TMI Blog2022 (2) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... period July 9, 2004 to November 30, 2005. Availment of CENVAT credit - HELD THAT:- The appellants have utilised Cenvat credit up to 20% of the tax payable during the period June 2007 to March 2008. During that period, tax of ₹ 135.16 lakhs was to be paid without utilising the Cenvat credit. However, they have paid the same after 1.4.2008 by utilising the balance of credit of 80% from the year 2007-2008. The appellants are entitled to utilise the balance 80% of the credit availed before 1.4.2008 after 1.4.2008. Having come to this conclusion, the appellant s action in paying service tax which fell due during 2007-2008 after 1.4.2008 is to be seen as a delayed payment. Accordingly, the appellants are required to pay interest at the applicable rate in terms of Section 75 of the Finance Act, 1994. The appellants are well established service tax registrants and therefore, we are of the considered opinion that the lapse of non-payment of service tax during the relevant period cannot be taken lightly - the appellants are entitled to utilise the balance credit after 1.4.2008, they will be liable to pay penalty under Section 76 of the Finance Act, 1994, as applicable during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the option either to maintain separate accounts of inputs services received under Rule 6(3)(c) of CENVAT Credit Rules, and in case such separate accounts are not maintained, they shall be entitled to utilise the CENVAT credit only to the extent of 20% of the service tax payable; the appellants though availed and utilised credit up to 20% of the tax payable, failed to pay the balance amount of 80% of total tax i.e. ₹ 135.16 lakhs in cash for the period June 2007 to March 2008. A show-cause notice dated 19.4.2010 was issued and was confirmed by the Order-in-Original dated 6.5.2011. Learned Commissioner confirmed the both the demands along with penalty and interest. Hence, this appeal. 2. Learned counsel for the appellant submits that it was not intention of the Government to tax software services as information technology services including Software Maintenance Services were excluded from Business Auxiliary Services ; the explanation added in the definition of Goods to include computer services if can only be prospective from 1.6.2007 and the Circular No.81/2005 dated 07.10.2005 cannot override the statutory provisions and moreover, the same was struck down by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nirlon Ltd. vs. CCE, Mumbai: 2015 (320) ELT 22 (SC) Bharat Hotels Ltd. vs. CCE: 2018 (2) TMI 23 Delhi High Court Uniworth Textiles Ltd. vs. CCE, Raipur: 2013 (288) ELT 161 (SC) 3. Learned AR for the department reiterates the findings of Order-in-Original and Order-in-Appeal and submits that in terms of Rule 6(3), the appellants are required to pay balance 80% of tax by way of cash only. 4. Heard both sides and perused the records of the case. As regards the first issue of demand on software maintenance services , we find that Karnataka High Court has settled the issue in favour of the appellants in the case of M/s. IBM (India) Pvt. Ltd. (supra) following the Madras High Court decision in the case of M/s. Kasturi and Sons (supra). We find that Hon ble Madras High Court has observed as follows: 6 . Admittedly, it is under the Finance Act, 2007, with effect from 1-6-2007, the term goods has been expressly made to include computer software. But earlier in the Finance Act, 2003 in which the terms, business auxiliary service and maintenance or service were introduced for the first time. There was specific exclusion of information technology service i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the impugned circular the second respondent placed reliance on the judgment of the Supreme Court in Tata Consultancy Service v. State of Andhra Pradesh [(2005) 1 SCC 308] to conclude that software being goods, any service relating to maintenance, repairing and servicing of the same is also liable for service tax. The Supreme Court in that case decided about the term, goods in the light of Andhra Pradesh General Sales Tax Act and framed the question as follows : The appellants provided consultancy services including computer consultancy services. As part of their business they prepared and loaded on customers computers custom-made software ( uncanned software ) and also sold computer software packages off the shelf ( canned software ). The canned software packages were of the ownership of companies/persons who had developed those software. The appellants were licensees with permission to sub-license those packages to others. The canned software programs were programs like Oracle, Lotus, Master Key, N-Export, Unigraphics, etc. The question raised in this appeal was whether the canned software sold by the appellants could be termed as goods and as such was assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services for taxable and exempted goods or services. Sub-rule (3) of Rule 6 provides that in case separate accounts are not maintained, the manufacturer or provider of services shall follow either of the conditions stipulated in sub-rule (3) of Rule 6. It is pertinent to note that after the amendment the only change that could be seen in respect of sub-rule (3) is to the extent of payment in respect of exempted goods produced or exempted services provided. While there is a cap on the utilisation of credit attributable to exempted goods or services, there is no cap whatsoever on the availment of CENVAT credit and there is no mention of any lapse of credit after utilisation of credit of 20% prior to 1.4.2008 or after payment of requisite percentage of value after 1.4.2008. Just because the services provided by the appellants have become taxable with effect from 1.4.2008, it cannot be said that the credit already availed and accrued shall lapse. As submitted by the appellants, we find that sub-rule (3) of Rule 6 begins with a word Notwithstanding anything contained in sub-rules (1) and (2) . The only inference that can be drawn from the non obstante clause is that the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ya, Commissioner of Service Tax; Madurai Commissionerate has issued Trade Notice No.14/2009 dated 13.3.2009, Service Tax No.6/2009; the said circular was followed by the Tribunal in various decisions. We find that as per our discussion above, there is no provision in the Rules for the credit availed to lapse once the conditions therein have been fulfilled. Therefore, we find that despite the circular the issue is clear. We find that this Bench in the case of DHL Logistics Pvt. Ltd. (supra) has held that: 5.1 As regards the denial of Cenvat credit to the extent of 2.85 crore, on the ground that the appellant did not maintain separate accounts towards utilization of credit in respect of both taxable and exempt services and also utilization of credit in excess of 20%, it is noted that the cap of 20% is applicable on the service tax payable and not on the service tax credit actually availed. What is restricted is only utilisation of the credit and not taking the credit per se; the credit taken could be carried forward. When the cap was removed on 1-4-2008, the appellant was eligible to utilise the credit also. In the present case what is involved is the utilisation of credit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar is inconsequential. However, it is not clear as to why Madurai Commissionerate has issued such a Trade Notice based on the Circular and as to whether the same was withdrawn subsequently. However, as we find that the appellants claim to the unutilised credit is correct on merits, we do not find any reason to go into the circular. 4.4 In view of the above, we hold that the appellants are entitled to utilise the balance 80% of the credit availed before 1.4.2008 after 1.4.2008. Having come to this conclusion, the appellant s action in paying service tax which fell due during 2007-2008 after 1.4.2008 is to be seen as a delayed payment. Accordingly, the appellants are required to pay interest at the applicable rate in terms of Section 75 of the Finance Act, 1994. The appellants are well established service tax registrants and therefore, we are of the considered opinion that the lapse of non-payment of service tax during the relevant period cannot be taken lightly. Though we hold that the appellants are entitled to utilise the balance credit after 1.4.2008, they will be liable to pay penalty under Section 76 of the Finance Act, 1994, as applicable during the relevant period. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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