TMI Blog2021 (12) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... L) Shri Madhav Rao, Shri Tushar Joshi Shri Mukunda Rao, Advocates, for the Appellant Shri Nitin Tagade, Joint Commissioner, Authorised Representative for the Respondent ORDER This appeal is directed against order in original No. 46/ST/COMMR/2018-19 dated 20.02.2019 of the Commissioner of CGST Central Excise, Aurangabad. By the impugned order Commissioner has held as follows: ORDER 6.1 I disallow CENVAT Credit amounting to ₹ 9,55,98,556/- (Nine Crore Fifty Five Lakhs Ninety Eight Thousand Five Hundred Fifty Six Only) and order its recovery under Rule 14 of CENVAT Credit Rules, 2004 read with Section 73 (1) of the Finance Act, 1994. 6.2 I order recovery of interest at the appropriate rate on the amount confirmed at para 6.1 above under Rule 14 of CENVAT Credit Rules, 2004 read with Section 75 of the Finance Act, 1994. 6.3 I impose a penalty of ₹ 95,00,000/- (Rupees Ninety Five Lakhs only) under the provisions of Rule 15 (1) of CENVAT Credit Rules, 2004 read with Section 76 of the Finance Act, 1994. 6.3.1 I impose a penalty of ₹ 10,000/- (Ten thousand only) under the provisions of Section 77 of the Finance Act, 1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants and Shri Nitin Tagade, Additional Commissioner, Authorized Representative for revenue. 3.2 Arguing for the appellant learned counsel submits that the issue under consideration has been decided by the Mumbai Bench of the tribunal in their own case for the past period dropping the demands raised and penalty imposed. Following the said order Commissioner has also vide his order in original No dated dropped the demands for subsequent periods. The issue was also considered by the Delhi bench, in case of Dish TV, and the demand made by the revenue on the same account has been dropped. In view of the above decisions the impugned order needs to be set aside and the appeal allowed. 3.3 Learned Authorized Representative, reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 The issue involved in the present case is only in respect of the set top boxes and other CPE s supplied to the consumers on the rental basis. However on perusal of the page 295, of the appeal paper book, which is Lease Rental CAF - Terms Conditions of Subscription of Videocon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, seek documents, take the possession of the CPE or any part thereof, without any objection by the Customer and such collection of proof shall be acceptable to the Customer and the Customer agrees that he shall not contest the same before any forum/court/ authority. The Customer further agrees that in the event if any breach or violation of any of the term/s and condition/s of this Agreement or Intellectual Property Right/s of VDL occurs due to any act/s or omission/s of the Customer, then VDL or its authorized representative shall have right to record such breach and also to exercise the fingerprinting mechanism or any other mechanism and the findings based upon such exercise shall be binding on the Customer and the Customer shall not contest the same. The Customer agrees and undertakes to complete the entire tenure of the Rental and will not disconnect during the minimum period as mentioned in Clause 11(I) herein below. In no case the Customer will be entitled to determine this agreement during the minimum period. Notwithstanding anything contained hereinabove, the Customer further categorically undertakes and agrees that he will be under an obligation to purchase the STB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order therein was reserved by Hon'ble Bench with the directions that the Appellant shall file an affidavit clarifying that demand raised and subsequently, confirmed vide Order-In-Original 46/ST/Commr/2018-19 dated 20.02.2019 (OIO) pertained to Set Top Boxes given to the customers on lease rental basis and not on outright sale or hire-purchase. 3. In pursuance to the Order dated 02.12.2021, the undersigned Deponent is filing the present affidavit. 4. That the appeal bearing number was filed against OIO passed by the Ld. Commissioner CGST C. Excise, Aurangabad (the Respondent) whereby the Respondent had disallowed CENVAT credit amounting to INR 9,55,98,556/- and confirmed the demand thereof along with applicable interest and penalty for the period between April 2015 to December 2016 in respect of Set Top Boxes ('STBs) which were given to the customers on lease rental. 5. That the methodology adopted under the Show Cause Notice No.10/ST/COMMR/2018 dated 12.04.2018 (SCN) for computation of demand was by taking the total CENVAT credit on CPEs during the period May, 2009 to December, 2016 which were de-activated beyond 620 days, i.e., INR 49,35,64,718/-, and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentified. The figure of the amount of credit reversed in regard to such sales of set-top boxes is much smaller as compared to the total credit reversed. This is for the reasons that apart from selling certain set-top boxes to the customers, certain set-top boxes were lost in transit or at the premises of the distributors who provide the set-top boxes to the ultimate subscribers. In all such cases credit was reversed unilaterally since the set-top boxes had not been put to use for rendering the DTH services. The Chartered accountant certificate is enclosed as Annexure 1. The relevant portions of the balance sheet for the period 01.04.2015 to 31.03.2017 reflecting sales of set-top boxes and the total lease rentals are enclosed as Annexure 2. Likewise, the relevant portion of the balance sheet for the period from 01.04.2015 to 31.03.2017 have also been enclosed in Annexure 2. The Chartered Accountant has certified from such data, the figures of rental income and figures from realisation from sales of STBs, including lost in transit or at the distributors premises, for the truncated period from 01.04.2016 to 31.12.2016, the relevant period of the show cause notice, in regard to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chasing CPES (Customer Premise Equipment including Set Top Boxes) herein after referred to as STBs and availing CENVAT credit of the same. The Noticee installs the CPEs at their customer's end on rental basis under an agreement to their various customers. The Noticee vide their letter dated 20.09.2015 has informed Access Service Scheme has been w.e.f. 01.04.2015 and under the scheme CPEs, will be provided to the customer only for the purpose of accessing D2H services and the access charges are recovered. [Para 2]; b. Whereas, from the facts disclosed by the Noticee, it appears that the Noticee was availing Cenvat Credit in CPES supply to the customer on lease rental option... [Para8] c. ... In such circumstances the Cenvat Credit availed on CPES supplied to the customers on rental/ lease options and under access scheme also, on de-activation appears inadmissible to the Noticee on the similar line as applicable on other three options i.e., hire purchase, outright purchase and access scheme under the provision Cenvat Credit Rules, 2004. [Para 15] 10. However, as submitted in paragraph 8 supra, as regards STBs which were given on access basis, these formed the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l credit reversed amounting to ₹ 1,21,73,806/-, which was reversed on account of various reasons such as loss of material, written off, sales of spares, lost/damage in Tamil Nadu Flood etc. The details in respect of reversal of credit for the period between April-2015 to December 2016 are enclosed herewith as Annexure-B. We further certify that the revenue earned towards access services/charges during the relevant period was not for sale of set top boxes but pertained to one time activation of set top boxes which were given on access/entrustment basis and on which service tax was discharged. Further, neither I, nor any of my Partners/Directors is a partner, director or an employee of the above named entity or its associated concerns. This Certificate is true and correct to the best of our knowledge and as per information and explanation provided by the Company to our satisfaction. 4.6 On the basis of the above referred affidavit filed by the appellants, duly supported by the chartered accountant certificate, we note that appellant has during the period of the dispute supplied some CPE on purchase basis and majority of the CPE were provided on the renta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Rules, 2004 are removed and as such . The appellant is a provider of taxable services and the expression removal , as utilized in Central Excise Act, 1944, is germane only for determination of valuation with intent to subject manufactured goods to assessment which does not logically lend itself for applicability to a provider of output service. Moreover, the said expressions are neither qualified with grammatical variations and cognate expressions nor amenable for adoption within CENVAT Credit Rules, 2004. Instead, it would be appropriate for us to lay emphasis on the scheme of CENVAT Credit Rules, 2004 which was reframed to cover input services procured by manufacturers and providers of output services as well as inputs procured by manufacturers and providers of output services. In the present dispute, we are concerned with capital goods alone. Capital goods , by their very nature, are not absorbed into the final product let alone finding inclusion in intangible output service . It is not contemplated, either in Finance Act, 1994 or in general commercial usage, that capital goods should be in perpetual operation. The absence of such condition in CENVAT Credit Rules, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd [Final Order NO. 50878/2019 Dated 11/07/2019] Delhi bench has held as follows: 9. After hearing both the sides and on perusal of the appeal record, we find that the following issues need to be addressed by us in this matter : (i) . ; (ii) ; (iii) whether assessee is liable to pay an amount equal to the Cenvat credit availed by them on the CPEs which are not being used for providing output services on account of the (deactivation) of DTC service and also the value of the CPEs have been written off in their books of accounts after 5 years of their capitalization. 20. Coming to the issue of reversal of Cenvat credit amounting to ₹ 9,84,62,871/- under the provisions of Rule 3 (5A) of the Cenvat Credit Rules, 2004 for the Consumer Premises Equipments (CPEs) which were lying unused at the consumer premises and which have also been written off fully in the financial accounts from 01/07/2012 to 31 March 2014 by the appellant. The Department has been of the view that the capital goods which have been removed by the appellant after being used, the Cenvat credit availed initially at the time of the purchase of such capital goods required to be reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premises of the provider of output service for providing the output service : [* * *] Provided further that such payment shall not be required to be made where any inputs are removed outside the factory for providing free warranty for final products ] [* * * * * *] (5A) (a) If the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely :- (i) For computers and computer peripherals : For each quarter in the first year @ 10% For each quarter in the second year @ 8% For each quarter in the third year @ 5% For each quarter in the fourth and fifth year @ 1% (ii) For capital goods, other than computers and computer peripherals @ 2.5% for each quarter : Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the 20 ST/51760 of 2016 amount to be paid shall be equal to the duty levia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven situation in the present case and, therefore, we feel that the provisions of Rule 3 (5A) are not applicable in the present case. 24. The provision of Rule 3 (5B) covers the situation where the value of the inputs or capital goods is written off fully or partially before being put to use. The fact of the matter is that the CPEs which have been installed at the subscribers premises are being used and, therefore, the provisions of sub-Rule (5B) which provides that if the value of any capital goods is written off partially or fully before being put to use and only in that situation the provisions of sub-Rule (5B) will be applicable and Cenvat credit need to be reversed in such situation. In the present case, we feel that since the CPEs are being put to use at the subscribers end and, therefore, even after 4 to 5 years the value of such CPEs is written off in the books of accounts the provisions of sub-Rule (5B) are not applicable. We feel that the Cenvat credit reversal under Rule 3 (5A) as invoked in the show cause notice and confirmed by the impugned order-in-original is legally not sustainable as the facts involved in this case are appropriately covered by the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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