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ST – Impugned order of Commissioner(A) relying upon rule 9(bb) of CCR for denying credit is contrary to the SCN as well as the O-I-O – not sustainable: CESTAT

2019-TIOL-2282-CESTAT-BANG

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

Appeal No. ST/21975/2018-SM

Arising out of Order-in-Appeal No. MLR-EXCUS-000-APP-MSC-135-2018-19, Dated: 20.09.2018
Passed by Commissioner of Central Tax, BELGAUM (APPEALS)

Date of Hearing: 27.2.2019
Date of Decision: 27.2.2019

M/s MAISTRY’S JAYAVARMA CENTRE
MALLIKATTA MANGALORE-575001, KARNATAKA

Vs

COMMISSIONER OF CENTRAL EXCISE AND CENTRAL TAX
MANGALORE COMMISSIONERATE 7TH FLOOR, TRADE CENTER
BUNTS HOSTEL ROAD MANGALORE – 575003, KARNATAKA

Appellant Rep by: Mr Dayananda, CA
Respondent Rep by: Mr Gopa Kumar, AR

CORAM: S S Garg, Member (J)

Service Tax – Assessee is registered under category of services, namely, Construction Services of other than Residential Complexes, including Commercial/Industrial or Civil Structures and Works Contract Services – During audit, it was noticed that the assessee had taken CENVAT credit on the strength of invoices issued by service providers who are not registered with Department – Therefore, a SCN was issued demanding inadmissible CENVAT credit along with interest and imposition of penalty.

Held: The impugned order is contrary to the SCN as well as the O-I-O because in the O-I-O, the issue of Rule 9(bb) was set aside whereas the Commissioner (A) has relied upon Rule 9(bb) and denied the credit which is beyond the SCN – Further, the provision of supplementary invoice is not applicable in the present case because in the present case, only invoices were issued and not the supplementary invoices – In the case of Kyocera Wireless (India) Pvt. Ltd. – 2016-TIOL-2596-HC-KAR-ST it was held that registration with the Department not a pre-requisite for claiming credit – The impugned order is not sustainable in law: CESTAT

Appeal allowed

Case laws cited:

Commr. of ST, Chennai Vs. Verizon Date Services (I) (P) Ltd., 2015 (39) STR 522 (Tri. Chennai)… Para 4

Viswanathan Constructions (P) Ltd. Vs. CCE, 2016 (45) STR (Tri. Chennai)… Para 4.1

mPortal India Wireless Solutions Pvt. Ltd. Vs. CST, Bangalore – 2011-TIOL-928-HC-KAR-ST… Para 6

Commissioner of Service Tax, Bangalore Vs. Kyocera Wireless (India) Pvt. Ltd – 2016-TIOL-2596-HC-KAR-ST… Para 6.1

FINAL ORDER NO. 20217/2019

Per: S S Garg:

The present appeal is directed against the impugned order dated 20.09.2018 passed by the Commissioner (A) whereby the Commissioner (A) has rejected the appeal of the appellant.

2. Briefly the facts of the present case are that the appellants are registered under the category of services, namely, Construction Services of other than Residential Complexes, including Commercial/Industrial or Civil Structures and Works Contract Services. During the course of Audit, it was noticed that the appellant had taken CENVAT credit on the strength of invoices issued by service providers who are not registered with Department. Therefore, a SCN dated 29.06.2017 was issued demanding inadmissible CENVAT credit of Rs.6,37,540/- along with interest and imposition of penalty. The Assistant Commissioner of Central Excise vide Order-in-Original dated 08.12.2017 confirmed the demand of CENVAT credit of Rs.1,77,347/- along with interest and imposed penalty of Rs.88,674/- under Rule 15 of CCR, 2004 read with Section 78 of the Finance Act, 1994. Aggrieved by the said order, the appellant filed appeal before the Commissioner (A) who rejected the same. Hence, this appeal.

3. Heard both sides and perused the records.

4. Ld. Consultant for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly considering the facts and the law. He further submitted that one Mr. Karunakara and Mr. Dombaiah raised invoice and charged Service Tax pertaining to the previous bills and were raised before obtaining the registration. He further submitted that few suppliers have supplied based on the investigation commenced and based on provisions of Rule 9(1)(bb) of CCR; such supplementary invoices were not proper documents for the purpose of availing the credit. He further submitted that as per Rule 4 of ST Rules, application for registration shall be made within 30 days of the provision of service liable to Service Tax. He then referred to Rule 4 and Sub-Rule 5 of Rule 4 and submitted that there is a threshold time limit of 30 days to file the application and once the application is filed, there is no bar in issuing the tax invoice from the date of application. Further, there is no provision in the application to mention the date from which the registration is required. Once the application is filed, the Return can be filed even for the period prior to registration. He also submitted that these two suppliers had filed application at least more than a month prior to the date of registration but the Department issued a certificate much after the date of application. Further, as per ST Rules, ST Returns should be filed on half early basis. In the present case, both the ST registrations are granted in December 2013 but the ST Return has been filed for the half year, October 2013 to March 2014 and the service provider had paid Service Tax on the invoices raised before the date of registration and hence credit should be allowed. For this submission, he relied upon the decision in the case of Commr. of ST, Chennai Vs. Verizon Date Services (I) (P) Ltd., 2015 (39) STR 522 (Tri. Chennai) wherein the Tribunal has held that by not getting registered a person does not cease to become a provider of taxable service if he is actually providing such service. Even if a service provider is not registered, there will be tax liability on him if he is providing taxable service. The benefit of CENVAT credit also has to be seen accordingly. The Tribunal also noted that Rule 4 of Service Tax Rules is applicable to a person who is liable to pay Service Tax. If there is an offence of not complying with Rule 4 of Service Tax Rules, that matter has to be adjudicated as per the provisions of the Act and the Rules. Denial of CENVAT credit may not be the proper course in such situation.

4.1. He also relied upon the decision in the case of Viswanathan Constructions (P) Ltd. Vs. CCE, 2016 (45) STR (Tri. Chennai), Revenue contended that the parties were not registered during the material period. But it was held by the Chennai Bench that Revenue’s contention that the parties were not registered at the material period is not the valid reason. And where the input services have been utilized by the appellant in providing output service and in absence of any contrary finding, there cannot be denial of CENVAT credit of the Service Tax paid on input service. Registration is mere technical formality to bring the taxpayer to the fold of law without curtailment of the right of the taxpayer to be subject to other provisions of law which grants benefit.

4.2. He further submitted that in the Order-in-Original, the issue of Rule 9(bb) was set aside and upheld the disallowance of credit on the ground that those two suppliers issued the invoice prior to their registration but the First Appellate Authority dismissed the appeal on the ground that supplementary invoices issued under Rule 9(bb) are not the proper document to avail the credit. The Order-in-Appeal is beyond the contention in the SCN as well as Order-in-Original and hence liable to be set aside.

5. On the other hand, the Ld. AR defended the impugned order.

6. After considering the submissions of both the parties and perusal of the material on record, I find that the impugned order is contrary to the SCN as well as the Order-in-Original because in the Order-in-Original, the issue of Rule 9(bb) was set aside whereas the Commissioner (A) has relied upon Rule 9(bb) and denied the credit which is beyond the SCN. Further, the provision of supplementary invoice is not applicable in the present case because in the present case, only invoices were issued and not the supplementary invoices. Further, I find that in view of the decision of the Karnataka High Court in the case of mPortal India Wireless Solutions Pvt. Ltd. Vs. CST, Bangalore, 2012 (27) STR 134 (Kar.) = 2011-TIOL-928-HC-KAR-ST wherein in it was held that-

“7. Insofar as requirement of registration with the department as a condition precedent for claiming CENVAT credit is concerned, learned counsel appearing for both parties was unable to point out any provision in the CENVAT Credit Rules which impose such restriction. In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. Therefore, said finding recorded by the Tribunal as well as by the lower authorities cannot be sustained. Accordingly, it is set aside.”

6.1. Further, I find that in the case of Commissioner of Service Tax, Bangalore Vs. Kyocera Wireless (India) Pvt. Ltd., 2016 (43) STR 542 (kar.) = 2016-TIOL-2596-HC-KAR-ST it was held that registration with the Department not a pre-requisite for claiming credit. Further, I find that the ratio of the above said decisions are applicable in the present case and by following the ratio of the above said decisions, I am of the view that the impugned order is not sustainable in law and therefore the same is set aside by allowing the appeal of the appellant. Hence, the appeal is allowed.

(Operative portion of the Order was pronounced in Open Court on 27.02.2019)

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