TMI Blog2022 (7) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... sions as in the earlier Notifications and also extended similar benefit by way of refund of the service tax paid on input services used for authorized operations of an SEZ Unit and that it also expressly clarified in paragraph 5 that an SEZ Unit shall have the option not to avail this exemption and instead take CENVAT credit on the specified services in accordance with the Credit Rules, but this Notification merely clarifies the position and would, therefore, be applicable retrospectively for the period when the appellant had taken the CENVAT credit of service tax paid on input services. In this connection, reliance can be placed on the judgment of the Supreme Court in BELAPUR SUGAR ALLIED INDUS. LTD. VERSUS COLLR. OF C. EX., AURANGABAD [ 1999 (4) TMI 79 - SUPREME COURT] . The issue involved was whether an assessee would be entitled to duty reduction available under an amending Notification before the date of issue of that Notification. The Supreme Court held that denial of the Exemption Notification for the period prior to the date of the amending Notification shall defeat the object and purpose of the Notification itself since the purpose of both the original and the amendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertainment by the Department - The demand of penalty under section 73(4A) of the Finance Act is, therefore, without any basis and the confirmation deserves to be set aside. Penalty imposed under rule 15(3) of the Credit Rules and interest under rule 14 of the Credit Rules - appellant had not made the payment in respect of this invoice till it accepted this mistake and reversed the CENVAT credit taken by voucher - show cause notice contained demands of interest under rule 14 of the Credit Rules read with section 75 of the Finance Act and penalty under rule 15 (3) of the Credit Rules read with section 78 of the Finance Act - HELD THAT:- It is not disputed by the Department that the appellant had reversed the CENVAT credit wrongly taken by the appellant through voucher dated 01.07.2014, and this fact is reflected in the show cause notice. It cannot also be disputed three months from the date of the invoice would expire on 01.0.2014. The appellant had, therefore, complied with the provisions of rule 4 (7) of the Credit Rules - when rule 4 (7) of the Credit Rules has been complied with, there is no question of any delay warranting payment of interest by the appellant under rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RVICE TAX APPEAL No. 71131 OF 2018 - FINAL ORDER NO. 70113/2022 - Dated:- 4-7-2022 - MR. DILIP GUPTA, PRESIDENT AND MR. RAJU, MEMBER (TECHNICAL) Shri Rony Oommen John, Advocate, for the Appellant Shri B.K. Jain, Authorised Representative of the Respondent ORDER Global Logic India Ltd.[ the appellant ] has filed this appeal to assail the order dated March 28, 2018 passed by the Commissioner (Appeals), Noida, by which the order dated March 14, 2017 passed by the Additional Commissioner has been upheld. The Additional Commissioner had disallowed CENVAT credit and ordered it to be recovered with interest and penalty. The Additional Commissioner also confirmed the demand made for service tax with interest and penalty. The order passed by the Additional Commissioner is reproduced below: 1 . (a) The Cenvat Credit amounting to Rs.66,36,774/-taken in the month of October' 13 for the period 2011 to June' 2013 is disallowed and ordered to be recovered under Rule 14 of Cenvat Credit Rules' 2004 read with proviso to Section 73(1) of the Finance Act, 1994. (b) The Interest involved on the aforesaid amount should also be recovered from the party under ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Penalty of Rs.18,62,067/- under Rule 15(3) of the CENVAT Credit Rules, 2004 read with 1994. Section 78 of the Finance Act, 1994 is imposed upon the party. The aforesaid amounts should be paid forthwith. The amounts already paid will be appropriated against the amounts adjudged as above. This Order is issued without prejudice to any other action that may be taken or proposed to be taken against the said persons or firms under the Finance Act, 1994, or any other law for the time being in force in the Republic of India. 2. It would be seen that this appeal has been filed against five heads of demand confirmed by the Additional Commissioner and upheld by the Commissioner (Appeals). These heads are as follows : I. Disallowance of CENVAT credit taken on service tax paid on input services received by the SEZ unit on the ground that SEZ unit could only have opted for exemption by way of refund of such service tax during the relevant period. Oct 2011 to June 2013 INR 66,36,774/- II. Service tax liability under reverse-charge mechanism on rent-a-cab services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act ] and conditional exemption has been made available only on the fulfilment of the specified conditions prescribed therein. The Notifications expressly recognize the option available to a SEZ unit to take CENVAT credit of the service tax paid on input services and there is no bar or prohibition prescribed against taking CENVAT credit of the service tax paid on input services. What, therefore, transpires is that when the option of taking the CENVAT credit is availed by an assessee, the benefit of exemption by way of refund will not be available to such an assessee and the Notifications themselves treat CENVAT credit as an alternative to refund mechanism. 7. It is for this reason that Shri Rony Oommen John, learned counsel for the appellant, submitted that the eligibility to take CENVAT credit on the service tax paid on input services received by the appellant cannot be denied on the basis of the two Exemption Notifications which were in force during the relevant period. Learned counsel pointed out that these Exemption Notifications provided SEZ units with an option to take refund of the service tax paid on input services, while recognizing the fact that some SEZ unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from payment of duty, the benefit of Modvat scheme could not be availed in terms of Rule 57C is counter-productive and not beneficial for the respondent-assessee. It works against them and makes them in-competitive and places them at a disadvantage. 19 . Thus, the stand of the Revenue is not sustainable. The object of the Modvat Scheme is to reduce cost of final product by taking credit for the duty paid on the inputs [Ichalkaranji Machine Centre (P) Ltd. (supra)]. The object of the exemption notification is to grant benefit to the SSI Units for clearing goods without payment of duty up to a particular limit. 20 . Both the Modvat scheme and the exemption notifications are beneficial legislation. The beneficial notification have to be strictly initially but liberally interpreted. 21 . If the interpretation of the Revenue is to be accepted that there was no choice to SSI Units to either avail the Modvat Scheme or the benefit of the exemption notification, then the SSI units are prejudiced and may even become unviable. The purpose of the Modvat Scheme is to prevent and neutralise cascading effect of the duty paid on inputs. If the interpretation of the Revenue is accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the exemption under the exemption notification or to pay duty on the final product by taking Modvat credit on inputs in terms of Rule 57A of the Rules. (emphasis supplied) 10. The same view was taken by the Karnataka High Court in Commissioner of Central Excise, Bangalore-II vs. Federal Mogul TPR India Ltd. [ 2016 (42) STR 427 (Kar.) ] in the context of an Exemption Notification issued under section 93(1) of the Finance Act. The assessee had not taken the benefit of the Exemption Notification and had instead taken CENVAT credit of the tax paid inputs. The relevant portion of the judgment is reproduced below : 9. A bare reading of this notification denotes that this notification is issued under Section 93(1) of the Finance Act, 1994 which exempts the taxable services of production of goods on behalf of the principal manufacturer from the whole of service tax leviable under Section 66 of the Finance Act. However, this exemption notification is subject to the condition that the said exemption shall apply only in cases where such goods are produced using raw materials or semi-finished goods supplied by the client, i.e., the principal manufacturer and goods so produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,02,00,275/- to the principal manufacturer, i.e., FMTPR much against the exemption Notification No. 8 of 2005 is not worthy of acceptance. As we have already discussed, the Notification No. 8 of 2005 is a conditional notification and Section 5A(1A) of Central Excise Act, 1944, is not applicable to the present case. 11. In the present case also the Exemption Notifications dated 01.03.2011 and 30.06.2012, granted only conditional exemption from payment of service tax. The appellant could, therefore, forego such exemption and claim benefit of CENVAT credit on the same amount of service tax paid on input services as would have been available as refund to an SEZ Unit. 12. It is true that the Notification dated 10.07.2013, which superseded the earlier Exemption Notifications dated 01.03.2011 and 20.06.2012, contained similar provisions as in the earlier Notifications and also extended similar benefit by way of refund of the service tax paid on input services used for authorized operations of an SEZ Unit and that it also expressly clarified in paragraph 5 that an SEZ Unit shall have the option not to avail this exemption and instead take CENVAT credit on the specified services in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded. Substituted para 4 has two parts, first `where production during three preceding year was nil and second part, `the entire production during May to September, 1982 will be exempted. Appellant case is covered under both parts. Its production in the last three preceding years was nil and in terms of Notification 132 read with this substituted para 4, in terms of 2nd part the entire sugar produced during May to September, 1982 would exempt. Thus the interpretation for revenue cannot be accepted as it defeats the very object of the Notification. 14. Reliance placed by learned authorized representative on the judgment of the Supreme Court in Krishi Upaj Mandi Samiti is misplaced. Paragraph 8 of the judgment on which reliance has been placed as reproduced below: 8. The exemption notification should not be liberally construed and beneficiary must fall within the ambit of the exemption and fulfill the conditions thereof. In case such conditions are not fulfilled, the issue of application of the notification does not arise at all by implication 15. In the present case, the appellant is not claiming the benefit of the Exemption Notification, but is claiming CENVAT cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, this re-classification of expenses has no bearing on the total value of rent-a-cab services which had been correctly computed and duly offered to tax by the appellant, as would be evident from the Service Tax returns filed by the appellant for the period April to September 2013 and October 2013 to March 2014. 21. From the Service Tax returns filed by the appellant for the year 2013-14, the following is derived: Period Value of taxable services (Rent-a-cab scheme operator service) Service Tax payable as Service Receiver Education Cess Secondary and Higher Education Cess Total Payment April 2013 to September 2013 64,99,222/- 7,79,906/- 15,598/- 7800/- 8,03,304/- October 2013 to March 2014 72,87,700/- 8,74,523/- 17,490/- 8,745/- 9,00,758/- 1,37,86,922/- 16,54,429/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation shall not serve any notice under sub-section (1) in respect of the amount so paid: Explanation 2. For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service tax under this sub-section and interest thereon. 27. Section 73(4A) and the Explanation to Section 73 of the Finance Act provide that no penalty shall be imposed if the assessee has paid the amount of service tax along with interest before the service of the show cause notice, whether on the basis of his own ascertainment or on the basis of ascertainment by the Department. 28. The demand of penalty under section 73(4A) of the Finance Act is, therefore, without any basis and the confirmation deserves to be set aside. IV Penalty imposed under rule 15(3) of the Credit Rules and interest under rule 14 of the Credit Rules 29. The factual position with respect to the aforesaid demand is as under: (a) On 31.03.2014, the appellant took CENVAT credit of input tax on the strength of an invoice dated 31.03.2014 raised by M/s IP Unity Communications Ltd.; (b) The appellant had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules: 31. It is not disputed by the Department that the appellant had reversed the CENVAT credit wrongly taken by the appellant through voucher dated 01.07.2014, and this fact is reflected in the show cause notice. It cannot also be disputed three months from the date of the invoice would expire on 01.0.2014. The appellant had, therefore, complied with the provisions of rule 4 (7) of the Credit Rules. 32. Thus, when rule 4 (7) of the Credit Rules has been complied with, there is no question of any delay warranting payment of interest by the appellant under rule 14 of the Credit Rules. 33. Similarly, the provisions of rule 15 (3) of the Credit Rules have no application for two reasons. The first is that there is no wrongful taking or utilisation of credit by the appellant, and secondly there is no allegation raised or material relied upon with respect to fraud, collusion, wilful mis-statement, suppression of facts or intent to evade payment of service tax on the part of the appellant. 34. Thus, the demand of interest and penalty on the CENVAT credit take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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