9911796707
TMI Blog2023 (8) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissions 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 by the dealer, M/s. TVS Sundaram Motors. 3. It is noted that the dealers of motor vehicles not being Agents / Brokers / Intermediaries of the Insurance companies are neither permitted to do insurance business nor are they permitted to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 the invoices on which credit is taken do not reflect the true description of the services provided by the dealers to the appellant. b. Secondly, in respect of M/s. Honda Motors India Ltd., that the appellant has availed cenvat credit based on unsigned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'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 computer generated invoices issued by M/s. Honda Motors India Ltd. to the appellant, the Ld. Counsel submitted that there is no dispute that the service provider is registered with the service tax department and that the service tax as mentioned in the invoices is deposited with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 service tax is not paid by an assessee (Bank) for Business Support Services, demand has been raised for providing infrastructure facilities and supports to the insurance company. That therefore the dealers have rightly paid the tax for the services provided to the appellant. The credit availed by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive 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 only provide insurance services. The taxable value and the service tax is calculated as a percentage of own damage (OD) premium and intimated by appellant to the dealers through e-mail. 8.3 The Ld. Special Representative of the department relied upon the various statements recorded during investigation to argue th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature. 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 because the dealers and manufacturers did not provide any service to the appellant and the invoices have been raised to pay the commission on insurance services to the dealers. The Ld. Special Representative prayed that the appeal may be dismissed. 10. Heard both sides. 11. The issue to be decided is whether the appellant is eligible to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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, SM etc, the service of promoting RS as one of the preferred insurers and wherever they are successful they processed and issued the insurance policies etc using data processing at their site? A: Yes. Q: If you were forced to give reply, why did you not retract the statement. A: I did not retract because I was not aware of the process. The cross examination of other witnesses is also on similar lines. The cross examination of Sri S. Shanmugam Sundaram, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 as the description of services in the invoices is incorrect. At times, in the SCN as well as OIO it is alleged that the credit is inadmissible as no services at all were provided by the dealers to the appellants. For better appreciation a sample of the invoice is noticed as under: 19. From the above document, it can be seen that the dealers have raised the invoice collecting charges for the services provided by them. There is nothing in these documents to indicate that no services were provided. At the cost of repetition, it needs to be stated that though department alleges that no services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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 the appellant. Further, the transactions are not hidden or suppressed in any manner. The department alleges these are illegal and in contravention of Insurance Act and IRDA Regulations. The guide lines on outsourcing of activities by Insurance companies issued by IRDA produced by the appellant shows that the non-core activities and activities supporting core activities can be out sourced. It is not disputed that the dealers have paid the service tax to the government which was collected from the appellant. 22. The Ld. Counsel for appellant has referred to the decision in the case of Karur Vyshya Bank Vs Ltd Vs CCE, Trichy - 2019 (22) GSTL 63 (Tri Chennai). In the said case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected 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"; (iii) the Dealers accordingly raised invoices on the insurance companies in the format provided to them and (iv) the Dealers have not provided the services as mentioned in the description of the invoices. In other words, the description of the services contained in the invoices used for availing Cenvat Credit do not reflect the true description of the services." 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 the appellant for the service rendered by service provider is not in dispute and that it is settled, the assessment to tax at the hands of the service provider end cannot be questioned in the hand of service receiver (appellant in this case)?" .. .. ... 10. From the foregoing, after appreciation of the facts and following the decision of the Hon'ble High Court in M/s. Modular Auto Ltd. (supra), we hold that the impugned order cannot sustain and requires to be set aside, which we hereby do." (emphasis supplied) 26. It needs to be stated that the allegations raised are the same as seen in para 39 of the order impugned in this appeal. Similar view was taken by the Tribunal in the case of IC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 period from April 2015 to June 2017. The facts and allegations are the same. Based on the very same investigation, the SOD dated 13.04.2018 has been issued proposing to deny the credit availed on the invoices issued by dealers, proposing to recover the amount along with interest and for imposing penalties. Interestingly, in para 13.2 it is held by the adjudicating authority that the commission charges paid by appellant to the dealers will be liable to service tax under Reverse Charge Mechanism in terms of notification 30/2012. Again, in para 14.1, it is concluded that there is no consideration received for the services provided by the dealers to appellant and that the chares paid by appellant to dealers along with service tax are nothing but reimbursable expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 registered with the Insurance Regulatory Development Authority of India (IRDAI). During the course of business, the appellant has entered into agreements with automobile manufacturer such as Ford India Private Ltd. (Ford), Tata Motors and others in terms of which the appellant and automobile manufacturer agreed to act in concert along with authorized dealers of the car to convenience car customers for the insurance coverage of cars. The appellant entered into a tripartite agreement on 24.2.2008 with the car manufacturer, M/s. Tata Motors Limited (TML) and service provider, M/s. Tata Business Support Services Limited (TBSS), who reportedly provides IT support services for enabling issuance of insurance policies to customers at the dealership location. Similar agreements have been made by the appellant with dealers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entry for the service request received from the customer for the policies processed by service provider f. Handle the refund request of the customer and forward the same to the company for refund g. Handle the request received from the customer for duplicate policy issuance for the policy processed by the service provider h. Collection of documents from the customer for complying with AML & KYC norms i. Printing and posting of reminders for short collections, info pending etc. j. Assisting in the claims documentation and investigation processes III Pre-Inspection (Motor Vehicle) a. Doing the inspection of the vehicle for motor proposals, wherever necessary, at the request of the company b. Preparing the pre-inspection report for the vehicle inspected and forwarding the same to the company to facilitate the underwriting of the proposal c. Prepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 imposed. The period covered is from 2010-11 to 2014-15. The learned Commissioner has divided the demand for irregular CENVAT credit, into three parts as under. Irregular availment of CENVAT credit; A. on the basis of invoices issued by automobile dealers (excluding automobile dealer viz. M/s. TVS Sundaram Motors) & Automobile Manufacturers (excluding automobile manufacturer, Viz. M/s. Honda Cards India Ltd.) B. on the basis of invoices issued by the automobile manufacturer viz. Honda Cards India Ltd. and C. on the basis of invoices issued by the automobile dealer, viz. M/s. TVS Sundaram Motors. 35. Aggrieved by the impugned order the appellant has assailed the same before us in appeal. Since the written and oral submissions made by the rival parties and their representatives have already been mentioned in the order of the learned Member (Judicial), I am not repeating the same again. The averments shall be separately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead with Rule 15 of Credit Rules is not attracted in the present case 108 20. No interest payable 109 21. Summary of findings 110 I now intend to examine the issues as listed above. 36. At the outset, the appellant submits that the Show Cause Notice is vague and based on incorrect principles of law. Therefore, the impugned Show Cause Notice itself is liable to be dropped. 36.1 The appellant is of the view that the department in the impugned order has wrongly denied the availment and utilization of CENVAT credit by the appellant on invoices given by dealers of cars. While the order at places states that no services have been received by the appellant, in other places, it emphasizes that services received by the appellant are not what have been described in the invoices. It does not discuss how the department has the authority to collect and retain the service tax that has been discharged by the dealers on such transactions if no services were indeed provided. Further, the denial is on the basis of invoices raised by the dealers. The impugned order fails to understand the basic transaction that the appellant has entered into, hence the order is liable to be set aside on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. . . . . " Again in Suresh Kumar Sharma Vs. Union of India [2007 5 STR 254 (Kar)] the Hon'ble High Court held as under; ". . .There are three components of a taxing statute viz., subject of the tax, person liable to pay the tax and the rate at which the tax is levied. If there is any real ambiguity in respect of any of these components which is not removable by reasonable construction, there would be no tax in law till the defect is removed by the statute. There are three stages in the imposition of tax namely (1) declaration of liability in respect of persons or property, (2) assessment of tax that quantifies the sum which the person liable has to pay, and (3) methods of recovery if the person taxed does not voluntarily pay. The taxing statute has to be strictly construed.. . " (emphasis added) 37.3 Service tax was introduced through Chapter V of the Finance Bill, 1994 during the presentation of the Union budget and implemented as an Act from 01/07/1994. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e., prior to May 01, 2006) or after its amendment, with effect from, May 01, 2006. . ." (emphasis added) Hence there was a clear mandate in section 67 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. As a result of this inbuilt check mechanism, only 'taxable service' and not 'any service' were subjected to levy under the provisions of section 67, prior to changes made in the statute effective from 01/07/2012. While the authority for levy of service tax on specified services from 01/07/1994 was contained in Section 66 of the Finance Act, 1994, with effect from 01.07.2012, the authority for levy of service tax was contained in Section 66B of the Finance Act, 1994. The section stipulated a rate of 14 per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in any as may be prescribed. As per Section 66BA, reference to section 66 was to be construed as reference to section 66B. It still required that an activity should be perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clature accorded to the services provided is not relevant, but the provision of service is the determinative factor 38.1 The appellant submits that according to them they have received the services as mentioned in the contract. However, even if the contention of the department was to be accepted, that the description of services mentioned in the invoices is incorrect, it would be an error on part of the department to hold that no services have been provided at all. Nomenclature mentioned in the invoices, or even at accounting stage does not take away the substance of provision of the service itself. It is a settled principle of law that the substance of the transaction has to be seen in order to tax the same. The nomenclature alone would not determine the nature of transaction. 38.2 This submission of the appellant encapsulates the whole dispute. Both parties to the dispute hold the same view on the principle of law involved, but apply it to their perception of events, arriving at different results. It is the answer to this riddle which will resolve this dispute and which I have set out to discover by the end of these discussions. 39. Without prejudice to the above submission, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have left any room for doubt in the mind of the appellant. However, the appellant having sought clarity, it is further stated that any tax collected, retained or not refunded by the department in accordance with the provisions of a statute must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Hence any excess money collected as tax and paid to government is seen to have been retained under the authority of law. The issue has been dealt with in the landmark nine Judge verdict of the Hon'ble Supreme Court in Mafatlal industries Ltd Vs Union of India [1997 (89) E.L.T. 247 (S.C.)] decided by a majority of 8:1. The relevant portion is reproduced below; "99. . . . The said enactments including Section 11B of Central Excises and Salt Act and Section 27 of the Customs Act do constitute "law" within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. . ." (emphasis added) Further the Apex Court in Union of India & Ors. Vs VKC Footsteps In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible refund, if he feels so, only in terms of Section 11B of the Central Excise Act, 1944 (CEA 1944). The Apex Court in its judgment in "Mafatlal Industries" (supra) has declared the law on the subject. Relevant portion is extracted below; "68. . . . To repeat - and it is necessary to do so - so long as Section 11B is constitutionally valid, it has to be followed and given effect to. We can see no reason on which the constitutionality of the said provision - or a similar provision - can be doubted. It must also be remembered that Central Excises and Salt Act is a special enactment creating new and special obligations and rights, which at the same time prescribes the procedure for levy, assessment, collection, refund and all other incidental and ancillary provisions. As pointed out in the Statement of Objects and Reasons appended to the Bill which became the Act, the Act along with the Rules was intended to "form a complete central excise code". The idea was "to consolidate in a single enactment all the laws relating to central duties of excise". The Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They further submit that under the Service Tax (Determination of Value) Rules, 2006 even consideration in kind is being considered as value of taxable service under section 67 of the Finance Act, 1994. Hence, the impugned notice is liable to dropped on this ground. 40.2 I agree with the principle stated by the appellant on this issue. The predicament with labels is that they tend to discourage the examination of facts at the very threshold. Hence, I too agree that just because the dealers label the payment in the invoice as being for 'Data Processing and Policy Servicing and related activities' it will not become representative of its true character. A principle of interpretation of an activity, is that the nomenclature assigned to it is not decisive of its nature. The fact that the payments made by the appellant to the dealer is calculated in sync with the quantum of business procured by the dealers cannot be the lone determinative factor that the amount paid to the dealers is merely a payout / commission. One has to look at the activity performed, the belief, knowledge and intention of the parties signing the agreement. One can also examine the commensurate nature of the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corroborated by circumstantial evidences like payout workings prepared in excel sheets communicated by the personnel of the Branch / Head Office of the appellant; that personnel of Branch / Head Office of RSAICL had issued instructions through their official email id's to prepare invoices in the formats devised by them to be issued by the car dealers to claim the payouts etc. The adjudicating authority had not felt the need for summoning the officers of DGCEI who recorded the statements as no clarification was to be obtained from the DGCEI officers in view of the fact that all the witnesses replied during cross-examination that no retractions were made by them. The contention of the appellant is that during the cross-examination of various persons, it was clearly admitted by all the dealers that they were providing the services of data processing and policy servicing to the appellant that during examination Shri B. Balaji stated in answer to Question No. 5 that he was forced to give the statement; that in his cross-examination Shri Venkatachalam Sekar stated in answer to Question No. 9 that he was forced to give the reply; that that in such circumstances, the statement given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent the service charges meaning that the amount claimed is not for rendering of services. The question and answer mentioned above were put forth and replied based on documents available on record and contained a wealth of facts, for which the officer cannot exert any pressure or force any one to explain the contents of. During the cross-examination of witness namely Shri Balaji, the genuineness of the documents was not questioned and the appellant in the instant appeal filed also have not disputed the veracity of the documents. Shri Balaji had all the time to explain to the AA, the necessity for M/s. TVS Sundaram Motors to raise two sets of invoices / bills for the same amount and for the same month calculated as a % of OD premium. As Shri Balaji had failed to clarify his explanation for query No. 5 even during cross-examination by the AA and thus stating that the answer to the query was taken by force does not hold water and it is an afterthought. Secondly, the appellant's contention is that the statement from Shri Venkatachalam Sekar, Financial Controller of RSAICL in respect of Question No. 18, 19, 20 and 25 was taken by force in his statement recorded by DGCEI. For ease of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re asked to raise such invoices on us so as to facilitate payment of payout. Q.20 Kindly see and sign the Invoice No. 39004503 dated 30.4.2015 issued by M/s. Chennai Auto Agencies Pvt. Ltd. (also called as Chennai Ford) 423, Ponnamallee High Road, Chennai (ST Regn. No. AAACC4158LST003). According to the invoice, they have provided "Data Processing and Policy Servicing and related activities for the month of April 2015" and you have paid Rs. 1,99,443/- as the service charge and Rs. 24,651/- as service tax. Please answer the following questions relating to each service mentioned in the invoice. a) What are the Data Processing and Policy servicing and related activities provided by Chennai Auto Agencies P Ltd. to you? b) Who uses these Data Processing and Policy servicing services? Please provide name, address and contact no. of your employee / manpower who have been using the services to provided? c) Have you taken CENVAT credit on this invoice? Ans. Having seen the above-mentioned invoices, I had appended my signature in it. RSAICL has received the above-mentioned invoices from Chennai Ford. The particulars mentioned in the invoices as "Data Processing, Policy servicing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether they support the stand of Revenue or not. 41.5 The Finance act 1994, is a special and self-contained enactment creating new and special obligations and rights, which at the same time prescribes the procedure for levy, assessment, collection, refund, investigation and all other incidental and ancillary provisions. To avoid repetition certain sections of the Central Excise Act 1944 (CEA 1944), has been made applicable in relation to service tax as they apply in relation to a duty of Central Excise. These are found in section 83 of the Finance Act, 1944 (FA 1944). One such section made applicable is section 14 of the CEA 1944, which is reproduced below. 14. Power to summon persons to give evidence and produce documents in inquiries under this Act.- (1) Any Central Excise Officer duly empowered by the Central Government in this behalf shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would gain any advantage or avoid any evil of a temporal nature in reference to the proceedings against him." To attract the provisions of this section, the following facts have to be established: (a) that the confession has been made by an accused, person to a person in authority; (b) that it must appear to the Court that the confession, has been obtained by reason of any inducement, threat or promise proceeding from a person in authority; (c) that the inducement, threat or promise must have reference to the charge against the accused person; and (d) the inducement, threat or promise, must, in the opinion of the Court, be such that the accused in making the confession 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. It is noted that in this case the statements by the officials are not by accused persons nor against themselves but only explain the functioning of the appellants company in a certain context. Further neither the officials nor the appellants counsel during the cross examination or otherwise till the issue of the impugned order or before us, have been able to est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey could be re-explained by the officials concerned in case any misunderstanding had crept into the recording of the same. The answers of officials were in monosyllables or very short, as seen at para 14 above. It was an opportunity lost by the appellant. Factual proof of the activity / service rendered as per the agreement could have been presented by the officials being examined by the appellant's counsel. In fact, apart from making a reference to the agreement with dealers or stray words or sentences in the impugned order, the appellant in the present case has shown remarkable shyness in showing physical / documentary proof that would demonstrate that the activity in the agreements with dealers were actually performed. The stand of the learned AA hence cannot be faulted in accepting the legally valid statements after rejecting the claim of threat / duress by the officials and satisfying himself of their evidentiary value in understanding the issue and deciding the matter. The appellant has further contended that 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross examination of officials who gave the statements as sought by the appellant was allowed and done. In a similar situation it was held by the Hon'ble Supreme Court in M/s Telestar Travels Pvt. Ltd. & Ors Vs Special Director of Enforcement [2013 (289) ELT (3) SC], as under; "18. . . . It is only when a deposition goes through the fire of cross-examination that a Court or Statutory Authority may be able to determine and assess its probative value. Using a deposition that is not so tested, may therefore amount to using evidence, which the party concerned has had no opportunity to question. Such refusal may in turn amount to violation of the rule of a fair hearing and opportunity implicit in any adjudicatory process, affecting the right of the citizen. The question, however, is whether failure to permit the party to cross examine has resulted in any prejudice so as to call for reversal of the orders and a de novo enquiry into the matter. The answer to that question would depend 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statements and cannot be faulted. This Tribunal cannot go into the merits of the AA's satisfaction, if it is reasonable. As held by the Hon'ble Apex Court in Gazi Saduddin v. State of Maharashtra and Another [(2003) 7 SCC 330]; "Primarily, the satisfaction has to be of the authority passing the order. If the satisfaction recorded by the authority is objective and is based on the material on record then the courts would not interfere with the order passed by the authority only because another view possibly can be taken. Such satisfaction of the authority can be interfered with only if the satisfaction recorded is either demonstratively perverse based on no evidence, misreading of evidence or which a reasonable person could not form or that the person concerned was not given due opportunity resulting in prejudicing his rights under the Act." The statements which clarified/ explained the information contained in documents from the personal 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 admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been performed by the dealers during the questioning of the dealers or by the appellants, right from the stage of investigation till the passing of the impugned order, except to state that the activities were mentioned in the agreements with the car dealers or to point out some stray words or sentences in the impugned order. The activity to be performed remained on paper in the form of an agreement but was not acted upon by the dealers at the behest and with the knowledge of the recipient of the activity which is the appellant. It was mentioned in the impugned order that car dealers have admitted raising invoices towards charges of 'data processing and policy servicing and related activities' as required of them by the confidential email communication received by them from the appellant. The amount of payout was decided by the insurance company i.e appellant. No representative from the insurance company assisted the 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em username and password, that these dealers can login in their website and enter the details of the cars like model number, price of the car, registration number, chassis number etc. and the car owners name, address, phone number etc. which is required by the dealer itself while selling a car and get the insurance policy printed in their showroom itself and give it to the customers at the time of delivering the car or other motor vehicles, that the infra company gives them the details of the premium collected from each dealer which then reconciled with the payment deposited by each dealer in their account, that thereafter they make payment of payouts to the car dealers accordingly and the infra-company gets a service charge at rate as negotiated with them, however, the amount paid is accounted as 'Payouts' in their Books of Accounts and that the present rates of service charge to infra-companies are: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as per the agreement to the Insurance Company, gets paid a percentage between 10 to 55 % on the OD premium amount for the insurance policies booked, allegedly for providing 'services'. These cannot be held to be genuine transactions of 'data processing and policy servicing'. Hence it cannot be said as averred by the appellant that the method of calculating the 'consideration' 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such a situation the service tax shown to be paid on the invoices was not a tax. It was the misuse of a tax mechanism of CENVAT credit to not only pass on monies to car dealers but to unjustly enrich all the participants of this scheme both financially and in the growth of business, at the cost of the customer-taxpayer who was clueless of the whole fraudulent scheme. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or premises of first or second stage dealers or provider of output service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document to pay as penalty: (a) in the case of first such detection, three times the tax due in respect of such transaction or claim; and (b) in the case of second or subsequent detection, five times the tax due in respect of such transaction or claim. (3) Before issuing any direction 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the goods alleged to have been purchased by it/them from the concerned dealers and on which the ITC have been claimed, the Assessing Officer is absolutely justified in rejecting such ITC claim. 11. In the present case, the respective purchasing dealer/s has/have produced 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition (Civil) No. 6093/2017, decided on 26.10.2017), relying upon by the learned counsel appearing on behalf of the purchasing dealers is concerned, at the outset, it is required to be noted that before the Delhi High Court, Section 9(2)(g) of the Delhi Value Added 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of the credit, as required under proviso to Rule 9(2) of the CCR 2004 and the credit has hence been irregularly availed. 43. No penalty proceedings have been initiated against the car dealers hence the service provided by dealers is 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 [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, together as they are related. It has been seen in the para above that the appellant being the provider of output service, has not satisfied the proper officer regarding the admissibility 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, New Delhi n. Cholamandalam MS General Insurance Co. Ltd. Vs. CCE reported in 2021 (3) TMI 24 - CESTAT 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 appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinguished. In 'Sarvesh Refractories' (supra), and similarly in 'M/s Ford 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the one discussed at para 45. Further, the question pertaining to the 'burden 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment at the dealer's end." (emphasis added) It is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appropriate para below. Similarly, 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, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 with the complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Sector Undertakings (PSUs) and Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly :- (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 or Service tax registration number of the person issuing the invoice, as the case may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 envisaged by the Rules. Proviso to a Rule cannot become the Rule. In the instant case the position become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20/1/2010 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 The appellant submits that firstly, there has been no violation of IRDA principles. From the statements of the personnel of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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 commission as it will be in violation of the IRDA guidelines. That the maximum commission fixed by IRDA is 10% of OD premium and the payou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 payment of duty. The appellant was under bona fide belief that they are entitled to avail and utilize credit of service tax paid on various input ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly 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 present case 50.1 The appellant is of the view that since they are eligible to avail CENVAT credit, and as the issue is technical in nature, no penalties can be impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed 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 payment of duty"; that is to say, it is intentional, deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 'ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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