Customs, Excise & Service Tax

 Appellate Tribunal West Zonal

Bench At Ahmedabad

REGIONAL BENCH- COURT NO.3

Excise Appeal No.10783 of 2022

(Arising out of OIA-CCESA-SRT-APPEAL-PV-060-2022-23 dated 20/07/2022 passed by Commissioner of Central Excise, Customs and Service Tax-SURAT-I)

 

USV PVT LTD

VERSUS

C.C.E. & S.T.-DAMAN

 

APPEARANCE:

Shri Hasit Dave, Advocate for the Appellant

Shri Rajesh Agarwal, Superintendent (AR) for the Respondent

 

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L. MAHAR

 

Final Order No. A/ 11082 /2023

 

 

 

 

RAMESH NAIR

DATE OF HEARING: 20.04.2023 DATE OF DECISION: 02.05.2023

 

 

The Brief facts of the case are that the appellant has received services such as Man power service, GTA Service, Scientific and Technical service and Management Consultancy service and the bills for such services were raised in the name of the appellant however, the service tax on the said service under reverse charge mechanism was paid by the appellant’s head office under their centralized registration number under the cover of GAR-7 Challan. The appellant have availed the cenvat credit on such service tax paid by head office on the strength of GAR-7 challan along with the service bills raised by the service provider.

 

2. The case of the department is that the GAR-7 challan is not the prescribed challan for availing the cenvat credit in terms of Rule 7 of Cenvat Credit Rules, 2004. It is also a case of the department that the head office should have obtained ISD registration and issued ISD invoice which is only a validservice tax payment document for availing the cenvat credit, on this

 

basis the cenvat credit was denied therefore, the present appeal filed by the appellant.

 

3. Shri Hasit Dave, learned counsel appearing on behalf of the appellant submits that since the appellant alone received the services and no part of the services was used by their other unit therefore, there was no need ofISD invoice from their head office for availing the cenvat credit. Moreover, the GAR-7 challan through which the service tax was paid under reverse charge mechanism is a valid service tax payment document on the basis of which the cenvat credit can be availed therefore, there is no violation on the part of the appellant. He further submits the service for which the cenvat credit was availed by the appellant unit was received and used by the appellant’s unit only and the payment of service tax is also not under dispute therefore, there is no reason to deny the cenvat credit.

 

• He further submits that show cause notice did not contain specific allegation that the service tax was to be paid through ISD and not under centralized registration hence, new ground raised first time in Order-In- Appeal therefore, the same is not sustainable being travelled beyond the scope of show cause notice. He also submits that there is absolutely neither any allegation in the show cause notice nor in the impugned order that the appellant has availed wrong cenvat credit due to fraud, willful mis-statement or suppression of fact with intent to evade payment of duty. Despitethis, the Commissioner (Appeals) has confirmed the demand beyond the normal period of limitation which is perverse and unsustainable in law.

 

• He further submits that in the Order-In-Original, the adjudicating authority had allowed the cenvat credit against which the revenue filed appeal before the Commissioner (Appeals) only on merit but no ground was raised on limitation however, the adjudicating authority has adjudicated the matter not only on merit but also on limitation in favour of the appellant. In this position, there is no appeal on limitation and the same attained finalityin the Order-In-Original. The learned Commissioner (Appeals) also has not decided the issue of limitation since the same was not raised before him accordingly, the demand for the extended period will in any case not sustain as the same has attained finality in terms of the Order-In-Original. In support of his submission, he placed reliance on the following judgments:-

 

• MAFATLAL INDUSTRIES LTD V/S CCE & ST AHMEDABAD- 2020 (43) GSTL 562 (TRI AHMEDABAD) 2) CCE V/S DOSHION LTD (GUJ HC) – 2016 (41) STR 884 (GUJ)
• HINDUSTAN ZINC LTD V/S CCE UDAIPUR -2019 (370) ELT 1582 (TRI. DEL)

 

• CGST & CCE V/S ADANI GAS PVT LTD REP IN 2017 (356) ELT 541 (GUJ)

 

• OERLIKON BALZERS COATING I PVT LTD V/S CCE PUNE II -2017 (4) GSTL 62 (TRI MUM) CONFIRMED BY MUM HC IN 2019 (366) ELT 624(BOM)

 

• RAJASTHAN PATRIKA PVT LTD V/S CCE JAIPUR -2020 (34) GSTL 226 (TRI DEL)

 

• PIRAMAL GLASS PVT LTD V/S CCE & ST SURAT I -2021 (55) GSTL 22 (TRI AHMD)

 

• CCE HYDERABAD I V/S FENOPLAST LTD -2017 (5) GSTL 302 (TRI HYDERABAD)

 

• VAMSHDHARA PAPER MILLS LTD V/S CCE & GSTCHENNAI – 2020 (33) GSTL 218 (TRI CHENNAI)

 

• ABM KNOWLEDGE LTD V/S CC (APPEALS) MUM -2019 (27) GSTL 694 (TRI MUM)

 

 

 

4. Shri Rajesh Agarwal, learned Superintendent (AR) reiterates the finding of the impugned order.

 

5. We have carefully considered the submissions made by both the sides and perused the record. We find that in the present case, the main reason for denial of cenvat credit of service tax under reverse charge mechanism is that GAR-7 challan on the basis of which the credit was availed is not valid document and also on the ground that the head office should have issued ISD invoice in favour of the appellant however, this particular allegation was not specifically made in the show cause notice therefore, any order passed by the Commissioner (Appeals) on this issue is not tenable.

 

• We further find that as per the undisputed fact of the case the service was received by the appellant, the invoices are in favour of the appellant. It is only the head office who paid the service tax under its centralized registrationunder GAR-7  In this position, when the service was

 

received by the appellant and service tax was undisputedly paid and particularly when the invoices are in favour of the appellant the credit cannot be denied. It is also not the case of the department that the part of the service was used by their other unit therefore, we do not see any reason why the cenvat credit should not be allowed to the appellant.

 

• As regard the availment of credit on the basis of GAR-7 challan, the challan is also a prescribed document under Rule 7 of Cenvat Credit Rules, 2004. Moreover, in case of payment of service tax under reverse charge mechanism the assessee pays the service tax on their own under GAR-7 challan therefore, the only document which is available for taking credit in respect of service tax under reverse charge mechanism is the GAR-7 challan only therefore, if the contention of the revenue is accepted then in every case of payment of service tax under Reverse Charge Mechanism, the assessee cannot avail the Cenvat credit which is not the provision under the

 

• As regard the contention of the revenue that the head office should have issued the ISD invoice, though the same is not tenable on the ground that there is no specific allegation to this effect in the show cause notice. However, we find that since the entire service was received by the appellant’s unit and their invoice of the same was also issued by the service provider in favour of the appellant’s unit the credit cannot be denied only on the basis that the Head Office has not issued the ISD invoice. The significance of ISD invoice is for the purpose that where the input service credit has to be distributed to more than one unit, the input service distributed invoice is required. However, in the present case, since entire service covered under the invoice of service provider was received and used bythe appellant, there is no case of distribution of input service credit to any other unit except the appellant unit. Only for this reason also even though the ISD invoice was not issued, the credit cannot be denied. This issue has been considered in the following judgments:-

 

• Inthe case of Mafatlal Industries Limited (supra), the Tribunal held as under:-

“14. Demand of Rs. 39,60,634/- was confirmed on the ground that same was wrongly availed on ISD invoices issued by the appellant’s Ahmedabad and Mumbai branch for services availed prior to the date of ISD registration was granted for the said unit. We find that Hon’ble High Court of Karnataka in the case of mPortal (I) Wireless Solutions (P)

 

Limited v. CST, Bangalore – 2012 (27) S.T.R. 134 (Kar.) has considered the issue of ISD invoices issued prior to registration and held that for this reason Cenvat credit cannot be denied. The relevant portion of the order is reproduced as under :-

Insofar as requirement of registration with the department as a “7. condition precedent for claiming Cenvat credit is concerned, Learned Counsel appearing for both parties were 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.

That does not mean that the assessee is entitled to refund as 8. claimed by him consequent to setting aside these orders. As is clear from the order of the original authority in the show cause notice, they have categorically called upon the assessee to furnish the particulars of the taxes paid on input services. They called upon the assessee to produce the invoices, bills, receipts to substantiate their claim for their verification. The assessee would be entitled to the refund of the Cenvat credit only on his proof that he has paid input Service tax.

In that view of the matter, the matter is now remanded back to the adjudicating authority to decide the correctness of the claim made by the petitioner. Liberty is reserved to the assessee to produce such documents which are in his possession to substantiate his claim. On production of such documents, the assessing authority shall process the application for refund in accordance with law and expeditiously.”

In view of the above judgment, it has been settled that even for ISD invoices issued for the distribution of input service credit prior to the registration, the same cannot be denied. Accordingly, demand of Rs. 39,60,634/- is set aside.”

 

 

• The Hon’ble Gujarat High Court, in the case of CCE vs. Dashion Limited (Supra) passed the following judgment:-

“7. The second objection of the Revenue as noted was with respect of non-registration of the unit as input service distributor. It is true that the Government had framed Rules of 2005 for registration of input service distributors, who would have to make application to the jurisdictional Superintendent of Central Excise in terms of Rule 3 thereof. Sub-rule (2) of Rule 3 further required any provider of taxable service whose aggregate value of taxable service exceeds certain limit to make an application for registration within the time prescribed. However, there is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons disentitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. It was in this background that the Tribunal viewed the requirement as curable. Particularly when it was found that full records were maintained and the irregularity, if at all, was procedural and when it was further found that the records were available for the Revenue to verify the correctness, the Tribunal, in our opinion, rightly did not disentitle the assessee from the entire Cenvat credit availed for payment of duty. Question No. 1 therefore shall have to be answered in favour of the respondent and against the assessee.

8. Coming to the question of penalty, right from the show cause notice stage till the final disposal of the show cause notice proceedings, we find little evidence to support the allegations of wilful misstatement, suppression, fraud or collusion on the part of the

 

assessee. In fact, perusal of the show cause notice would show that the entire basis of the Revenue was wrongfully availment of the credit. Mere wrongfully availment without element of mens rea and that too for the purpose of evading payment of duty would not be sufficient to impose penalty. The adjudicating authority, without any basis or evidence, merely mechanically recorded that the assessee had, by reason of wilful misstatement, suppression of fact or in contravention of the provisions of the Rules, evaded payment of central excise duty. He was not even sure whether this was a case of wilful misstatement or suppression of fact or contravention of provisions of the Rules.”

 

 

• In the case of CCE & ST, Hyderabad vs. Fenoplast Limited (supra), the Tribunal passed the following order:-

“5. I have heard the submissions made by both sides. The main issue is that the appellants did not obtain ISD registration before distribution of the credit by the Head office. Undisputedly, the Head office had Centralised Registration for payment of service tax. Later, from 11-3-2005 ISD registration was introduced. Therefore, it can be seen that the ISD registration is only to facilitate the distribution of credit. Failure to obtain ISD registration can be only a procedural lapse which has been rectified by the appellant on receiving the show cause notice. In my view, the Commissioner (Appeals) has rightly considered the same as only a procedural lapse and condoned the same for the reason that there is no doubt that the respondent has paid the service tax on input services which have been distributed by the Head office. The second ground put forward in the appeal is that the documents on which credit was distributed did not show the category of services. The ld. Counsel for respondent has explained that the said documents noted by the Department is an incomplete document. The entire document is produced before the Tribunal by the ld. Counsel for respondent wherein, it is shown that the respondents have furnished details of the category of input services and the credit availed by them mentioning the category of services also. Therefore, I do not find any infirmity in the order passed by the Commissioner (Appeals). The appeal is dismissed.”

 

 

 

• Without prejudice to the above finding on merit, we find that the adjudicating authority in the adjudication order dropped the demand notonly on merit but also on limitation. From the perusal of the revenue’s appeal before the Commissioner (Appeals) it is found that the revenue has not uttered a word as regard the dropping of demand on time bar therefore, the revenue has not made out any ground on limitation. Moreover, the learned Commissioner (Appeals) has also not given any finding on limitation which is obvious that no ground was made in the appeal by the revenue he was not supposed to deal with  In this position, the dropping of demand on limitation by the adjudicating authority has attained finality therefore, even if it is assumed that the demand on merit is tenable, the same is not maintainable on limitation. Accordingly, the demand is not sustainable on the ground of time bar also.

 

6. Asper our above discussion and findings, the impugned order is set aside. Appeal is allowed.

 

(Pronounced in the open court on 02.05.2023)

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

(C.L. MAHAR) MEMBER (TECHNICAL)