2011 25/04/2011 2011-2012 1,94,57,90,608/- 1,87,55,28,002/- 7,02,62,606/- April - September 2011 25/12/2011 October March 2012 25/04/2012 01/4/2012 to 31/01/2013 2,26,47,56,192/- 1,58,43,18,011/- 68,04,38,181/- April June 2012 22/11/2012 July - September 2012 22/04/2013 October March 2013 31/08/2013 Total 701,62,39,459/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken by it amounted to manufacture and accordingly paid excise duty and also availed Cenvat credit of the inputs utilized. The department contended that as the activity of the assessee did not amount to manufacture, the assessee is liable to reverse the CENVAT credit availed. The Gujarat High Court held that Cenvat credit cannot be denied when the assessee has paid the tax, as payment of tax amounts to reversal of credit. The court in paragraph 7 of the decision held as follows : The Tribunal is justified in holding that if the activity of the respondent assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture. This decision was upheld by the Supreme Court by dismissing the SLP filed by the revenue. The order of dismissal is reported at 2009 (243) E.L.T. A 121. (ii) Commissioner of Central Excise, Pune III vs. Ajinkya Enterprises 2013 (294) E.L.T. 203 (Bom.) On similar facts, the High Court in this case dismissed the appeal of the Revenue on the ground that if duty is paid where it is not requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eversal of the Cenvat credit and there was no need of issuing show cause notice to the appellant. It has further been added that it was wrong on the part of the Adjudicating Authority to have imposed a penalty of the equal amount on this count considering the fact that there was no contumacious conduct on the part of the appellant in evasion or misuse of any Cenvat credit and the Cenvat credit were taken because of the over-sight as the procurement of the capital goods namely CPEs are received on continuous basis on the purchase invoices indicating payment of excise duty. As per the standard accounting principle the credits are taken as soon as payment for purchases are made and invoices have been received. The fact that certain CPEs have not been received on or have been lost comes to light on later date. It has been also contended that the Commissioner has been provided with the details of set-top boxes which have been lost during 2010-2011 to 2011-2012 and for 2013-2014, on which Cenvat credit have already been reversed. It has further been mentioned that only for a short period of 2012-2013 by oversight the Cenvat credits have not been reversed. It has further been argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r being used by the provider of output service. It has been the case of the appellant that since the goods have been supplied to the subscriber as per the provision of Rule 3 (5B) of the Cenvat Credit Rules, and, therefore, the provision of the Rule 3 (5A) are not relevant in this case. It has further been submitted that the Department had earlier issued a show cause notice on the same issue for the period immediately preceding the present proceedings namely for October 2007-2008 to 2010-2011 contending that such credit was to be reversed under Rule 3 (5B) of the Cenvat Credit Rules, as according to the Department the set-top boxes value had been written off fully in the books of accounts before being put to use . Such a demand was dropped by the Commissioner, CGST, Noida by order dated 12/01/2018 holding that the capital goods had been put to use as also the capital goods have not been fully written off. The Commissioner in that order has also noted the fact that the local Range office had objected to the denial of credit by letter dated 31/01/2013 . A copy of the order passed by the Commissioner CGST, Noida dated 12/01/2018 has been filed along with the compilation of judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of capital goods which was used for providing output service in the state of Jammu and Kashmir where the provisions of Finance Act, 1994 are not applicable. However, they have regularly paid service tax to the Central Government since April 2009 to January 2013. The service tax during this period i.e. from 2009-2010 to 2012-2013 (upto January 2013) the service tax has been paid by them not only by utilizing the Cenvat credit but also by making the cash payment to the Central Government. The chart below as provided by the appellants indicates the amount of the Cenvat credit utilization as well as payment of service tax in cash during a period from 2009-2010 to 31 January 2013 :- Period Total Service Tax payment (Rs.) Cenvat credit utilized for payment of service tax (Rs.) Service Tax paid in cash (Rs.) Date of filing of relevant ST-3 return 2009-2010 1,216,050,209/- 1,141,968,929/- 74,081,280/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise exempted service. We find that it is a matter of record that though the appellant are not required to pay any service tax on the output service provided by them in the state of Jammu and Kashmir, however, under a mistaken belief that the provision of the Finance Act, 1994 are also applicable in the state of Jammu and Kashmir, the appellant paid service tax on the output services provided by them in the state of Jammu and Kashmir. There is also no denial of the fact, as can be seen from the table in the preceding paras, that the appellant discharged service tax liability on the output service, not only by utilizing Cenvat credit, which they have availed, but also paid the service tax from the cash over and above the Cenvat credits availed by them. This fact prove the bonafide of the appellant that firstly by the fact that they had been under the wrong impression that service tax liability is applicable in the state of Jammu and Kashmir; secondly that service tax which have been paid on the output service is much more than the input and capital input Cenvat credit availed by them. We do not agree with the finding of the Original Adjudicating Authority that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) Similar view was taken by the Delhi Tribunal in the case of Asian Colour Coated Ispat Ltd. vs. Commissioner of Central Excise 2015 (317) E.L.T. 538 (Tri. Del.) . Thus it is a settled principle that where an assessee who has discharge tax when it was not required to be paid, credit availed cannot be denied to the assessee. In the instant case, the amount of credit availed has been reversed by paying service tax which was not required to be paid. In the light of the above mentioned judicial precedents, the impugned order is liable to be set aside. 13. Thus, we hold that for the period of availment of the Cenvat credit for which the service tax has been paid on the output service by the assessee, the appellant need not reverse back the Cenvat credits, however, we confirm that Cenvat credit taken between period 1st February 2013 to 31 March 2014 amounting to ₹ 87,35,678/- when no service tax has been paid on the output service by the appellant, we therefore, hold that assessee need to reverse back an amount of ₹ 87,35,678/- as per the provisions of Section 73 (3) readwith Rule 14 of Cenvat Credit Rules alongwith the applicable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in this section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation For the removal of doubts, it is hereby declared that the interest under Section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer], but for this sub-section . 16. We find that the above-mentioned provisions of law provide that if there is no suppression or collusion or willful misstatement with an intent to evade service tax and the required amount of the service tax is paid before the issue of show cause notice in that case, there is no need of issuing of any show cause notice. We feel that since all the facts and details of the Cenvat credit and output services have been recorded in the books of accounts of the assessee and during the enquiry itself, the assessee has made a payment of ₹ 5 crores as details given above, we feel that there are no valid ground of issue of show cause notice for demanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have no opportunity to meet the case of the Department. It was held : ...There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11-A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso.... (Emphasis supplied) 26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,86,89,328/- 19. A glance at the above table thus points out that during financial year 2010-2011, 2011-2012 and 2013-2014 a substantial amount of Cenvat credit had already been reversed by the appellant for the CPEs which were lost or destroyed before being put for use. However, due to oversight the amount of ₹ 66,66,437/- lost in transit CPEs during the financial years 2012-2013 could not be reversed. It has been admitted by the appellant that they own the liability of reversal of this amount of ₹ 66,66,437/- on account of the lost or destroyed CPEs, however, it was argued that there is no malafide involved in the matter as all the details were being maintained in their books of accounts. It has also been stated that before the issue of the show cause notice, a substantial amount of ₹ 5 crore have been deposited by the appellant for making good of the wrongly availed Cenvat credit of ₹ 62,66,437/- as well as the interest due on such credits. We find that there is no valid ground for invocation of Section 78 of the Finance Act, 1994 readwith Rule 15 (3) of Cenvat Credit Rules, 2004 as there was no willful suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and accordingly the provisions of Rule 3 (5A) of Cenvat Credit Rules, 2004 will be applicable. During the course of hearing, the learned Advocate has taken us through a chart of deactivation/activation of the CPEs for various subscribers. The learned Advocate has tried to show that it is not the case that a deactivated CPE is not being used at the following years for availing the output service. He has pointed out certain cases where after deactivation, the CPEs have been got activated and output service have been availed by such subscribers through CPEs which were provided by the appellant to the subscribers initially. The main argument of the appellant has been that the provisions of Rule 3 (5A) of the Cenvat Credit Rules (under which Cenvat reversal is demanded) is not applicable in their case. 21. Before proceeding further, we feel that it will be appropriate to analyze relevant provision of the Cenvat Credit Rules, 2004 in this regard. The relevant rule covering the given situation is covered by the provision of Rule 3 (5) of the Cenvat Credit Rules, 2004. The text of Rule 3 (5) is reproduced here below :- Rule 3 (5) When inputs or capital goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account then] the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods : Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of [output] services, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.] 22. It can be seen from the provisions of Rule 3 (5) that the law has provided that in case the inputs or capital goods on which Cenvat credit has been availed are removed as such from the premises of the manufacturer or service provider, the manufacturer or service provider will have to reverse back the Cenvat credits equal to the amount of the credits availed by them. However, under the proviso to Rule 3 (5) it is provided that such payment shall not be required to be made where any input or capital goods are removed outside the premises of the provider of the output service for providing the output service . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pse of certain months or years and, therefore, it is also wrong to assume that the CPEs (capital goods) on which the Cenvat credit has been taken by the appellant are not being put for providing the output service. In these circumstances, we feel that the appellant have rightly availed the Cenvat credit on the CPEs which have been placed for utilization at the subscribers premises and there is no provision under Cenvat Credit Rules for reversal of the Cenvat credit on such CPEs if they are being used for providing output service. We also take note that the impugned order-in-original has wrongly confirmed the reversal of the Cenvat credit under Rule 3 (5A) of the Cenvat Credit Rules, 2004 which is primarily meant for the capital goods which are put for use for certain period of time and then removed from the factory premises or premises of the output service provider. The facts of the present case are absolutely different as stated in the preceding paras and, therefore, the applicability of Rule 3 (5A) of the Cenvat Credit Rules, 2004 is not sustainable. Thus, we feel that the order-in-original ordering the reversal of Cenvat credit amounting to ₹ 9,98,46,287/- is legally not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore being put to use as per the provision of Section 73 (1) of the Finance Act, 1994 readwith Rule 14 of the Cenvat Credit Rules, 2004 ; (III) we set aside the confirmation of the reversal of Cenvat credit amounting to ₹ 9,84,62,671/- as discussed in the preceding paras on the set top boxes which were deactivated at the subscribers premises. 27. We also confirm appropriate amount of interest as per the provisions of Section 75 of the Finance Act, 1994 readwith the Cenvat Credit Rules, 2004 on the above-mentioned two amounts of the Cenvat credits as confirmed for reversal under para 26 (I) to 26 (II) above. 28. Since, the appellant have already deposited an amount of ₹ 5 crores vide challan No. 00173 dated 30 July 2014, challan No. 00391 dated 01/08/2014, challan No. 00176 dated 11/08/2014 before issue of the show cause notice, the amount of the service tax as mentioned at Sl. No. I II as well as the amount of the interest need to be appropriated from the above-mentioned amount of the ₹ 5 crores. Coming to the issue of imposition of the penalty under Section 78 of the Finance Act, 1994, we feel that in the given circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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