Service Tax Appeal No. 131 of 2012
(Arising out of OIO-STC/51/COMMR/AHD/2011 dated- 28/11/2011 passed by Commissioner
of Service Tax-SERVICE TAX – AHMEDABAD)
Stelmec Ltd
VERSUS
C.S.T.-Service Tax – Ahmedabad
Appearance:
Shri H.G Dharmadhikari & Shri D. A Bhalerao, Advocates appeared for the
Appellant
Shri Vinod Lukose, Superintendent (AR) for the Respondent
CORAM:
HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A / 10043 /2023
DATE OF HEARING: 15.09.2022
DATE OF DECISION:12.01.2023
RAJU
This appeal has been filed by M/s Stelmec against demand of service
tax and denial of cenvat credit.
Learned counsel pointed out that following demand has been
confirmed against the appellant.
Learned counsel pointed out that the demand of service tax on GTA
services is raised on the basis of the figures reported in the ST-3 return and
figures appearing in the balance sheet/P&L Account of the appellant. Learned
counsel argued that the demand is based on the assumption and
presumptions. He also pointed out that they have submitted reconciliation in
the shape of a certificate of chartered accountant which has been summarily
rejected. Learned counsel also pointed out that demand has also been made
in respect of amount reflected in the Balance Sheet for which no payment
had been made at the material time. He pointed out that the service tax
liability arises only at the time of receipt of payment. He further pointed out
that in para 8.1.4 the adjudicating authority has admitted that part of the
liability would arise after 31.03.2008 but has confirmed the demand stating
that no evidence of payment of service tax for the period after 31.03.2008
has been made by the appellant. Learned counsel also pointed out that the
issue is revenue neutral as the appellant would be entitled to cenvat credit
of the duty service tax paid.
3.1 Learned AR relies on the impugned order. He pointed out that no
evidence of payment of service tax on GTA service has been produced by
the appellant.
3.2 On the issue of the demand of service tax on the GTA service, it is
noticed that the demand has been made on the basis of difference between
the figures appearing in ST-3 Return and balance sheet/P&L account. From
the order it is noticed that the adjudicating authority has rejected the CA
Certificate for the reason that the supporting document has not been given
by the appellant. The purpose of getting the service from the CA is that a
summary of the findings can be obtained. In case the adjudicating
authority had any doubt regarding the CA certificate he could have asked for
the supporting document or any other explanation. We find that no such
documents have been sought by the adjudicating authority. In these
circumstances summary rejection of chartered accountant certificate is not
right. Learned counsel argued that the situation is revenue neutral as the
appellant would have been entitled to cenvat credit on the tax paid on the
GTA services. It is not entirely correct argument as part of the GTA services
could have been availed for the purpose of clearance of finished goods and
the admissibility of cenvat credit on such service tax depends on many
factors. In this circumstance the argument of revenue neutrality does not
survive.
3.3 In view of the above the order confirming demand on service tax on
GTA services is set aside and the matter is remanded back to the Original
Adjudicating Authority to decide a fresh. The doubt raised on the CA
certificate may be highlighted and if the necessary supporting need
document can be called.
Learned counsel pointed out that the demand of service tax has been
made under the category of Business Auxiliary service on the commission
received by the appellant. Learned counsel pointed out that they have
discharged the necessary service tax liability on the said commission
and the detailed reconciliation of the said payment was given to the
auditors vide their letter dated 26.03.2009. Learned counsel pointed out
that the amount of 1, 11, 32,454/- was an amount receivable in their
account under the head of commission as on 01.04.2004 for the
services provided prior to that date. It has been argued at that material time
when the service tax was provided the same was exempt under Notification
No. 13/2003–ST dated 20.06.2003 Learned counsel stated that they have
submitted a certificate dated 10.09.2011 from Chartered Accountant to
support their contention that the amount of which demand has been raised
was in respect of the services provided prior to 01.04.2004. Learned counsel
pointed out that the exemption under Notification No. 13/03- ST dated
20.06.2003 has been denied by the Adjudicating Authority wrongly. He
relied on the following decisions:-
CS T vs. Somani Exports – 2009 (13) STR 562 (Tri. Ahmd)
Brindoo Sales Ltd vs. CST – 2015 (40) STR 986 (Tri. Del)
4.1 Learned AR pointed out that the impugned order in para 8.9 clearly
states that suitable deduction for the exempted service has already been
given and already these services not covered has been confirmed. He argued
that the amount of Rs 1,11,32,454/- is the amount of commission received
in respect of services and not in respect of goods. He argued that the
benefit of exemption on services provided in respect of goods has already
been extended in Annexure B to the show cause notice. Learned AR
also submitted that the services provided by them is not merely in respect
of sales of goods but attending to the customers complaints also.
4.2 On the second issue regarding demand of service tax on the sales
commission and denial of Notification 13/03 –ST dated 20.06.2003 it is
noticed that the benefit of exemption notification has been extended in
the show cause notice itself. The perusal of annexure B of the show cause
notice shows that sales commission for the period 01.04.2004 to
09.07.2004 and the opening balance of debtors under the head of sale
commission has been excluded from the gross value for the purpose of
demand. Annexure B to the Show cause notice is reproduced below:
4.3 In this background the defence of the appellant that the benefit of
exemption notification on the sales commission has not been extended is
incorrect. However, we also find that the demand has been made without
examining the nature of commission received. The show cause notice
does not mention the nature of the commission received by the appellant.
The SCN merely picks up the head of commission in the balance sheet and
compares it with the ST- 3 return. The Order-In –Original also makes the
vague reference to commission received in respect of repairs and attending
to customers complaints. It is not understood how the services would
become taxable under the business auxiliary service. The appellant has
also not produced any documents to show the exact nature of the services
provided by them.
4.4 In this circumstances we left with no alternative but to set aside the
order and remand the matter back to the Original Adjudicating Authority
to decide a fresh after examining the actual contract under which such
payment has been received and specifically examine the nature of services
provided an its taxability. The appeal is allowed by way of remand.
The third issue raised relates to denial of cenvat credit on account of
certain defects in the documents on the strength of which the credit was
taken. Learned counsel pointed out that the SCN seeks to recover the
Cenvat credit of Rs 45,97,501/- taken by them during the period 2006-
2007 to 2007-2008 on the strength of debit notes issued by M/s Gupta
Metallics and Power Ltd and M/s Dhariwal & Doshi Industries Pvt Ltd. It
has been alleged in the SCN that when the said debit notes were issued
neither M/s Gupta Metallics and Power Ltd nor M/s Dhariwal & Doshi
Industries Pvt Ltd were registered with service tax department. It was
also alleged in the SCN that M/s Gupta Metallics Power Ltd have taken
the service tax registration on 01.06.2007 and M/s Dhariwal & Doshi
Industries Pvt Ltd have taken registration on 05.07.2006 i.e. subsequent to
the date of issue of debit notes.
5.1 Learned counsel pointed out that at the time of issue of debit notes
the service provider namely M/s Gupta Metallics and Power Ltd and M/s
Dhariwal & Doshi Industries Pvt Ltd had mentioned their service tax
registration obtain for GTA service. However, while at the time of
payment of service tax to the government treasury the registration
certificate was amended by the said service provider. He pointed out that
the said issue has been examined by the Tribunal in the following cases:-
Sanghi Industries Ltd Vs. CCE – 2009 (14) STR 462 (Tri. Ahmd)
Imagination Technologies India P. Ltd Vs. CCE – 2011 (23) STR 661
(Tri. Mum)
Secure Meters Ltd Vs. CCE – 2010 (18) STR 490 (Tri.- Del)
5.2 Learned AR relies on the impugned order. He also submitted a copy of
letter dated 21.01.2013 which relates to the verification conducted by
revenue in respect of such debit notes. The said report indicates that no
debit notes were issued by M/s Gupta Metallics and Power Ltd and M/s
Dhariwal & Doshi Industries Pvt Ltd during 2006 -2007and the same were
fake. However, 4 debit note issued by M/s Dhariwal & Doshi Industries Pvt
Ltd in the year 2007 -2008 were found to be genuine. Similarly debit notes
issued by M/s Gupta were found to be genuine. The revenue has placed
on record letter dated 21.01.2013 of Commissioner of Service Tax
Ahmedabad. The letter is reproduced below:-
“Please refer to your office letter F.No. ST/131/2012 dated
03.12.2012 on the above subject.
The total Cenvat credit Involved is Rs. 45,97,501/- out of which Rs.
33,07,708/- pertains to the Division –I of Central Excise Vadodara –
- The Dy. Commissioner, Vadodara –I has verified the relevant
Cenvat Credit Debit /notes and has found that the debit notes issued
during the year 2006 -07 involving service tax of Rs. 22,99,372/- were
not issued by M/s. Dhariwal & Doshi Industries Pvt Ltd and hence,
appear to be fake. Since the debit notes are fake with no entres in
the registers at their end, there is no question of issuing SCN.
Four debit notes issued by M/s. Dhariwal & Doshi Industries Pvt Ltd
in the year 2007 -2008 are involved in this case. The deputy
Commissioner, Service Tax, Division – III, Ahmedabad has verified
these four debit notes with the documents supplied by the Deputy
Commissioner, Vadodara –I and it is reported that service tax has
been paid in respect of these 4 debit notes viz., Debit Note No.
GEB/DR/02 dt. 24.08.2005, GEB/DR/03 dt. 31.12.2005, GEB/DR/01
- 5.5.2006 and GEB/DR/02 dt. 16.5.2006 involving total service tax
of Rs. 10,08,336/-.
Another Rs. 12,89,793/- pertains to Central Excise, Division
Chandrapur. The Dy Commissioner has verified an amount of Rs.
14,18,141/- ( including above Rs. 12,89,793/-) as admissible and
can be allowed. AC/DC report No. CNo. IV (11)
168/ST/Misc/Infor/2012, dtd 20.12.12 of DC Chandrapur along with
its enclosures is enclosed with this letter for perusal please.”
5.3 It is noticed that this report has been obtained after adjudication of
the case by the adjudicating authority and the same was not available at
the time of adjudication. Since this report was not available with the
adjudicating authority the decision could not have been taken after
examining complete facts. Consequently the demand on this issue is also
set aside and the matter is remanded back to the original Adjudicating
Authority.
In view of the above the demand is set aside and appeals are allowed
by way of remand.
(Pronounced in the open court on 12.01.2023
)
RAMESH NAIR
MEMBER (JUDICIAL)
RAJU
MEMBER (TECHNICAL)
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