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No suppression of facts can be alleged to invoke extended limitation or impose penalty if there were divergent views on issue at hand during the period of dispute: CESTAT

2019-TIOL-2187-CESTAT-BANG

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, BANGALORE

Appeal No. E/20302/2018-SM

Arising out of OIA No. 547-2017-CT, Dated: 19.12.2017
Passed by Commissioner of Central Tax, North West Commissionerate, BANGALORE-I(Appeal)

Date of Hearing: 30.10.2018
Date of Decision: 27.02.2019

MAPAL INDIA PVT LTD
PLOT 307 AND 308, 5TH MAIN 4TH PHASE
PEENYA INDUSTRIAL AREA,BANGALORE BANGALORE
KARNATAKA – 560058

Vs

COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX
COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH WEST COMMISSIONERATE
2ND FLOOR, SOUTH WING, BMTC BUS STAND COMPLEX SHIVAJI NAGAR
BANGALURU, KARNATAKA – 560051

Appellant Rep by: Shri Ibrahim, Adv.
Respondent Rep by: Shri K Murali, Superintendent AR

CORAM: S S Garg, Member (J)

CX – The assessee is engaged in manufacture of excisable goods – The department found that the assessee have not produced documents on which they have taken credit to the Department and hence it appears that assessee have availed irregular CENVAT Credit on improper documents or without valid documents and the amount being irregular credit is liable to be recovered with interest and penalty – As per the purchase orders, assessee is supposed to supply the goods at the buyer’s premises and the price of the goods include outward freight – The various circular issued by the Board in year 2007, 2014 clearly show that evidences of parties is to be ascertained as to when the property in goods passes along with the other documents i.e. purchase order and invoices – The subsequent Circular issued in 2018 does not help the assessee because once the Apex Court has declared the law, the Circular issued by Board cannot override the judgment of Apex Court – By following the ratios of the Apex Court and the decision in case of Ultra Tech Cement – 2018-TIOL-42-SC-CX, there is no infirmity in impugned order demanding the cenvat credit wrongly availed by assessee with regard to GTA – As far as CENVAT credit on CHA service is concerned, the services rendered by CHA falls under the definition of input service and therefore the assessee is entitled to CENVAT credit on CHA services – Further regarding the credit on insurance service, assessee submitted that these services pertain to General insurance service of employees and marine insurance of goods which are not excluded by amendment in definition of input service w.e.f. 01/04/2011 – Further on perusal of amendment in input service w.e.f. 01/04/2011, General Health insurance is excluded from the definition of input service – Therefore, assessee is not entitled to CENVAT credit on insurance service, as held by Commissioner (A) also – As far as invoking the extended period of limitation and imposition of penalty is concerned, there were divergent views during the period in dispute on the issue, therefore the allegation of suppression with intent to evade payment of duty is not sustainable – The demand beyond the normal period of limitation is set aside as there was no intention to evade payment of duty – Therefore, the penalties imposed on assessee are also not sustainable and hence set aside – The impugned order in respect of demand for the normal period with interest is upheld and penalties are set aside: CESTAT

Appeal disposed of

Case laws cited:

CCE V. Roofit Industries Ltd. – 2015-TIOL-87-SC-CX… Para 4.2

CCE V. Vardhaman Prestressed Products (P) Ltd. – 2017-TIOL-3065-CESTAT-MUM… Para 4.2

Madras Cements Ltd. V. Addl. CCE – 2015-TIOL-1682-HC-KAR-CX… Para 4.2

Mahle Engine Components India Pvt. Ltd. V. CCE – 2017-TIOL-765-CESTAT-DEL… Para 4.2

GKN Sinter Metals Pvt. Ltd. V. CCE – 2018-TIOL-662-CESTAT-MUM… Para 4.2

CCE V. EMCO Ltd – 2015-TIOL-163-SC-CX… Para 4.2

Birla Corporation Ltd. V. CCE, 2018 (10) GSTL 43 (Tri.-Del.)… Para 4.2

Mahle Engine Components India Pvt. Ltd. V. CCE – 2017-TIOL-765-CESTAT-DEL… Para 4.2

Commissioner of Central Excise Vs. Ultra Tech Cement – 2018-TIOL-42-SC-CX… Para 5

FINAL ORDER NO. 20224/2019

Per: S S Garg:

The present appeal is directed against the impugned order dt. 19/12/2017 passed by the Commissioner(Appeals) whereby the Commissioner(Appeals) has allowed the credit of Rs.7,245/- on hotel accommodation services and confirmed the demand of Rs.20,41,716/- along with interest. Further, he also imposed penalty of Rs.1,50,000/-.

2.1. Briefly, the facts of the present case are that the appellants are engaged in the manufacture of excisable goods falling under Chapter 73, 82 and 74 of the CETA, 1985. The appellants informed to the Department that they are also providing various taxable services on payment of appropriate service tax and undertakes trading activity of goods sought with a separate dealer registration. They are also availing the facility of cenvat credit on various inputs and input services under the provisions of Cenvat Credit Rules, 2004. The appellants stated that they have identified the invoices pertaining to eligible input services on which they have missed availing cenvat credit in the past and that missed out input services includes, repair & maintenance service, house keeping services, service tax paid on reverse charge / partial reverse charge mechanism etc. Further, they have explained the nexus between input service and dutiable final products in respect of telephone / mobile services, hotel accommodation services, travelling services, outward transportation of goods by GTA and outward courier freight insurance services and they have not explained the nexus of other input services with their dutiable final products.

2.2. The Department, during the verification, found that the appellants have taken cenvat credit on various input services irregularly to the tune of Rs.34,80,886/- in terms of Rule 2(l) of CCR, 2004. It was also found that the appellants have not produced documents on which they have taken credit to the Department and hence it appears that the appellants have availed irregular CENVAT Credit on improper documents or without valid documents and the amount of Rs.34,80,886/- being irregular credit is liable to be recovered with interest and penalty. Accordingly, a show-cause notice dt. 20/08/2015 proposing to recover the irregular cenvat credit along with interest and penalty was issued to the appellant and after following the due process, the adjudicating authority vide Order-in-Original dt. 29/02/2016 allowed the credit of Rs.14,31,925/- and disallowed the credit of Rs.20,48,961/- on irregular input services having no nexus with the output services and also on the ground that input services documents were not produced and confirmed the demand along with interest and also imposed penalty of Rs.1.5 lakhs. Aggrieved by the said order appellant filed appeal before the Commissioner(Appeals) who only allowed the credit of Rs.7,245/- on hotel accommodation services and denied the credit of Rs.20,41,716/- and also upheld the penalty of Rs.1.5 lakhs.

3. Heard both sides and perused records.

4.1. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same is contrary to the facts and the law and binding judicial precedents. He further submitted that with regard to Outward GTA service, the place of removal being customer premises and not the factory gate. He further submitted that due to the paucity of time, they could place some documents which contains terms of delivery / evidence of Purchase Order. Further he submitted that with reference to hotel accommodation and insurance services, he submitted some documents and requested to examine the same.

4.2. He further submitted that in the present case the place of removal is the buyer’s place in terms of Section 4(3)(c) of Central Excise Act 1944 read with Explanation to Rule 5 of the Central Excise (Determination of Price of Excisable Goods). He further submitted that outward freight has been included while computing the assessable value of the goods and the invoices and purchase orders clearly show the same. He further submitted that as per Rule 2 of CCR 2004 input service credit on freight is availed upto the place of removal i.e. the customer’s premises. He also submitted that the goods supplied by the appellant are tested for acceptance at the customer’s place and hence sale takes place at the customer’s place and not the appellant’s factory. He also submitted that none of the invoices in question state that the price is ‘ex-works’ indicate that the appellant bears the risk of loss and damage of goods as the appellant has taken the insurance cover for the goods. He also submitted that the extended proviso for demanding duty is not applicable as there is no willful suppression of fact with intent to evade payment of service tax. In support of his submission, the appellant relied upon the following decisions:

a. CCE V. Roofit Industries Ltd. – 2015 (319) E.L.T. 221 (SC) = 2015-TIOL-87-SC-CX

b. CCE V. Vardhaman Prestressed Products (P) Ltd. – 2017 (6) GSTL 286 (Tri.-Mum.) = 2017-TIOL-3065-CESTAT-MUM

c. Madras Cements Ltd. V. Addl. CCE, 2015 (40) STR 645 (Kar.) = 2015-TIOL-1682-HC-KAR-CX

d. Mahle Engine Components India Pvt. Ltd. V. CCE, 2017 (51) STR 44 (Tri.-Del.) = 2017-TIOL-765-CESTAT-DEL

e. GKN Sinter Metals Pvt. Ltd. V. CCE – 2018-TIOL-662-CESTAT-MUM.

f. CCE V. EMCO Ltd. 2015 (322) E.L.T. 394 (SC) = 2015-TIOL-163-SC-CX

g. Birla Corporation Ltd. V. CCE, 2018 (10) GSTL 43 (Tri.-Del.)

h. Mahle Engine Components India Pvt. Ltd. V. CCE, 2017 (51) STR 44 (Tri.-Del.) = 2017-TIOL-765-CESTAT-DEL

4.3. Learned counsel for the appellant submitted that after the decision of the Apex Court in the case of Ultra Tech Cement Ltd., the Board has issued a Circular dated 08.06.2018 whereby they have clarified that for the purpose of availing cenvat credit on GTA, facts of each case is to be ascertained. The learned counsel further submitted that the said Circular clarifies the doubts in the mind of field formation as to how they have to find out where the sale takes place as per the evidences of the parties.

5. On the other hand the learned AR defended the impugned order and submitted that the appellants are not entitled to credit of service tax paid on GTA as the same does not fall within the definition of ‘input service’. He further submitted that earlier there were certain decisions in favour of the appellant as relied upon by the appellant wherein it has been held that in case of FOR sale the place of removal is the buyer’s premises where the sale takes place and the assessee is entitled to cenvat credit on GTA up to the buyer’s premises because the property in the goods does not pass at factory gate rather it takes place only at the buyer’s premises. He further submitted that the Hon’ble Supreme Court recently in the case of Commissioner of Central Excise Vs. Ultra Tech Cement reported in – 2018-TIOL-42-SC-CX has held that cenvat credit on Goods Transport Agency Service availed for transport of goods from the place of removal to buyer’s premises is not admissible to the assessee.

6.1. After considering the submission of both the parties and perusal of the material on record, I find that in the present case as per the purchase orders, the appellant is supposed to supply the goods at the buyer’s premises and the price of the goods include outward freight. Further I note that the various circular issued by the Board in the year 2007, 2014 clearly show that evidences of the parties is to be ascertained as to when the property in the goods passes along with the other documents i.e. purchase order, invoices etc. Further I note that the Hon’ble Supreme Court in the case of Ultra Tech Cement cited supra has held in para 11 to 13 as under:

“11. As can be seen from the reading of the aforesaid portion of the Circular, the issue was examined after keeping in mind judgments of CESTAT in Gujarat Ambuja Cement Ltd. and M/s. Ultratech Cement Ltd. Those judgments, obviously, dealt with unamended Rule 2(l) of Rules, 2004. The three conditions which were mentioned explain the ‘place of removal’ as defined under Section 4 of the Act, there is no quarrel upto this stage. However, the important aspect of the matter is that cenvat credit is permissible in respect of ‘input service’ and the Circular relates to the unamended regime. Therefore, it cannot be applied after amendment in the definition of ‘input service’ which brought about a total change. Now, the definition of ‘place of removal’ and the conditions which are to be satisfied have to be in the context of ‘upto’ the place of removal. It is this amendment which has made the entire difference. That aspect is not dealt with in the said Board’s circular, nor it could be.

12. Secondly, if such a circular is made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of Rules, 2004 and such a situation cannot be countenanced.

13. The upshot of the aforesaid discussion would be to hold that cenvat credit on goods transport agency service availed for transport of goods from place of removal to buyer’s premises was not admissible to the respondent. Accordingly, this appeal is allowed, judgment of the High Court is set aside and the Order-in-Original dated August 22, 2011 of the Assessing Officer is restored.”

6.2. Further I find that the subsequent Circular issued in 2018 does not help the appellant because once the Hon’ble Apex Court has declared the law, the Circular issued by the Board cannot override the judgment of the Apex Court. By following the ratios of the Apex Court and the decision in the case of Ultra Tech Cement, I am of the considered view that there is no infirmity in the impugned order demanding the cenvat credit wrongly availed by the appellant with regard to GTA.

6.3. As far as CENVAT credit on CHA service is concerned, I am of the considered view that the services rendered by CHA falls under the definition of input service and therefore the appellants are entitled to the CENVAT credit on CHA services. Further regarding the credit on insurance service of Rs.24,985/-, the learned counsel submitted that these services pertain to General insurance service of employees and marine insurance of goods which are not excluded by amendment in the definition of input service w.e.f. 01/04/2011. Further perusal of the amendment in the input service w.e.f. 01/04/2011, I find that General Health insurance is excluded from the definition of input service. Therefore, I hold that the appellant is not entitled to CENVAT credit on insurance service, as held by the Commissioner(Appeals) also.

6.4. As far as invoking the extended period of limitation and imposition of penalty is concerned, I find that there were divergent views during the period in dispute on the issue, therefore the allegation of suppression with intent to evade payment of duty is not sustainable. In these circumstances, the demand beyond the normal period of limitation is set aside as there was no intention to evade payment of duty. Therefore, the penalties imposed on the appellant are also not sustainable and hence set aside. The impugned order in respect of the demand for the normal period with interest is upheld and penalties are set aside.

7. Appeal is accordingly disposed of.

(Order was pronounced in Open Court on 27.02.2019)

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