By TIOL News Service

KOLKATA, JAN 23, 2016: THE Adjudicating authority disallowed CENVAT credit of Rs.42,92,90,582/- and imposed equivalent penalty and interest.

The period of demand is April, 2007 to September, 2011 & the demand break-up is as follows - an amount of Rs.30,69,98,748/- pertains to Cenvat Credit taken by the appellant on the capital goods installed in the state of Jammu & Kashmir (denied u/r 6(4) of CCR, 2004); amount of Rs.11,52,24,984/- pertains to credit taken on the input services availed in the state of Jammu & Kashmir (denied u/r 6(1) of CCR, 2004); amount of Rs.16,00,139/- taken on the basis of documents issued by the Banks is also denied u/r 9 of CCR& credit of Rs.56,66,711/- is with respect to Service Tax paid on managerial services availed on the basis of duty paying documents which according to Revenue are also improper documents u/r 9 of CCR.

The appellant is before the CESTAT and inter alia submits -

(i) That demand for the period 01.04.2007 to 31.03.2011 (amounting to Rs.36,38,996/-) is time barred as the SCN is issued on 19.01.2012 and there is no willful suppression or misstatement on the part of the appellant.

(ii) That the capital goods installed in J & K state are used for providing taxable as well as exempted services when a subscriber of Bhubaneswar circle of the Appellant goes to the state of J & K and avails roaming services. That Bhubaneswar circle of the Appellant collects roaming charges from such subscriber and discharges service tax on the same. Therefore, the capital goods installed in the state of Jammu & Kashmir have not been used by the Appellant for exclusively providing exempted services, hence, Rule 6(4) is not violated.

(iii) That since the input services were used for providing taxable services as well as exempted services provided in J & K, therefore, upto 31.03.2011 (for credit availed Rs.3,14,55,065/-) the credit taken will fall under Rule 6(5) and hence not hit by the bar of Rule 6(1) of the CCR.

(iv) That other credits are denied on the basis of improper documents which is not correct as all the requisite particulars as per Rule 4A of the Service Tax Rules, 1994 are contained in the documents on the basis of which Cenvat Credit was taken by the appellant and accordingly Rule 9 of CCR is not violated.

(v) That procedural lapses like taking of Cenvat Credit on the invoices prior to taking centralized registration on bank guarantee commission of states other than Orissa, cannot be made the basis for denying Cenvat Credit if otherwise admissible.

Case laws aplenty were also cited in support.

The AR while supporting the order of the adjudicating authority submitted that as per Section 64(1) of the FA, 1994, Service Tax provisions are not applicable to the state of Jammu & Kashmir; that no extra service tax specifically has been paid by the appellant for providing roaming services in the state of Jammu & Kashmir and roaming charges collected from the customers are same everywhere in India; that no such Service Tax paid on roaming charges in the state of Jammu & Kashmir has been separately indicated either in the ST-3 returns filed by the appellant or in the invoices charged to the customers; that once no taxable service is provided in the state of Jammu & Kashmir then no Cenvat Credit to capital goods installed in the state of Jammu & Kashmir is admissible as per CCR. In the matter of invoking the extended period of limitation, the Bench is informed that nowhere in the returns filed with the department by the appellant it was specified that credit of capital goods and inputs services utilised in Jammu & Kashmir has been availed.

The Bench crystallized the issue under four heads and gave its findings thereon -

(i) Whether appellant has correctly availed Cenvat Credit with respect to capital goods installed in the state of Jammu & Kashmir where service tax provisions are not applicable as per Section 64(1) of the Finance Act, 1994?

++ Branch office in Jammu & Kashmir was not required to be included by the appellant in the centralized registration from where no taxable service is provided by virtue of Section 64(1) of the Finance Act, 1994. There is nothing on record that any special charge is recovered by the appellant from the customers towards the roaming facilities provided in the state of Jammu & Kashmir. Roaming charges are the same whether roaming facilities are provided in Jammu & Kashmir or elsewhere in India as nothing contrary to that aspect has been brought on record by the appellant. In view of the above all the branch offices of the appellant remain separate service providers even if a centralized registration for discharging service tax liability is obtained by the appellant. Accordingly it is held that when branch office (service provider) in Jammu & Kashmir was not required to discharge service tax then all the capital goods installed in the state of Jammu & Kashmir have to be considered ineligible for taking credit.

(ii) Whether Cenvat Credit is admissible with respect to the services availed in the state of Jammu & Kashmir?

++ Proviso to Rule 6(2) of CCR lays down that the Cenvat Credit Rules do not apply to taking of Cenvat Credit of Service Tax. Therefore, Cenvat Credit taken with respect to services availed in the state of Jammu & Kashmir, has been correctly denied to the appellant.

(iii) Whether appellant is eligible to Cenvat Credit of Rs.72,66,850/- availed by the appellant on documents which according to Revenue are not proper documents as per Rule 9 of the CCR?

++ The words "invoice", "bill" and "challan" have not been defined in the Service Tax Rules, 1994 but the details contained in such documents have been prescribed in Rule 4A(1) of these rules. Further provisos under Rule 4A(1) any document, whether or not serially numbered with respect to banking services, GTA Services, and Aircraft Operator Services; has been prescribed. From a collective reading of these provisions we are of the opinion that if details prescribed in Rule 4A(1) of the Service Tax Rules, 1994 are available in a document then the same can be considered as an invoice, bill or challan and will be a proper document for availing Cenvat credit under CCR.

++ Minor procedural irregularities, if any, cannot be made the basis of denying Cenvat Credit if utilization of taxable services have been established to be used in the output services provided by an assessee. Cenvat Credit of Rs.72,66,850/- (Rs. 16,00,139/- + Rs.56,66,711/-) has been correctly availed by the appellant and appeal to that extent is required to be allowed.

(iv) Whether extended period of five years can be invoked against the appellant for demanding duty and imposing penalty?

++ As per the provisions contained in Rule 9(6) of the CCR, 2004 the burden of proof regarding admissibility of Cenvat Credit lies on the provider of output service taking such credit. In the existing realm of self-assessment of taxes more trust is cast upon the taxpayer.

++ It is an admitted fact that before centralized registration, appellant was having separate registration for the premises where taxable services were provided. Office premises in Jammu & Kashmir, from where services were provided in Jammu & Kashmir, were not registered for providing taxable services.

++ It was a mis-statement on the part of the appellant to include the premises of Jammu & Kashmir in the centralized Registration when no taxable services were provided in the state of Jammu & Kashmir. No service tax credit could be taken by virtue of Section 64(1) of the Finance Act, 1994.

++ An assessee of the stature of the present appellant, having the best legal advise at their command, cannot be considered to be ignorant of law. Nowhere in the statutory returns/intimations, submitted to the department and brought on record, that Cenvat Credit of capital goods and services installed/availed in the state of Jammu & Kashmir has been depicted. Appellant never approached the department at any stage that any ambiguity or confusion exists in taking of credit with respect to capital goods/services installed availed in the state of Jammu & Kashmir.

++ Extended period is applicable and penalty, equivalent to the inadmissible credit, imposed upon the appellant is justified.

++ Appellant has no reasonable cause for considering that Cenvat Credit on capital goods/services installed/availed in the non-taxable state of Jammu &Kashmir, is admissible. Accordingly, it is not a case for allowing the benefit of Section 80 of the Finance Act, 1994 to the appellant.

The appeal was dismissed except to the extent of credit of Rs.72,66,850/-held eligible as mentioned against clause (iii) above.

In passing: Do more…zoozoos

(See 2016-TIOL-249-CESTAT-KOL)