M/S.C.L.Educate vs Commissioner Of Service Tax, Delhi

[Arising out of Order-in-Appeal No.153/CE/Appl./D-II/2011 dated 24.03.2011 passed by the Commissioner of Central Excise (Appeals), Delhi-II]

For approval and signature:

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s.C.L.Educate Appellant

Vs.

Commissioner of Service Tax, Delhi  Respondent

Present for the Appellant :Shri Rachit Jain, Advocate

Present for the Respondent:Smt. Kanu Verma Kumar, D.R.(Commissioner)

Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 15.10.2015

Final ORDER NO. 54119/2015

PER: S.K. MOHANTY

The brief facts of the case are that the appellant is engaged in providing the taxable services namely, Commercial Coaching and Training, Business Auxiliary service and Management or Business Consultancy service. The appellant also provides exempted service i.e. Advertisement Service through print media. The appellant avails cenvat credit of service tax paid on the input services used in the provision of both taxable as well as exempted services. As per Rule 6 (3) (c) of the Cenvat Credit Rules, 2004, the assessee is liable to pay 20 per cent of service tax towards the output service by utilizing the cenvat credit. In the present case, in compliance to the requirement of Rule 6 (3) (c) of the Rules, the appellant had discharged the service tax liability towards the provision of taxable service. However, the Department objected to payment of service tax on the ground that during particular month, excess cenvat credit, over and above the prescribed limit of 20% has been utilized by the appellant. Since the statutory provisions were not complied with, the Department initiated proceedings against the appellant. The adjudication order passed in this regard confirmed service tax demand of Rs.15,48,826/- alongwith interest and imposed penalty of Rs.31,00,000/- on the appellant. In appeal, the Commissioner (Appeals) vide the impugned order has confirmed the adjudged demand. Hence, the present appeal is before this Tribunal.

2. Shri Rachit Jain, the ld. Advocate appearing for the appellant submits that in compliance with the requirement of Rule 6 (3)(c) of the Cenvat Credit Rules 2004, the appellant had discharged the service tax liability. He further submits that there is no specific restriction/prohibition contained in the said rule that every month the amount of 20% should be paid from the cenvat account. Thus, according to the ld. Advocate, in absence of any specific restrictions contained in the rules, 20% amount paid from the Cenvat account during the financial year meets the requirement of the said rules and payment of said amount on monthly basis cannot be insisted by the Department. To support his said stand, the ld. Advocate has relied on the decisions of this Tribunal in the case of Vijayanand Roadlines Limited vs. CCE reported in 2007 (7) STR 219 (Tri. Bang.) and Idea Cellular Limited vs. CCE reported in 2009 (16) STR 712 (Tri. Del.).

3. Per contra, Mrs. Kanu Verma Kumar, the ld. D.R. appearing for the Revenue reiterates the findings recorded in the impugned order.

4. I have heard the ld. Counsel for both sides and examined the case records.

5. Obligation of the service provider, providing taxable as well as exempted service is contained in Rule 6 of the Cenvat Credit Rules, 2004. Sub-rule (1) of the said rule restricts taking of cenvat credit, in the eventuality, where the service provider exclusively provides the exempted service. Where the service provider provides for both taxable as well as exempted service, sub-rule (2) of the said rules provides for maintenance of separate accounts. In the case, where no separate accounts have been maintained, clause (c) of sub rule (3) mandates that the provider of output service shall utilize credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on output service. It is not in dispute that the appellant had not paid 20% amount from its cenvat account towards the taxable output services. The case of the Department is that on monthly basis, this 20% calculation has to be done and the same should be paid from the cenvat account; and if any amount is paid over and above 20% during the particular month/period, the same is not in conformity with the statutory provisions, and thus, the assessee is required to pay the cenvat credit. To the said specific allegation of the Department, I am of the view that there are no specific restrictions or prohibitions contained in Rule 6 of the Cenvat Rules, providing for reversal of cenvat credit on monthly/periodic basis. Rather, as per the statutory mandates, the amount of 20% has to be paid during a particular financial year, irrespective of the fact that in some months the amount paid is more and in other months, the payment is less. Payment in this manner will not be treated as irregular.

6. In this context, I find reliance from the decision cited by the ld. Advocate in the case of Idea Cellular (supra). The relevant paragraph of said decision is extracted herein below:-

4.2?The Appellant have pleaded that if the 20% ceiling on utilization is applied only to credit of services other than the services covered by Rule 6(5) and credit of inputs goods other than capital goods, utilization of credit for payment of service tax, in excess of the ceiling has taken place only in January 2005, March 2005 and May 2005 and this excess utilized credit cannot be demanded as Rule 6(3)(c) is silent with regard to the period during which the 20% credit shall be utilized and in this regard reliance has been placed on Tribunals judgment in case of Vijayanand Roadlines Ltd. v. CCE, Belgaum reported in 2007 (7) S.T.R. 219 (Tri.-Bang.), wherein the Tribunal with reference to Rule 3(5) of the Service Tax Credit Rules, 2002, which is pari materia with Rule 6(3)(c) of the Cenvat Credit Rules, 2004, has held that the utilization is not restricted to monthly or quarterly basis and that it can be utilized at any time. We agree with this plea. In the case of Vijayanand Roadlines Ltd. (supra) the Appellant during June 2003 to December 2003 period, as against service tax credit utilization quota of 35% of the total service tax payable, had paid entire service tax through PLA and they utilized the unutilized quota of payment through duty credit for January 2003 - December 2003 period, during January 2004 - March 2004 period and the Tribunal held that there is no time frame fixed in Rule 3(5) of the service tax credit Rules, 2002 for utilization of the credit to the extent of 35% of the tax liability. Applying the ratio of the Tribunals judgment in M/s. Vijayanand Roadlines Ltd. case, to this case, if during certain months, the credit utilization for payment of service tax was less than the 20% ceiling specified in Rule 6(3)(c) of Cenvat Credit Rules, 2002, the unutilized credit of those months has to be adjusted against utilization in excess of the 20% ceiling, in other months.

6. In view of above, I am of the opinion that payment of amount by the appellant is in conformity with the provisions of Rule 6(3)(c) of the Cenvat Credit Rules, 2004. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellant.

(Dictated and pronounced in the open Court)

(S.K. MOHANTY)

MEMBER (JUDICIAL)

Anita

??

??

??

??

0 2