M/S Shapoorji Pallonji & Co. Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I

Appeal No. ST/154/09

(Arising out of Order-in-Original No. P-I/Commr/ST/03/2009 dated 25.03.2009 passed by Commissioner of Central Excise, Customs and Service Tax (Appeals), Mumbai, Pune III)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, 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 : No 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 Shapoorji Pallonji & Co. Ltd.

Appellant Vs.

Commissioner of Central Excise Pune I Respondent

Appearance:

Shri S.S. Gupta, C.A. for appellant Shri K.S. Mishra, Addl. Commissioner (AR) for respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of Hearing: 13.08.2015 Date of Decision: 13.08.2015

ORDER NO Per: M.V. Ravindran

This appeal is directed against Order-in-Original No. P-I/Commr/ST/03/2009 dated 25.03.2009.

2. The relevant facts that arise for consideration are during the period March 2006 to September 2006, the appellant had taken/availed CENVAT credit. Appellant is a service provider under the category of Commercial and Industrial Construction Services and discharged the service tax liability by availing the benefit of Notification No.1/2006-ST. It is the case of the Revenue that the service tax liability discharged by the appellant during the period in question by claiming abatement of 67% is incorrect as they have availed CENVAT credit of inputs and input services. Show cause notice was issued. Appellant contested the show cause notice on merits as well as on limitation. The adjudicating authority did not agree with the contention raised and confirmed the demand along with interest. He refrained from imposing any penalties on the appellant under Section 77 and 78 but imposed penalty under Section 76 of the Finance Act, 1994.

3. Learned C.A. after taking us through various facets of the case would submit that CENVAT credit availed by the appellant from March 2006 were in respect of the services rendered by the service providers prior to 01.03.2006. It is his submission that the date 01.03.2006 is very important as prior to 01.03.2006 there was no bar in availing CENVAT credit of the service tax paid on input services and claiming the benefit of abatement under erstwhile Notification 15/2004-ST. It is his submission that appellant herein availed CENVAT credit of the service tax paid by the appellant for the services rendered prior to 01.03.2006 but payment of such services were made by them from March 2006 onwards. He would submit that an identical issue was decided by this Tribunal in the case of Santosh Associates  2009 (16) STR 87 (Tri.  Ahmd.). Alternatively, it is his submission that the value which has been considered for computation of the tax liability is incorrect as material cost is also included which requires to be reduced and entire CENVAT credit which has been taken by the appellant during the relevant period can be reversed and no demand of tax liability would arise. His further submission is that there is a confirmation of an amount approximately of Rs.15.00 lakhs which is arising in respect of the calculation error for discharge of service tax liability which they should have paid, by accepting the mistake they paid the service tax liability, and will also pay the interest liability. It is his submission that the penalty imposed under Section 76 of the Finance Act, 1994 be set aside.

4. Learned D.R. would draw our attention to the Notification No. 1/2006-ST and submit that the Notification is very clear and CENVAT credit should not have been availed on the input services. It is his submission that CENVAT credit has been availed hence the case law which has been relied by the learned C.A. will not be applicable in this case. He would read para 8.2 of the order-in-original and submit that the appellant on their own submission has accepted that they have taken CENVAT credit of service tax paid by various service providers. He would also read Rule 4 (7) and the proviso thereof of CCR, 2004 and submit that availment of CENVAT credit bars the appellant from claiming abatement of 67% under Notification 1/2006.

5. We have considered the submissions made at length by both the sides and perused the records.

6. On perusal of the records we find as regards the service tax liability of approx Rs.15 lakhs there is no dispute and as to that there was a calculation error which is accepted by the appellant and has paid the service tax liability. We uphold the tax liability and also hold that the appellant is liable to discharge the interest on the said amount as per law.

6.1 As regards the service tax liability on the amount which has been claimed as abatement we find that the adjudicating authority was incorrect in holding it so for more than one reason.

6.2 Firstly the said Notification 1/2006-ST came into the effect from 01.03.2006. In the case in hand the appellant had taken a plea before the lower authority that the CENVAT credit availed by them on the service tax paid by various service providers were in respect of the services rendered before 01.03.2006 and there was no restriction for availing such CENVAT credit and claiming abatement from the total value of the bill. It is also the plea of the appellant before the lower authority that post 01.03.2006 they have not taken CENVAT credit of the service tax paid by various service providers.

In our considered view the CENVAT credit availed by the appellant of the service tax paid by the service providers for the services rendered prior to 01.03.2006 cannot be faulted with as availment of CENVAT credit by service recipient is subject to the condition that payment for such service rendered as the provisions. Undisputedly, in this case the appellant had paid the service providers / settled the service providers bill subsequently from March 2006 for the service rendered prior to 01.03.2006 and has correctly claimed the legitimate CENVAT credit available.

6.3 Secondly we find that the Tribunal in the case of Santosh Associates (supra) on the very same issue has considered all the aspects of law and held in paragraph 4 as under:-

4.?I have considered the submissions made by both the sides. There is no dispute that the service was provided prior to amendment and by the time payment was received and tax liability arose, the Notification had been rescinded. As rightly pointed out by the learned Consultant, in this case, the taxable event which is rendering the services was completed during the period prior to 01-3-2006. For this period appellant was entitled to abatement as well as Cenvat credit and for the subsequent period in respect of services rendered, the appellant was not entitled to abatement as well as Cenvat credit. As pointed out by the Ld. Consultant, the argument is supported by the instructions issued of the Board at the time of introduction of services for commercial training, wherein a view was taken that in respect of services rendered continuously and part of services rendered prior to imposition, proportional tax shall be leviable. I also find the decisions of the Tribunal in Art Leasing case cited by the Consultant is also applicable even though I find other two decisions are not exactly applicable to the facts of the case. In Art Leasing case, the Tribunal held that taxable event had already occurred when the hire purchase contract was entered and installment payment started. The Tribunal also held that installments are only obligation of hirer and rate of services will be the rate prevailing on the date on which contract is entered into. In this case also, following the same analogy, appellants are eligible for the benefit of Notification No. 18/2005 for the period prior to 1-3-2006. Appeal is allowed with consequential benefit to appellants. 6.4 The submissions made by learned D.R. as to the applicability of sub-Rule (7) of Rule 4 of CENVAT Credit Rules, 2006 and the 2nd proviso thereto will not carry the case of the Revenue any further. In order to appreciate the said submissions we reproduce the said sub-rule (7) of Rule 4:-

(7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9.

Provided that in case of an input service where the service tax is paid on reverse charge by the recipient of the service, the CENVAT credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9:

Provided further that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill r, as the case may be, challan referred to in rule 9, is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service and in case the said payment is made, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules:

It can be seen from the above reproduced 2nd proviso that, on the contrary it supports the case of the appellant herein, as it mandates legitimizing the credit availed only on payment to service provider.

6.5 Since we have disposed of the appeal filed on merits, we are not recording any findings on other various submissions made by both the sides. In our considered view the issue involved in this case is being a question of interpretation, penal provisions need not be invoked and appellant be visited with any penalties. The penalties imposed by the adjudicating authority is also liable to be set aside and we do so.

7. The appeal is disposed of as indicated herein above.

(Dictated in Court)

(C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial)

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ST/154/09