TMI Blog2023 (8) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of M/S. CHOLAMANDALAM MS GENERAL INSURANCE CO. LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI [ 2021 (3) TMI 24 - CESTAT CHENNAI] . The facts and allegations are identical. The Tribunal followed the decision of the Jurisdictional High court in the case of Modular Auto Ltd. [ 2018 (8) TMI 1691 - MADRAS HIGH COURT] holding that i t can be seen that the case of the Department is that the payout paid by the appellant to the dealers on the OD premium collected by the dealers from the customers is camouflaged as service provided by the dealers to the appellant; that therefore, the services contained in the invoices have actually not been provided by the dealers to the appellant and thus, Cenvat credit is not eligible. The second ground for rejecting the credit is credit availed based on unsigned invoices issued (in respect of M/s. Honda Motors India Ltd. In para 40 of the impugned OIO dt. 23.12.2016, the adjudicating authority has noted that in regard to the invoices raised by M/s. Honda Cars India Ltd., the credit to the tune of Rs. 6,93,203/- is ineligible for the reason that the invoices do not bear signature. It is further stated that the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of CENVAT, while taking input credit, falls on the recipient of service i.e. the appellant. D) As per the general rule in legal proceedings also, he who asserts must prove. The appellant who is asserting the taxability of the activity received by him, if any, should have shown that the activity described in the invoice was indeed received and secondly that it was a taxable service eligible for being claimed as CENVAT credit. E) For the reasons cited at (A), (B) and (C) above the SCN had rightly required the appellant to show cause as to why the credit availed should not be denied and on failure to do so the impugned has confirmed the demand. F) As per section 67 of the FA 1994 service tax is collected with reference to the value of service. As a necessary corollary, it is the value of the service which is actually rendered which is to be ascertained for the purpose of calculating the service tax payable thereupon. Any other amount which is calculated not for providing such taxable service, in this case the service as declared in the invoice, cannot be a part of that valuation as that amount is not calculated for providing such taxable service . G) As per Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement believed or supposed that by making it he would pin any advantage or avoid any evil of temporal nature in reference to the proceedings against him. This has not been done by the officials concerned. M) In spite of a large list of 25 activities that were to be performed by the automobile dealers as per the Service Provider Agreement listed at para 33 above, the officials of both the appellant and the dealers company, when questioned were unable to list out the activities that were actually performed. In fact, they admitted that no service at all was performed. N) Appellants company officials have stated in legally admissible statements that they have no option but to pay the payouts to the car dealers due to their agreement with the car manufacturers and that there is no separate sale of insurance policies because it is automatically sold with the sale of the new car as the price of the insurance is in-built in the On Road Price of the car. O) It is relevant to note that the Service Charge paid to infra companies for their service is in the range of 1.75 to 4% of OD premium and the dealer, who cannot recall having provided any service activity as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , were only meant to show that the huge payouts by the appellant to the car dealers were not on account of Data Processing and Policy Servicing and related activities . Revenue has succeeded in this limited objective. To find whether the amounts paid by the appellant to car dealers were within or in violation of IRDAI guidelines is not the remit of this Authority. T) The appellant has made a submission to the effect that, without prejudice, the illegality of a transaction does not determine or alter its tax implications. The concept has met with legal traction in matters relating to Income Tax laws, where the illegal gains are to be taxed at the hands of those who financially gained from these actions. However, in the case of Indirect Taxes where the burden of tax rests on the final consumer, while those who perpetuate the illegality are beneficiaries of the illegal monies collected as tax - due to input credit schemes meant to neutralize the cascading effect of tax - needs to be tested against the legal principle that a person ought not to be able to profit from his or her own wrong. U) The entire scheme as unraveled by Revenue points to fraud, collusion, willful misstate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of Motor, Health, Personal Accident and Fire and Burglary insurance services and Miscellaneous policies. They have centralized registration, and are registered for payment of service tax under reverse charge mechanism on commissions paid to insurance agents, etc. 2. Intelligence was gathered by DGCEI, Chennai zonal unit that the appellant is availing cenvat credit wrongly on the basis of invoices issued by dealers of Motor Vehicles containing description of services which were never actually provided by the automobile dealers to the appellant. Accordingly, investigation was initiated and documents recovered, statements recorded. The investigations was done as under : (i) Investigation into the alleged irregular availment of cenvat credit by appellant on the basis of invoices issued by the automobile dealers (excluding the dealer, M/s. TVS Sundaram Motors) and manufacturers (excluding the manufacturer, M/s. Honda Cars India Ltd.) (ii) Investigation on the irregular availment of credit on the basis of invoices issued by the manufacturer, M/s. Honda Cars India Ltd. (iii) Investigation into the alleged irregular availment of credit on the basis of invoices issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due process of law, the adjudicating authority disallowed the credit, and confirmed the demands along with interest and imposed penalties. Aggrieved, the appellants are now before the Tribunal. 5. The Ld. Counsel Shri Raghavan Ramabadran appeared and argued for the appellant. It is submitted that the appellant is engaged in providing general insurance services pertaining to motor insurance, health insurance, property insurance, engineering insurance, liability insurance and other miscellaneous insurances. 5.1 At the time of sale of the automobiles, the automobile manufacturers through their established dealer network assist the vehicle buyers to obtain the insurance. From the view point of the insurance companies, including the Appellant, the dealers of automobile manufacturers are usually the first point of contact with the buyers of motor vehicle and hence for motor insurance too. Accordingly in order to increase its customer base, the Appellant enters into agreement with various automobile manufacturers and their authorized dealers in order to get access to their customers through various dealerships. 5.2 The case of the Department is as follows : a. Firstly, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those returns based on the declarations made by the service provider. Having accepted and not disputed it, the Department cannot be allowed to raise the issue at the service recipient s end. 5.5 To support this argument Ld. Counsel relied on the judgment of the Hon ble High Court of Madras in M/s. Modular Auto Ltd. CCE Chennai 2008-VIL-541-MAD-ST. The ratio laid in this case was followed by the Tribunal in the case of M/s. Ford India Pvt. Ltd. Vs Commr. of GST CCE - 2019-VIL-182 CESTAT CHE-ST. 5.6 The very same issue in this appeal on identical set of facts was considered by the Tribunal in the case of Cholamandalam MS General Insurance Co. Ltd. Vs CCE - 2021 (3) TMI 24 CESTAT CHENNAI [2021 (47) GSTL 263 (Tri.-Chennai)]. The Tribunal in the said case followed the judgment of the Hon ble jurisdictional High Court in the case of M/s.Modular Auto Ltd. (supra) to hold that when it is not disputed that the dealer has paid service tax on the services described in the invoices, the denial of credit at the recipient s end cannot be justified without reopening the assessment at the dealer s end. 5.7 In regard to the second issue of denial of cenvat credit on unsigned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period April 2015 to 2017, that the service provided by the dealer is liable for payment of service tax under Reverse Charge Mechanism (RCM) in terms of notification 30/2012-ST, the adjudicating authority in para 13 of the OIO has made discussions in this regard. So also, there is no mention in the SOD that the activities cover reimbursable expenditure. However, in para 14.2 the adjudicating authority has held that the amounts paid by appellant to dealer are reimbursements and therefore no service tax is payable by dealer on such amounts, and therefore appellant is not eligible for credit. The Ld. Counsel argued that by considering the notfn no. 30/2012 and the amount as reimbursements, the adjudicating authority has travelled beyond the SCN. 6. The Ld. Counsel adverted to the decision of the Tribunal in the case of Karur Vysya Bank Ltd. VS CCE Trichy - 2019 (22) GSTL 63 (Tri.Chennai). It is pointed out that in the said case, the department had issued SCN demanding service tax under Business Support Service (BSS) on infrastructure support services provided to insurance companies by the bank. The Tribunal upheld the confirmation of demand. It was thus argued that when serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or an intermediary or insurance intermediary. 8.1.1 As per IRDA Circular Ref: 011/IRDA/Brok-Com/August/2008 dated 25/08-2008 issued under Section 14 of IRDA Act, 1999, which limits the payment of Commission or brokerage to 10%. The circular specifically state, No payment of any kind including administrative or servicing charges is permitted to be made to the agent or broker in respect of the business of which he is paid agency commission or brokerage. 8.2. The appellant maintains business connection with automobile dealers for procuring insurance policy from the vehicle buyers. The tie up with manufacturer brings out the mechanism for rendering such insurance services and they inform the dealer the rate of commission for rendering such services. The appellant is not authorized to outsource such insurance services. As per Section 40 of Insurance Act, 1938, only licensed Brokers are permitted to do insurance business and entitled to receive commission. For the purpose of receiving the commission, the dealers have raised the invoices describing the services as data processing and policy servicing activities . In reality, the dealers do not provide any such service and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed on computer generated unsigned invoices was countered by referring to the discussion made by adjudicating authority in para - 40 of OIO dt. 23.12.2016. It is argued that the Board vide F.No.224/44/2014-CX.6 dt. 06.07.2015 had issued instructions for option to issue invoices in electronic form and authentication of digital signature. This came into effect only on 6.7.2015. So the credit availed by appellant on unsigned invoices issued by e-mail from M/s. Honda Cars is not valid and the demand has been correctly confirmed by the impugned order. 8.5 The third issue is regarding two sets of invoices showing different description of services. The description of service in the invoice of the account maintained by the dealer (TVS Sundaram Motors) is shown as additional incentive . The description of the service in the corresponding invoice of the appellant shows as Data processing and Policy related activities . The appellant has not been able to explain the discrepancy. The credit has been righty denied by the adjudicating authority. 9. It is asserted by the Ld. Counsel that the credit has been denied not because of incorrect description of service in the invoice, but b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the preferred insurers to car buyers? A: Yes Q: Do you agree that if a customer agreed to take insurance fresh or renewal from RS, that KM processed and issued the policy? A: Yes Do you agree that for the above service KM was paid service charges at a % of the OD premium? A: Yes Q: Do you agree that KM rendered the services mentioned in Schedule A of the agreement of the service provider agreement dated 15.11.2013? A: Yes, they provided Policy servicing and Data processing services. Q: Do you therefore agree that your answer to question no. 18, 19 20, 25 (questions by department while recording statement) are incorrect? A: Yes it is incorrect {four separate questions and answers are made into one here} Q : why were there such four incorrect replies? A: I was forced to give such answer. Q: In question no. 34, is the description in the invoices-data processing and policy servicing-absolutely false? A: No. They are providing data processing and policy related activities services. Q: Do you agree that you received from KM, Chennai Ford, Honda Cars India Ltd, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the truthfulness of these statements and requested for cross examination. The courts have always emphasized the importance and need to permit cross-examination of witnesses. 16. Section 9D of the Central Excise Act, 1944 provides as to how the statements recorded during investigation can be admitted in evidence. The said Section has been adopted in Finance Act, 1994 as provided in Section 83 of the Finance Act, 1994. The Hon ble High Court of Punjab and Haryana in the case of G-Tech Industries Vs Union of India 2016 (339) ELT 209 (P H) had occasion to consider the compliance of the provisions of Section 9D of the Central excise Act, 1944. It was held that the statements recorded during an inquiry or investigation cannot be merely accepted in evidence. For admitting such statements summons has to be issued to the witness and examined. The witness can be cross examined by the assessee. The relevant para reads as under: 16. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not open to Respondent No. 2 to rely on the said statements, without following the mandatory procedure contemplated by clause (b) of the said subsection. The Orders-in-Original, dated 4-4-2016, having been passed in blatant violation of the mandatory procedure prescribed by Section 9D of the Act, it has to be held that said Orders-in-Original stand vitiated thereby. 17. The Hon ble Jurisdictional High Court in the case of Sri Bala Ganeshan Spinners - 2021 (377) ELT 510 (Mad.) has emphasised the requirement of cross examination. The Tribunal in the case of Swift Institutes of Engineering Technology Vs Commissioner - 2020 (34) GSTL 502 (Tri-Chand) had occasion to consider the applicability of Section 9D of Central Excise Act 1944, to the investigations conducted for short payment of service Tax. 18. During cross-examination the witnesses have categorically stated that the dealers provided services to the appellant in the nature of data processing and insurance related activities . The dealers have also collected charges from the appellant for such services along with service tax. In the SCN it is alleged that the cenvat credit is not eligible to the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintain and make available the same to Insurer the necessary IT Support to enable the Insurer s provision of various Insurance Services at Dealerships to Customers. b. Facilitate availability of infrastructure of Dealers and also facilitate the relationship between Insurer and Dealerships for insurer making available insurance Services to customers in terms of this MOU: CONSIDERATION In consideration of the services provided in pursuance of this Agreement Insurer agrees to pay a) HCIL, a fee, mutually agreed for utilization of the IT support established; maintained and provided by HCIL that would be available to the Insurer for its providing the Insurance Services. b) Dealerships a fee/service charge for utilization the infrastructure provided by Dealers at Dealerships. c) The nominated Brokers such reasonable brokerage (subject to IRDA norms) for the brokerage services to be provided by them. The rates of the fee or charges may be mutually agreed upon from time to time in writing. 21. Similar agreements have been entered with M/s. Tata Motors, M/s. Ford etc. From such agreements it can be seen that the dealers have provided services to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (supra). The relevant para of the discussion of the Tribunal is as under : 6.1 The allegation of the Department is that no services have been provided by the dealers to the appellant as per the invoices and therefore, the appellant is not eligible to avail credit of the Service Tax reflected in this invoices. In paragraph 31 of the Order-in-Original dated 30-1-2017, the crux of the allegations of the Department has been recorded by the Original Authority, as under : 31. On careful consideration of the statements of personnel of M/s. Chola and Dealers, I find that (i) The payment made by M/s. Chola to M/s. Hyundai/Dealers of Motor Vehicles is only a percentage of OD premium collected and the said payout details are calculated by the Head Office of M/s. Chola and communicated to the Dealers; (ii) M/s. Chola could not term such payout as commission (which would be in violation of IRDA guidelines) and hence the Dealers were given prescribed format to raise invoices as if they provided computing network connectivity through extranet, internet space, furniture and fixtures, consumables, salary of staff, computers, printers, electronics and electricity ; (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact of Dealers issuing invoice with the description suggested by the Taxpayer have come to light. Hence their contention that department cannot approbate and reprobate in the same case is not valid. 7.3 It is not disputed that the dealer has paid Service Tax on the services described in the invoices. If that be so, the denial of credit at the recipient s end cannot be justified by the Department without reopening the assessment at the dealer s end. .. .. 8.1 A similar issue came up for consideration in the case of M/s. Modular Auto Ltd. (supra). The substantial questions of law considered in the above case are as under : 2. The above appeals are admitted on the following substantial questions of law; (a) When the service provider was not before the Tribunal, whether the Tribunal can go into the question as to whether the said service provider had provided service to the appellant or not, more so when the said service provider has been assessed to service tax under Business Support Service for the service rendered by them to the appellant. (b) Is the Tribunal not in error in refusing credit to the appellant for service tax paid by them to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. Merely because the computer generated invoice does not contain the signature, it cannot be said that the credit is ineligible. Further, for the period after 2015, the Board has clarified that signatures are not required in the case of computer generated format. 28. The third issue is rejection of credit on the ground that the invoices issued by M/s. TVS Sundaram Motors (service provider) contains a different description of the service. It is alleged in the SCN that invoice maintained by dealer mentions the description of service tax as additional incentives whereas the invoice with the same serial number maintained by the assessee has the description as data processing and policy related services . Again, it is not disputed that the tax has been paid as per the invoices. Appellant who is the service recipient cannot be found fault for the description mentioned in the invoice maintained by the service provider. Appellant has no control over the accounts maintained by the service provider (dealer). The credit at the recipient s end cannot be denied for this reason. We hold that the denial of credit on this reason is not justified. 29. Appeal No.ST/40198/2020 covers the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal succeeds, it would be a rare but exemplary exertion of the right of a taxpayer to pay taxes in the teeth of opposition by the department. If the findings of the impugned order are found to be correct and true, then; (i) it would be a case of fake invoicing with its attendant evils. (ii) it would involve defrauding the ultimate taxpayer on whom the incidence of tax rests, to the tune of Rs Rs. 62,31,23,972/- during the impugned period alone. (iii) it would be an ingenious and creative method of using tax laws for unjustly enriching participants to the specially devised scheme, at the cost of the ingenuous and hapless taxpayer. (iv) it may possibly be a violation of IRDA circular which is mentioned in the impugned order. Hence the issue deserves a deeper examination of facts and layered treatment of law, which I propose to explore before coming to a conclusion. Hence this separate order. 33. The brief facts of the case are that the appellant is engaged in the business of providing general insurance service pertaining to motor insurance, health insurance, property insurance, etc. They started the insurance business in the year 2001 and are register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Agreement and availed the services of various automobile dealers (hereinafter referred to as dealers ) for provision of certain services. In terms of these agreement, the dealers, as service providers shall provide the following services:- I Policy Data Processing:- a. Arrange for physical collection of completed proposal forms and organize them for quality check and data entry b. Conduct preliminary quality checks for the proposal form as per the Standards and instructions of the company c. Identify and escalate any discrepancies found in the proposal forms and / or support documents and get them rectified. d. Enter the data in the application form with receipt details in an agreed application and general control sheets. e. Forwarding the data to the company. II Policy Servicing: a. Printing of policy pack as per the Standards and Instructions of the Company b. Ship the policy pack to the insured c. In case of the returned policy, keep record of the details of the customer and send the details to the company d. Prepare detailed MIS as required by the company in the format provided by the Company e. Carry out data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant for receiving the payouts / commissions from the appellant, while no taxable service was provided by the dealers as mentioned in their invoices. Hence the irregularly availed credit needs to be reversed. Therefore, the payment of charges by the appellant to the dealer, on which the disputed service tax was voluntarily discharged by the appellant and credit availed, is not duty as contemplated under the Finance Act 1994. It was at best commission paid to the dealers for the business given to the insurance company. Additionally, in respect of the services provided by M/s. Honda Cars India Ltd. (manufacturer) and TV Sundaram Motors (Dealer), it was found that the documents on which the credit was availed was not proper. The CENVAT credit wrongly availed by M/s. Honda Cars India Limited and TV Sundaram Motors (Dealer) and which was reversed by them to the tune of Rs. 69,35,403/- and Rs. 1,72,63,912/- respectively was demanded and confirmed. Hence in the impugned order, it has been held that the appellant has availed ineligible CENVAT credit of Rs. 62,31,23,972/- (Rs. 59,89,24,657/- + Rs. 69,35,403/- + Rs. 1,72,63,912/-), which has been demanded with interest and penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer of the dealer is revised, the credit at the recipient/ appellants end cannot be denied. 73 8. No penalty proceedings on car dealers hence department is not disputing the service rendered by car dealers 80 9. Appellant submits that they are eligible to avail and utilize the CENVAT credit of the services in question because they qualify as input services. 81 10. Substantive benefit of CENVAT credit cannot be denied on technical issues 81 11. Dealers are providing Business Auxiliary Services and the appellant is entitled to the CENVAT credit of the same 82 12. Contractual supply is the essence of applicability of service tax. 82 13. Cost of input service is included in the assessable value of the final services. 82 14. M/s. Cholamandalam MS General Insurance Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the individual issue arises. 37. Service is intangible in nature 37.1 The appellant submits that the Finance Act 1994 does not define the term service per se till 1.7.2012. hence, one has to look at the ordinary meaning of service for the period prior to 2012. The service rendered is consumed by them as and when provided by the service provider. There is no end product of the service, unlike goods and the movement of service cannot be traced or tracked inasmuch as service cannot be transferred from person to another. Thus, once there is an understanding for provision of service, the service recipient states that he has received the services from the service provider, the service provider states that service has been provided to the service receiver, the service provider raises an invoice for provision of service on the service receiver, the service receiver honors the said invoice and most importantly these facts being undisputed and no contrary evidence being produced on record, it has to be concluded that services have been provided by the service provider to the service receiver. Therefore, CENVAT credit cannot be denied to the appellant under any circumstances. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y it was limited to three services. These were Telephone Services , Non-Life Insurance Services and Stock Brokers Services . Slowly over the years new services were added to the taxable services list and only those specific activities which were covered by definition under the statute were brought under the levy. The rate at which such a service had to be taxed came to be imposed through Section 66 on the value of taxable services. The Hon'ble Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Private Limited reported in 2018 (10) G.S.T. L. 401 (SC), examined section 67 regarding the valuation of taxable service. Relevant paragraphs are extracted below: 21) . . . . As noted above, prior to April 19, 2006, i.e., in the absence of any such Rule, the valuation was to be done as per the provisions of Section 67 of the Act. 22) Section 66 of the Act is the charging Section which reads as under: there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed. 23) Obviously, this Section re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Duty needs to be collected or paid only if there is a valid levy on a subject of tax. 37.4 Thus a plain reading of the Act shows that each activity that has been brought under the net of a taxable service was defined under Section 65 of the Finance Act 1994. The position in law changed from 01/07/2012 in that all activities which did not form part of the negative list was per se included and brough under the service tax levy. However, a reading of both the sections, prior and post the change, show that there is absolutely no confusion in understanding the meaning of an activity and whether it is a service leviable to tax during either of the periods. The declaration of liability for each activity is unambiguous before and after the definition underwent a change. Hence there is no gain in saying that there is difficulty in identifying the subject of the levy without reference to the Britannica Encyclopedia or Black s Law Dictionary etc. In Pyarali K. Tejani Vs. Mahadeo Ramchandra Dange Ors [[1973] INSC 196 / 1973 Latest Case law 196 SC] the Apex Court held; In the field of legal interpretation, dictionary scholarship and precedent-based connotations cannot become a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant, then there is no requirement to pay service tax at all and whatever CENVAT credit is taken should be treated as refund of the tax not required to be paid. 39.1 The appellant has raised two issues of law here; (i) When there is no service being provided by the dealer to the appellant, then why was service tax paid on such transactions accepted by the department? (ii) When there is no requirement to pay service tax at all then whatever CENVAT credit is taken should be treated as refund of the tax not required to be paid. 39.2 The answer to query (i) above is that in the self-assessment regime the taxpayer assesses his tax liability and pays the same to the exchequer as provided for in law. It is not the appellants case that the amount was forcefully exacted by the department. In such a situation, it has been pointed out by Revenue in their submissions, that if the dealer had collected monies from the taxpayer as a tax, even if it was wrongly done, it has to be deposited to Government as per Section 73A(2) of the FA, 1994. This does not mean that department has accepted the taxpayer s assessment and that the actions of the taxpayer have been rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 stated; D.1.3. Part III- Legal Propositions (i) Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. There being no challenge either to the levy or collection of taxes in these cases, taxes paid into the coffers of the Union Government or the States become the property of the Union/States; (ii) The refund of taxes is neither a fundamental right nor a constitutional right. The Constitution only guarantees that the levy should be legal and that the collection should be in accordance with law. There is no constitutional right to refund. Refund is always a matter of a statutory prescription and can be regulated by the statute subject to conditions and limitations; (iii) Even in the case of an illegal levy or a levy which is unconstitutional, the decision of the nine judges Bench in Mafatlal Industries Limited v. Union of India held that the right of refund is not automatic. The burden of proof lies on the claimant to establish that it would not cause unjust enrichment. (emphasis added) 39.3 Now to the second issue raised by the appellant, when there is no requirement to pay service tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the taxes which have been collected contrary to law, viz., Sections 11A and 11B and its allied provisions. . . where a statute creates a special right or a liability and also provides the procedure for the determination of the right or liability by the Tribunals constituted in that behalf and provides further that all questions about the said right and liability shall be determined by the Tribunals so constituted, the resort to civil court is not available - except to the limited extent pointed out therein. Central Excise Act specifically provides for refund. It expressly declares that no refund shall be made except in accordance therewith. The Jurisdiction of a civil court is expressly barred . (Emphasis supplied) Hence it is clear from the judgment that it is for the person who is aggrieved to initiate the process of refund in terms of Section 11B, if he feels that he has paid tax not due and it s not for the department to so suo moto refund the amount or allow CENVAT credit of the same. 39.4 Based on the discussions I do not find any substance in the appellants averments on this settled point. 40. Manner of payment of consideration is merely a measure for paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service involved etc especially in the case of suspect agreements. It should satisfy the test of what a reasonable person of ordinary prudence would do. So, it is a combination of factors that have to be examined. This is however not the same as saying, it is wholly irrelevant to decide the nature of services provided by the appellant . Being a part of the agreement, it is relevant to understanding the nature of the contract but is not the sole factor. Moreover, valuation of a service and payment of duty come secondary after satisfactorily determining whether an activity which is performed is a taxable activity. The measure adopted to pay a consideration alone is not determinative of the taxability of a service. As discussed at para 37.3 above, there is a clear mandate that the value of taxable services for charging service tax has to be in consonance with Section 66 which levies a tax only on the taxable service and nothing else. Hence the appellant needs to explore the exact activity being performed by the dealer and received by him along with other factors and come to a conclusion as to whether it is a legitimate taxable service. Then accordingly test the declared descript ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said persons loses its relevancy and evidentiary value. With regard to Shri B. Balaji s assertion in respect of reply to Question No. 5, Revenue has referred to the question asked and the reply given by him, the text of which is reproduced below:- Q5. Please see Bill No. 007-A1/14-15/Chn dt. 27.1.15 raised by M/s. TVS Sundaram Motors, Chennai to RSAICL towards the reimbursement of expenses viz. policy processing expenses, policy servicing expenses, training expenses involving total service for the month of December 2014 for a value of Rs. 16,83,197/- and service tax of Rs. 2,08,043/- totalling to Rs. 18,91,240/-. In this connection, I am showing you an invoice No SM/BAS/2014-15/1070 dt. 2.1.15 raised by M/s. TVS Sundaram Motors (Legal Document filed with all authorities) submitted by them to DGCEI, CHZU for the same amount with description as Additional Incentive (HA) for December 2014 for the same amount with service tax. Please explain whether the services mentioned in the Bill No. 007-A1/14-15/Chn dt. 27.1.15 had been rendered by SM To RSAICL and also explain for what purpose these invoices were raised by SM. Ans : Having seen the above documents, I have appen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For ease of understanding, all the 4 queries and answers are reproduced below- Q.18 The email dated 12.615 encloses the proforma invoice and the payout details regarding the insurance policies done by M/s. Khivraj Motors Pvt. Ltd. The dealer has got orders for the insurance policies for your company for the month of May 2015. The total payout to them is exactly same as the Data processing and Policy servicing services which the dealers have supposed to be provided to you. How is it possible? Is it mere coincidence or that you have actually given them commission only for the insurance policies sold, in the name of services which they had never provided? Ans .: I have seen the print out shown to me and signed on it on token of seeing it. As already stated by me, the payouts given to the car dealers are arrived on the OD premium received. Hence there are no actual services as claimed in the invoices of the dealers. We follow the practice of sending such mails along with the payout statements and subsequently receiving hardcopies of corresponding invoices from the dealers and send them to our Corporate Office as instructed by the Finance Dept of our Corporate Office. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned in the invoices as Data Processing, Policy servicing and related activities are towards insurance payouts that RSAICL had paid to the dealers which are actually a percentage fixed on the OD premium collected by them. The payout details are calculated by our Central Payout Team located at the Corporate Office and the same is communicated to the car dealers for raising invoices on us. Q25. This email encloses the proforma invoice and the payout details regarding the insurance policies done by M/s. Chennai Auto Agencies Pvt. Ltd. As per the statement enclosed to the email, the dealer has got orders for the insurance policies for your company for the month of April 2015. The total payout to them is Rs. 2,24,094/- (inclusive of service tax of Rs. 24,651/-) which is exactly same as the Data Processing and policy servicing and related activities services which the dealers have supposed to be provided to you. How is it possible? Is it mere coincidence or that you have actually given them commission only for the insurance policies sold, in the name of services which they had never provided? Ans . I have seen the print out shown to me and signed on it on token of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned. (2) All persons so summoned shall be bound to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required: Provided that the exemptions under sections 132 and 133 of the Code of Civil Procedure (5 of 1908) shall be applicable to requisitions for attendance under this section. (3) Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860). (emphasis added) The section makes it clear that the investigating officers in the impugned case were empowered to record a statement from the company officials and dealers, which shall be deemed to be recorded during a judicial proceeding within the meaning of section 193 and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants counsel during the cross examination or otherwise till the issue of the impugned order or before us, have been able to establish that the actions of the investigative officers attract the provisions mentioned in the section above. 41.6 A question arises as to how much weightage can be given to these replies recorded in the form of a statement. Before examining this issue, it may help to know the officials who were examined and have given their statements. They are listed below; a) Shri L.S. Swaminathan, State Head, Chennai Branch office of the appellant s company b) Shri Venkatachalam Sekar, Financial Controller of the appellant s company c) Shri T.S. Rangarajan, Head Taxation of the appellant s company d) Shri Jethmall Chordia, Partner M/s. Khivraj Motors e) Shri S. Chandrasekar General Manager (Finance) of M/s. Khivraj Motors f) Shri S. Suresh, General Manager Finance, M/s. Sundaram Motors (Division of TV Sundaram Iyengar Sons) g) Shri S. Shanmugasundaram, General Manager Finance, M/s. Chennai Auto Agencies h) Shri Shailendra Kumar, staff, Business Development, M/s Honda Cars India Ltd. i) Shri B. Balaji, Area Manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the statements would not automatically be binding and reliable until the procedure prescribed under section 9D of the Central Excise Act 1944 is satisfied as held by the Hon ble High Court in G-Tech Industries Vs Union of India [2016 (339) E.L.T. 209 (P H)]. It would hence be appropriate to reproduce the said provision: 9D. Relevancy of statements under certain circumstances.- (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,- (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the facts and circumstances of each case. For instance, a similar plea raised in Surjeet Singh Chhabra v. Union of India and Ors. (1997) 1 SCC 508 before this Court did not cut much ice, as this Court felt that cross examination of the witness would make no material difference in the facts and circumstances of that case. The Court observed 3. It is true that the petitioner had confessed that he purchased the gold and had brought it. He admitted that he purchased the gold and converted it as a kara. In this situation, bringing the gold without permission of the authority is in contravention of the Customs Duty Act and also FERA. When the petitioner seeks for cross-examination of the witnesses who have said that the recovery was made from the petitioner, necessarily an opportunity requires to be given for the cross-examination of the witnesses as regards the place at which recovery was made. Since the dispute concerns the confiscation of the jewellery, whether at conveyor belt or at the green channel, perhaps the witnesses were required to be called. But in view of confession made by him, it binds him and, therefore, in the facts and circumstances of this case the fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al knowledge of official dealing with it, cannot be said to be perverse or not based on evidence. Voluntary statements, if clearly proved and found acceptable are the most effective proofs of law and can t be ignored. The legal issue of the admissibility of the statements in evidence is hence found valid. 41.8 I next propose to discuss whether these statements support the stand of Revenue or not. 41.9 The main charges against the appellant regarding taking ineligible CENVAT credit is set out at para 34 above. One of the conclusions in the impugned order is that the dealers are raising invoices as per the instructions of the appellant for receiving the payouts / commissions from the appellant and no taxable service is provided by the dealers as mentioned in their invoices. Therefore, the payment of charges by the appellant to the dealer, on which the disputed service tax was voluntarily discharged by the appellant and credit availed, is not duty as contemplated under the Finance Act 1994 (FA 1994). In accordance with section 106 of the Indian Evidence, the fact within the knowledge of a person must be proved as the burden of proof is cast upon him. Moreso, when he is confron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers and no separate expenses is specifically incurred on behalf of the appellant or any other preferred insurance company. They do not provide any space to the employees of any insurance company and they have not rented any portion of the premises to the insurance companies, insurance agents, brokers / intermediaries for providing them in infrastructure, manpower etc. The amounts received from the appellant are fixed as a percentage on the basis of the premium amount booked for the insurance policies for new vehicles and for the renewal of old policies. The invoices are prepared on the basis of the standard format given by the appellant through their emails. The invoices prepared by the car dealers were as given to them by the appellant-company and the amounts reflected therein were a percentage of the insurance premium and had nothing to do with the service provided by the said dealers. One of the dealers mentioned that the commission received from the appellant is recognized as income and accounted under the head Insurance Income . 41.11 Secondly, in the statement recorded from the car manufacturer M/s. Ford India (FIPL) reveal that they have the following insurance com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TBSS-TATA 4% of OD Premium HCIL 2% of OD Premium TBSS-Ford 1.75% of OD Premium TBSS-Renault 1.75% of OD Premium The deposition made shows very clearly that whatever support which are needed for issuance of insurance policies are not provided by the car dealers but by the Infra-company for which they are paid a very small percentage of the OD Premium but with an intention to suppress this fact M/s RSAICL has shown this charge as Payouts in their Books of Account. Shri Venkatachalam Sekar has further admitted that they have no option but to pay the payouts to the car dealers due to their agreement with the car manufacturers and that there is no separate sale of insurance policies because it is automatically sold with the sale of the new car as the price of the insurance is in-built in the On Road Price of the car. Hence it is seen that the dealers who have a pool of captive customers which would be otherwise difficult for the insurance company to net, canvasses the purchaser of an insurance policy, helps in makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is wholly irrelevant to decide the nature of services provided by the appellant. When examined in totality the payments do not satisfy the test of what a reasonable person of ordinary prudence would do while hiring services. They signify something more. 41.14 Third, the statements of senior officials of the appellant company, which was again based on a Question and Answer format, reveal that some of the questions which were asked by the departmental officers were, a request to provide documents like agreement and as to what type of services were rendered by the appellant towards data processing and policy servicing and related activities? What was the documentary evidence in support of their claim? How is the amount calculated towards cost? What was the expenses incurred by the appellant with regard to data processing and policy servicing and related activities and whether it is specified under any agreement? How are the charges arrived at for data processing and policy servicing and related activities? How many data processing and policy servicing and related activities have been made by the dealers? How the data processing charges raised on the appellant by car dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. While the appellant paid the dealer, he got back the amount as input credit to be used for payment of duty on output service. No financial injury was caused to either the dealer or the appellant. They benefitted at the cost of the customer, who in reality was not expected by law to bear the final burden of a non-tax. 41.16 The entire story unravels through facts and documents which are connected and explained by the officials involved and hence lend credibility to the findings in the impugned order. 41.17 I find that with respect to SCN 30/2012-ST. the impugned order states that the service provided by the dealer is liable for payment of Service Tax under the Reverse Charge Mechanism. I find that this finding is not based on the charge made in the SCN and hence does not sustain. 42 Unless the assessment made by the jurisdictional officer of the dealer is revised, the credit at the recipient s end cannot be denied. 42.1 The appellant states that the dispute is regarding classification and hence CENVAT credit cannot be denied at the hands of the recipient-appellant. 42.2 From going through the facts in issue, I find that this is not a case of the department see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, he may allow the CENVAT credit. . . . . . . . (5) The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit. (emphasis added) The jurisdictional Hon ble High Court of Madras happened to examine the claim of credit by the recipient, under the GST laws, the principles of which are similar to the claim of CENVAT credit, in Pinstar Automotive India Private Limited v. Addl. Commissioner CGST CE, [W.P. No. 8493 of 2023]. The Hon ble Court held that in the case of non-payment of GST by supplier to the Government, the substantive liability falls on the supplier and the protective liability upon the purchaser. Relevant portion of the judgment is below; 10. An additional factor is that where the tax liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rection for the payment of the penalty under this Section, the prescribed authority shall give to the dealer the opportunity of showing cause in writing against the imposition of such penalty. 9.1 Thus, the provisions of Section 70, quoted hereinabove, in its plain terms clearly stipulate that the burden of proving that the ITC claim is correct lies upon the purchasing dealer claiming such ITC. Burden of proof that the ITC claim is correct is squarely upon the assessee who has to discharge the said burden. Merely because the dealer claiming such ITC claims that he is a bona fide purchaser is not enough and sufficient. The burden of proving the correctness of ITC remains upon the dealer claiming such ITC. Such a burden of proof cannot get shifted on the revenue. Mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced either the invoices or payment by cheques to claim ITC. The Assessing Officer has doubted the genuineness of the transactions by giving cogent reasons on the basis of the evidence and material on record. In some of the cases, the registration of the selling dealers have been cancelled or even the sale by the concerned dealers has been disputed and/or denied by the concerned dealer. In none of the cases, the concerned purchasing dealers have produced any further supporting material, such as, furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. and therefore it can be said that the concerned purchasing dealers failed to discharge the burden cast upon them under Section 70 of the KVAT Act, 2003. At the cost of repetition, it is observed and held that unless and until the purchasing dealer discharges the burden cast under Section 70 of the KVAT Act, 2003 and proves the genuineness of the transaction/purchase and sale by producing the aforesaid materials, such purchasing dealer shall not be entitled to Input Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Tax Act was under consideration, which reads as under: 9(2)(g) to the dealers or class of dealers unless the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period. The burden of proof as per Section 70 of the KVAT Act, 2003 was not an issue before the Delhi High Court. How and when the burden of proof can be said to have been discharged to prove the genuineness of the transactions was not the issue before the Delhi High Court. As observed hereinabove, while claiming ITC as per section 70 of the KVAT Act, 2003, the purchasing dealer has to prove the genuineness of the transaction and as per section 70 of the KVAT Act, 2003, the burden is upon the purchasing dealer to prove the same while claiming ITC. 15. In view of the above and for the reasons stated above and in absence of any further cogent material like furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disputed. 43.1 The appellant is of the view that since no penalty proceedings has been initiated against the car dealers for incorrect issuance of invoice, the department is not disputing the fact of providing the service as described in the invoice or remittance of duty on the same. 43.2 This averment of the appellant is not correct. The SCN does not disclose that no action has been taken against the car dealers. The appellant s claim is hence not substantiated and is not a part of the dispute in this case. Moreover, the present case has been made by officers of DGCEI and not by the Commissionerate. The action taken by Division officers who are doing the normal assessment functions are not know and are a separate cause of action. No inference can be drawn on the bald statement made by the appellant. The action in this case is appellant specific based on Rule 9 of CCR 2004. Moreover, in Basawaraj Anr. vs Special Land Acquisition Officer [(2013) 14 SCC 81] , the Apex Court ruled that: 8. It is a settled legal proposition that Article 14 of the Constitution is not meant to perpetuate illegality or fraud, even by extending the wrong decisions made in other cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssibility of the credit, as required under Rule 9 of the CCR 1994. Hence the averment that they qualify as input services is not correct. Contractual supply may be the essence of applicability of service tax only if there is a proper agreement which is executed in letter in spirit by the parties concerned. Illegality cannot get the cover of an agreement/ contract and succeed. Further no taxable activity was performed by the dealers as described in the invoice, as discussed above, hence the question of eligibility for the mis-declared invoice to qualify as an input service-related document does not arise. The matter has been discussed elaborately at para 37 above. To put it briefly in Intercontinental Consultants and Technocrats Private Limited (supra), the Hon ble Apex court held that as per section 67 of the FA 1994 service tax is with reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. Any other amount which is calculated not for providing such taxable service, in this case the service as declared in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Chennai o. Continental Foundation Jt. Venture Vs. CCE, Chandigarh reported in 2007 (216) ELT 177 (SC) p. Padmini Products Vs. Collector of Central Excise reported in 1989 (43) ELT 195 (SC) I shall discuss the implications and applicability of the said judgements as per the facts emerging from them and applicable to the facts in issue in this case below, on the accepted principle that it is neither desirable nor permissible to pick out a word or a sentence from a judgment divorced from the context of the question under consideration and treat it to be complete law. 45.2 In the Modular Auto Ltd (supra) the Hon ble High Court examined the following questions of law; a) When the service provider was not before the Tribunal, whether the Tribunal can go into the question as to whether the said service provider had provided service to the appellant or not, more so when the said service provider has been assessed to service tax under Business Support Service for the service rendered by them to the appellant. b) Is the Tribunal not in error in refusing credit to the appellant for service tax paid by them to service provider when payment of service tax by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India , the issue involve was whether reclassification of goods can be done at the receiver s end. The issue here relates to the provider of output service satisfying, with proof, the proper officer that the input service on which credit is taken has actually been received by him. The question of law pertaining to the burden of proof as per Rule 9(5) of the CENVAT Credit Rules, 2004 on the recipient was also not an issue in the cited judgment. The matter has been discussed at para 45. In Nahar Granites (supra), the Hon ble High Court dealt with an issue pertaining to a case where the department did not dispute the classification by the manufacturer and accepted the declaration and duty. It was held that CENVAT credit cannot be denied to the purchaser who otherwise fulfill all conditions. In the instant case the issue s include the dispute regarding the taxability of a service and that the appellant did not discharge the burden of proof that all the conditions required for taking CENVAT credit have been fulfilled. In Karur Vysya Bank (supra) again a coordinate Bench of this Tribunal examined an issue where the appellant was providing services such as supply of infrastructur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden of proof on the recipient of service and whether substantive liability falls on the supplier and the protective liability upon the purchaser (recipient) was also not an issue before the Hon ble Court. Shreeraj Panmasala (supra) relates to clandestine removal. Since allegations were not collaborated and the SCN was based on assumptions and presumptions they have no leg to stand on. In contrast the present matter the departmental officers have established their case based on facts, documents and statements in a proper manner and the allegations were found to sustain as discussed elaborately above. In M/s Cholamandalam (supra) a Coordinate Bench of this Tribunal examined the issue was that credit was availed by an Insurance Co. on the basis of invoices issued by the dealers of motor vehicles containing description of service which was allegedly never provided by them. Since the appellant has placed great stress on the said judgment, paras 6.2 to 7.3 which is important to understand the basis of the decision is reproduced below; 6.2 From the above, it can be seen that the case of the Department is that the payout paid by the appellant to the dealers on the OD premium col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that the questions raised by appellants in the said case and which were also raised by the appellant in this case, have been answered by me at para 39.1 above. 10.2 The appellant has raised two issues of law here; (i) When there are no services being provided by the dealer to the appellant, then why the service tax paid on such transactions were accepted by the department. (ii) When there is no requirement to pay service tax by the dealer to the department, the amounts collected should be refunded. It was concluded that as per Section 73A(2) of the Finance Act, 1994, even if tax is not liable to be collected from a person, if collected, the collected amount has to be paid to the credit of the government. In this case, it does not mean that department has accepted the taxpayer s assessment and that the actions of the taxpayer have been ratified. Further taking guidance from the Hon ble Apex Courts judgment in Mafatlal Industries (supra) that it is for the person who is aggrieved to initiate the process of refund in terms of Section 11B, if he feels that he has paid tax not due and it s not for the department to so suo-moto refund the same. A refund can only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarly, the Apex Courts judgment in Padmini Products (supra) states that the extended period of 5 years is inapplicable for mere failure or negligence. This too will be discussed later in this order. I have discussed the facts and law of each case cited before us, and have tried to demonstrate that these cases cannot serve as a precedent in this case for reasons discussed. In Escorts Ltd. Vs Commissioner of Central Excise, Delhi II [2004 (173) E.L.T. 113 (S.C.)], the Apex Court held; 10. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. 11. The following words of Lord Denning in the matter of applying precedents have become locus classicus : Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d authentication of invoices by digital signatures. Board vide instruction in F.No. 224/44/2014-Cx.6 dated 6.7.2015 had brought out the salient features of the above Notification for guidance. Relevant portions are reproduced below; . . . . the Central Board of Excise and Customs hereby specifies the following conditions, safeguards and procedures for issue of invoices, preserving records in electronic form and authentication of records and invoices by digital signatures, namely:- 1. Every assessee proposing to use digital signature shall use Class 2 or Class 3 Digital Signature Certificate duly issued by the Certifying Authority in India. 2. (i) Every assessee proposing to use digital signatures shall intimate the following details to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise, at least fifteen days in advance:- a) name, e-mail id, office address and designation of the person authorised to use the digital signature certificate; b) name of the Certifying Authority; c) date of issue of digital certificate and validity of the digital signature with a copy of the certificate issued by the Certifying Authority along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit era in as much as, when taken as credit in the books of account, they are instantaneously equivalent to liquid cash for payment of duty. An invoice showing a payment of duty of Rs. one crore when taken into the books of a manufacturer or service provider can be instantly used for the discharge of duty payable of the same amount at the same time of entry into books of account. The temptation for creating a fake or irregular document so as to avoid availing a costly loan facility is great and has to be guarded against, by a strict adherence to Rules. System generated invoices created without legal safeguards are easy to manipulate much more so than manual document. If the government treasury is allowed to be bled in this manner, the statute would be seen not to have been followed sufficiently by the officers so as to carry out the intent for which FA 1994 was enacted. This cannot thus merely be a procedural matter. Apart from the field of taxation, government has introduced facilities like the online platform TReDS (Trade Receivables Discounting System) that facilitate the financing of invoices of vendors drawn on big organizations and other corporates, including Public Secto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be serially numbered and shall contain the following, namely :- (i) the name, address and the registration number of such person; (ii) the name and address of the person receiving taxable service; (iii) description and value of taxable service provided or agreed to be provided; and (iv) the service tax payable thereon: . . . . (emphasis added) Rule 9 of the CENVAT Credit Rules 1994, extracted above is again reproduced for juxtaposition and convenience of reference. It states; RULE 9. Documents and accounts. (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely : . . . . (2) No CENVAT credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document: Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rule. Secondly Rule 9(2) ibid clearly mandates that the document should contain the details of the correct description of the goods or taxable service, among other things. The proper officer does not have the discretion to overlook this important fact. The impugned invoices fails both these tests. As per the guidelines of the Hon ble Apex Court in Gazi Saduddin v. State (supra), this Tribunal cannot go into the merits of the AA s satisfaction so long as it is not perverse or without proper reason. The satisfaction has to be of the authority passing the order. It is seen from para 46.3 above that maintenance of records in electronic media had come into effect only from 6.7.2015. Hence prior to that date, without the safeguards prescribed for an electronic signature, the jurisdictional officer would not be aware that the appellant was taking credit on electronic documents and such a modus operandi could be unearthed only after a search of the office by the officers. Even otherwise if this pernicious practice is accepted it will allow all assesses to take credit on incomplete documents and when found out seek the benefit of proviso to Rule 9(2) of CCR 1994. A situation not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent one to them. They are not aware of the reason for the same. The appellant has referred to Boards Circular Np 120/1/2010 dated 19/01/2010, which states that in case of incomplete invoices, the department should take a liberal view in view of various judicial pronouncements by courts. The contravention if at all, is a procedural defect and hence credit may be allowed. 47.3 Ordinarily credit taken on invoices that give the correct description of a service when complete in all respects is valid. A liberal view can also be taken of minor discrepancies in normal cases. However, in this case firstly there is another set of documents for additional incentive available with the service provider casting aspersions on the actual taxable activity stated on the credit availed invoice. They point towards transactions that are not genuine. Having found the credit irregular as a part of the full-scale investigation done by DGCEI and examined by the AA, the decision cannot be faulted. 48. The appellant humbly submits that the service tax department cannot act as a super-regulator and hold the appellant responsible for violation, if any, under other laws and regulations 48.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred under section 102(b) of Insurance Act, imposed a penalty of Rs.5 lakh on the appellant. The appellant-Insurer was further advised to revise the clauses of agreements to comply with the all clauses of Guidelines on Outsourcing of activities by the Insurance Company. (Circular Number IRDA/LIFE/CIR/GLD/013/02/2011 dated 1st Feb. 2011). This Revenue states, goes on to show that what the department has been alleging regarding the non-providing of taxable service is correct. 48.3 it is seen from para 5.7.18 of the impugned order that during the investigation one of the very senior officials admitted that while making payment to the dealers as payout, they have to give a description of the services as data processing and policy servicing and related activities in the invoices. This is because they cannot term such a payment as commission. Commission can only be given to the insurance dealers / brokers / intermediaries, who are duly approved by IRDA (or by insurance companies), that since the dealers are not the approved persons / agencies for selling the insurance polices and hence can t be officially allowed to sell the insurance policies, they cannot call such payouts as commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the issue in the impugned matter is, the burden of the output service provider (appellant) failing to prove to the proper officer, the correctness of CENVAT credit sought to be claimed/ availed, as per proviso to Rule 9(2) off CCR 2004. Hence an admission of illegality and the suggestion of an alternative classification under FA 1994, which fits the activity could have been tested before the lower authority, while considering their specific request in permitting input credit, under proviso to Rule 9(2) ibid. 49. The extended period of limitation is not invocable in the present case since the appellant had not wilfully suppressed any fact much less with intention to evade payment of duty. Further, the demand is also in continuation of earlier proceedings. 49.1 The appellant states that in the present case, the Show Cause Notice is dated 16.10.2015. Whereas the period involved in the present case is from 2010 to 2015. Therefore, the majority of the demand in the present Show Cause Notice is beyond the normal period of limitation. The extended period of limitation for raising a demand is not invocable as there was no suppression of facts much less with intent to evade paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter, as was done by DGCEI. Hence the extended period of time under proviso to section 73 of the Finance Act, 1994, for issue of SCN has been correctly invoked. The judgments cited by the appellant do not come to their rescue as the substance of the whole scheme planned and perpetuated by the appellant satisfies proviso to Section 73 of the Finance Act 1994, as submitted by Revenue and held in the impugned order. In Commissioner of Customs, Kandla Vs M/s Essar Oil Limited Ors. [2004 (172) E.L.T. 433 (S.C.)] it was held; Fraud in relation to statute must be a colourable transaction to evade the provisions of a statute. If a statute has been passed for some one particular purpose, a court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which is quite foreign to its object and beyond its scope. It is now well settled that fraud vitiates all solemn acts. Any advantage obtained by practicing fraud is a nullity. Hence the extended period of time has been rightly invoked in this case. 50. Penalty under section 78 of the Finance Act, 1994 read with Rule 15 of Credit Rules is not attracted in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since CENVAT credit was properly taken and no amount is recoverable from the appellant in the first place, the question of payment of interest does not arise. 51.2 We have earlier elaborately discussed and found that the CENVAT credit was not availed properly. It is seen that interest is necessarily linked to the duty payable, such liability arises automatically by operation of law. As per the Hon ble Supreme Court's judgment in Commissioner of Central Excise, Pune Vs M/s SKF India [2009-TIOL-82-SC-CX] interest is to be paid on delayed or deferred payment of duty for whatever reasons. The relevant portion is as below; 9. Section 11A puts the cases of non-levy or short levy, non-payment or short payment or erroneous refund of duty in two categories. One in which the non-payment or short payment etc. of duty is for a reason other than deceit; the default is due to oversight or some mistake and it is not intentional. The second in which the non-payment or short payment etc. of duty is by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid levy. B) As per proviso to Rule 9(2) of CCR 2004 the appellant being the provider of output service, is required to satisfy the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, that the input services on which CENVAT credit is sought to be taken has been received and is covered by the description given in the invoice and accounted for in the books of the appellant. C) Rule 9(5) of CCR, 2004 makes the principle clear that the burden of proof regarding the admissibility of CENVAT, while taking input credit, falls on the recipient of service i.e. the appellant. D) As per the general rule in legal proceedings also, he who asserts must prove. The appellant who is asserting the taxability of the activity received by him, if any, should have shown that the activity described in the invoice was indeed received and secondly that it was a taxable service eligible for being claimed as CENVAT credit. E) For the reasons cited at (A), (B) and (C) above the SCN had rightly required the appellant to show cause as to why the credit availed should not be denied and on failure to do so the impugned has confirmed the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements with dealers were being actually performed. K) The belief, knowledge and intention of the parties are a part of evidence. Documents do not always speak in a language understood by the layman. These are effectively brought to life through the statements of officials who are in the know of things. Based on this evidence the learned AA has to form his own conclusion. L) Persons claiming that statements were obtained under threat / duress must, for that ground to operate, establish that the threat is such that the person in making the statement believed or supposed that by making it he would pin any advantage or avoid any evil of temporal nature in reference to the proceedings against him. This has not been done by the officials concerned. M) In spite of a large list of 25 activities that were to be performed by the automobile dealers as per the Service Provider Agreement listed at para 33 above, the officials of both the appellant and the dealers company, when questioned were unable to list out the activities that were actually performed. In fact, they admitted that no service at all was performed. N) Appellants company officials have stated in legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 1994. A situation not envisaged by the Rules. Proviso to a Rule cannot become the Rule. It has to be applied to the facts of each case as per the satisfaction of the proper officer, when approached by assessee s with clean hands. Secondly proviso to Rule 9(2) ibid clearly mandates that the document should contain the details of the correct description of the goods or taxable service, among other things. The proper officer does not have the discretion to overlook this important fact. S) Allegations made by Revenue regarding non-compliance with IRDAI guidelines, were only meant to show that the huge payouts by the appellant to the car dealers were not on account of Data Processing and Policy Servicing and related activities . Revenue has succeeded in this limited objective. To find whether the amounts paid by the appellant to car dealers were within or in violation of IRDAI guidelines is not the remit of this Authority. T) The appellant has made a submission to the effect that, without prejudice, the illegality of a transaction does not determine or alter its tax implications. The concept has met with legal traction in matters relating to Income Tax laws, where the illeg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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