M/S Intervalve (I) Ltd vs Cce, Pune-Iii

IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. IV

APPEAL NO. ST/85483/14 (Arising out of Order-in-Appeal No. PUN-EXCUS-003-APP-315-13-14 dated 25.11.2013 passed by the Commissioner of Central Excise (Appeals) Pune.)

For approval and signature: Honble Shri P.S. Pruthi, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No 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 : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy : Seen of the order?

4. Whether order is to be circulated to the Departmental : Yes authorities? =====================================================

M/s Intervalve (I) Ltd.

: Appellant Versus

CCE, Pune-III : Respondent

Appearance Shri C.J. Anto, Advocate : For Appellant Shri B.K. Iyer, Supdt. (A.R.) : For Respondent

CORAM: HONBLE SHRI P.S. PRUTHI, MEMBER (TECHNICAL) Date of Hearing : 22.04.2015 Date of Decision: 22.04.2015

ORDER NO....................................................... Per: P.S. Pruthi:

The appellant is in appeal against impugned order of Commissioner (Appeals) confirming demand of interest of Rs. 3,91,054/-.

2. During the period 10.05.2008 to 31.03.2011 the appellant provided Business Auxiliary Service to their associate enterprises M/s EL-O-Matic (India) Pvt. Ltd. The appellant paid Service Tax of Rs. 1,13,57,364/- on receipt of after the receipt the commission amount for providing the services.

2.1 The issue in the present case is what is the relevant date prescribed for payment of Service Tax when service is provided to an associate enterprise. The Order-in-Appeal refers to Section 67(4) of the Finance Act which deals with valuation of services. It was amended on 10.05.2008 to redefine gross amount charged by inclusion of clause (c) to Section 67(4) of the Finance Act, 1994. Clause (c) read as:-

gross amount charged includes ...............................................

book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense Account or by any other name, in the books of account of a person liable to pay Service Tax, where the transaction of taxable service is with any associate enterprise.

Similarly, an explanation was added under third proviso to Rule 6(1) of the STR by Notification No. 19/2008-ST dated 10.05.2008, which reads as under:-

For Removal of doubts, it is hereby declared that where the transaction of taxable service is with any associate enterprises, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called suspense account or by any other name, in the books of account of a person liable to pay Service Tax.

Revenue is of the view that the explanation above provides for shifting of the date of payment of Service Tax from date of receipt of payment to the date on which amount is entered in the Books of Account of the person liable to pay Service Tax, in the case of Associate Enterprises. With this view taken regarding the date of payment of Service Tax, it was held that the appellant had not paid Service Tax on the day the amount is entered in the Books of Account but paid it after receiving the payment on issue of the invoices. Accordingly, there was delay in the payment and interest of Rs. 3,91,054/- was ordered to be paid under Section 75 and penalty of Rs. 10,000/- was also imposed. Commissioner (Appeals) upheld the order of the adjudicating authority.

3. Heard both sides.

4. The learned advocate appearing for the appellant stated that proper bills were raised on the associate enterprises, the money was received through banking channels, there was no book adjustment between them and the associate enterprises and their transaction does not fall under the ambit of the said explanation under the third proviso to Rule 6(1) of the Service Tax Rules. He relied on CBEC Circular/letter D.O.F. No. 334/1/2008-TRU dated 29.02.2008, which clarifies that Service Tax is leviable on taxable services provided by the person liable to pay Service Tax even if the amount is not actually received but the amount is credited or debited in the Books of Account of the service provider.

5. The learned A.R. reiterates the findings of the Commissioner (Appeals).

6. I have carefully gone through the facts of the case. It appears that the implication of amendment to Section 67(4) of the Act and the inclusion of explanation under Rule 6(1) has been misread by the lower authorities. Section 67(4) merely clarifies that, apart from the amount charged by raising invoices, if any other amount is charged to the service receiver and adjusted in the Books of Account against any amount payable to the service receiver, the same shall still be includable in gross amount charged for service provided in terms of Section 67(1). Section 67(1) is the provision under which value of taxable service is to be determined. Further Rule 6, during the relevant time, only laid down that the Service Tax is to be paid by the 5th/6th of the month following the calendar month in which the payments are received towards the value of the taxable services. Here again we may see that the explanation regarding transaction of taxable service with an associate enterprises only refers to value of taxable service which shall include any amount credited or debited in the Books of Account. But the date on which payment of Service Tax is due to be made is the 5th/6th of the month following the calendar month in which payments are received towards the value of taxable services in terms of Rule 6(1) as it stood during the relevant period (before 01.04.2011). There is no confusion on this.

7. The appellant have clearly shown the dates on which the payments are received through the banking channels. There is no book adjustment outside the scope of the invoices raised to the Associate Enterprises. The lower authorities have completely mis-interpreted the provisions of the Rules and the Act. The amount has not been credited to the appellants account. Simple recording of invoice amount as receivable in the Books of Account does not mean that there is a book adjustment in every case. If Revenues view is taken as correct, the provision of law which states that Service Tax payment is linked to the receipt of payment of service, would render Rule 6(1) meaningless. The view of lower authorities does not stand to reason and must be rejected. I hold that the demand of interest does not sustain.

8. Impugned order is set aside and appeal is allowed.

(Pronounced in open Court)

(P.S. Pruthi)

Member (Technical)

Sp

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