M/S. Travel Inn India Pvt. Ltd vs C.S.T., Delhi

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes

Appeal No.ST/580/2009-CU[DB]

[Arising out of Order-in-Original No.17-18/2009, dated 22.05.2009 passed by the C.C.E., Delhi]

M/s. Travel Inn India Pvt. Ltd. Appellants

Vs.

C.S.T., Delhi Respondents

Appearance

Shri JK Mittal, Advocate - for the appellants

Shri Amresh Jain, DR - for the respondents

CORAM: Honble Mr. Ashok Jindal, Member (Judicial)

Honble Mr. R.K. Singh, Member (Technical)

Final Order No51777/2015, dated 28.05.2015

Per Mr. Ashok Jindal :

The appeal is against the impugned order denying the benefit of Notification No.1/2006-ST, dated 01.03.2006, thereby confirming service tax demand of Rs.1,28,89,944/- along with interest and equal amount of penalty and a demand of interest of Rs.12,138/- under Section 75 of the Finance Act, 1994 for delayed payments.

2. The facts of the case are that the appellant is providing tour operator service during the period 2005-06 to 2006-07, the appellant was availing certain input services for providing output services and taking Cenvat credit thereon. With effect from 01.03.2006, Notification No.1/2006-ST was introduced which granted exemption of taxable services specified in sub-clause (n) of clause (105) of Section 65 of the Finance Act that the benefit of the Notification No.1/2006-ST will not apply to the cases where the assessee has availed Cenvat credit of duty on inputs or capital goods or the Cenvat credit of service tax on input services used for providing such taxable service. The appellant was availing Cenvat credit during the period April, 2006 to March, 2007 and also claiming the benefit of Notification No.1/2006-ST. On realisation that the appellant is not entitled to avail the benefit of the Notification as they are availing Cenvat credit, the appellant immediately deposited the amount of Cenvat credit availed during the period April, 2006 to March, 2007 along with interest on 03.10.2007 and intimated to the Department on 04.10.2007. On doing this, the Revenue issued two Show Cause Notices to the appellant on 15.02.2007 and 25.02.2008 respectively to deny the benefit of Notification No.1/2006-ST and consequently demanded the service tax along with interest and equivalent amount of penalty was imposed. In the Show Cause Notices it was also alleged that as the appellant has not paid service tax on due dates, therefore, appellant is required to pay interest for the intervening period, i.e., the date of deposit of cheque into the credit of treasury till its realisation. The Show Cause Notices were adjudicated and the impugned demand was confirmed by denying the benefit of the Notification. Aggrieved from the said order, the appeal is before us.

3. Shri JK Mittal, Sr. Advocate, ld. counsel for the appellant appeared and submits that it is not a case of detection of availment of inadmissible Cenvat credit by the appellant by the Department but the appellant themselves realised that they are availing Cenvat credit, consequently they are not entitled for the benefit of the Notification No.1/2006-ST. Therefore to avail the benefit of the above Notification, they their own calculated the amount of inadmissible Cenvat credit and paid thereof along with interest on 03.10.2007 for the period 01.04.2006 to 31.03.2007. The same was intimated to Revenue on 04.10.2007. Therefore, the such reversal of Cenvat credit amounts to non-availment of Cenvat credit, consequently they are entitled to avail the benefit of Notification No.1/2006-ST as held by the Tribunal in the case of Khyati Tours & Travels Vs. CCE, Ahmedabad [2011 (24) STR 456 (Tri.  Ahmd.)]. He also cited the Hon'ble Allahabad High Court decision in the case of Hello Minerals Water (P) Ltd. Vs. Union of India [2004 (174) ELT 422 (All.)]. For demand of interest, he submits that as per Rule 6(2A) of Service Tax Rules, 1994, the appellant is not required to pay the interest, as per the said Rule, the appellant has deposited the cheque on the due date and same is the date of payment of service tax subject to realisation of the said cheque. Therefore, the appellant is not required to pay interest as demanded by the adjudicating authority in the impugned order. Therefore, the impugned order is to be set aside.

4. On the other hand, ld. Departmental Representative opposed the contentions of the ld. counsel and submits that the appellant is not entitled to avail the benefit of Notification No.1/2006-ST as per the decision of the Tribunal in the case of Hind Lamps Ltd. Vs. CCE, Kanpur [2010 (250) ELT 237 (Tri.  Del.)]. In fact, this Tribunal has relied on the decision of the Hon'ble Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. Vs. Collector of Central Excise, Nagpur [1996 (81) ELT 3 (SC)], wherein the Hon'ble Apex Court observed that if the credit has been reversed before the point of taxation then the same shall amount non-availment of the benefit of Cenvat credit. But in this case, the appellant is regular provider of output services and the said credits have been utilised by the appellant for the payment of service tax. Therefore, they are not entitled to avail the benefit of Notification No.1/2006-ST ibid. He further submits that the demand of interest has rightly been confirmed against the appellant.

5. Heard the parties and considered the submissions.

6. In this case, the following issues have emerged for consideration of the basis of arguments advanced by both the parties:-

(a) Whether the appellant is entitled for the benefit of Notification No.1/200-ST ibid on reversal of Cenvat credit on realisation that they are not entitled to avail the Cenvat credit if claiming the benefit of Notification No.1/2006-ST or not.

(b) Whether the appellant is liable to pay interest for delayed payment of service tax as per Rule 6(2A) of Service Tax Rules, 1994 or not.

7. To decide the issue of availment of benefit of Notification No.1/2006-ST ibid, we find that in this case, the appellant has reversed the inadmissible Cenvat amount along with interest by their own on being realisation. Ld. Departmental Representative has relied on the decision of Chandrapur Magnet Wires (P) Ltd. (supra) to say that if the Cenvat credit has been reversed before utilisation only then they are entitled to avail the benefit of the above Notification. We have examined the decision of the Hon'ble Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. (supra). In that case, it was observed by the Hon'ble Apex Court that whether the assessee is the manufacturer of both dutiable and exempted final product and there is no possibility to maintain separate account for inputs, in that case, if the Cenvat credit has been reversed before the removal of exempted final product on input used for manufacture of such goods. But the Hon'ble Apex Court has not put any bar that if the same has not been reversed before removal of goods, in that case the assessee is required to pay the amount of 5%/10% of the value of the exempted goods. Therefore the observation made by the Hon'ble court only obiter dicta and the Hon'ble Apex Court has also quoted that the said reversal is permissible and assessee is entitled for exemption. Therefore, the facts of the said case are not applicable in this case. Moreover, those observations made by the Hon'ble Court in the case of manufacture of goods and central excise duties payable thereon. This case is pertained to the providing of output service, i.e., tour operator. Moreover, the decision of Chandrapur Magnet Wires (P) Ltd.(supra) was examined by the Hon'ble High Court of Allahabad in the case of Hello Minerals Water (P) Ltd.(supra), wherein the Hon'ble court has observed as under:-

17. The? question as to whether manufacturer can be treated as not having taken credit on the inputs used in the manufacture of final product, even though it was originally taken but subsequently reversed, has been decided by a five Member Bench of the Tribunal in the case of Franco Italian Company Pvt. v. CCE, 2000 (120) E.L.T. 792. The aforesaid five members Bench of the Tribunal after taking into account the ratio laid down by the Supreme Court in the case of Chandrapur Magnet Wire (P) Ltd. v. CC, Nagpur, 1996 (81) E.L.T. 3 has held as under :-

6. Drawing similar analogy we consider that subject to the reversal of Modvat credit taken with regard to the inputs which were utilised in the manufacture of duty free goods, the manufacturer could avail of the Modvat credit as well as full duty exemption under applicable small scale exemption notification with regard to some specified goods. Reference is answered accordingly.

7. As a result the impugned order-in-appeal dated 28-1-1999 passed by the Central Excise is set aside and the appeal of Franco Italian Company (supra) is allowed subject to the conditions that Modvat credit taken of the duty paid on the inputs which were utilised in the manufacture of duty free goods, is reversed.

18. In view of? the above decision we are of the opinion that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunals stage.

19. The?Tribunal while passing the impugned order dated 1-10-2003 [2004 (163) E.L.T. 55 (Tri. - Del.)] has not referred to the larger Bench decision of the Tribunal and other binding decisions. In Chandrapur Magnet Wire Limited v. Collector Central Excise, 1996 (81) E.L.T. 3 the Supreme Court has held :-

If debit entry is permissible to be made, the credit entry for duties paid on the inputs utilised in manufacture of final exempted product will stand deleted in the account of the assessee. In such a situation it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of final exempted product under Rule 57-A. In other words the claim of exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of duty paid on the inputs used in manufacture of these goods.

22. Hence in? our opinion the Tribunal was not justified in taking a view that reversal of the credit having been made by the petitioner after removal of the final products the petitioner was not entitled to the benefit of Notification No. 15/94-C.E., dated 1-3-1994.

23. This view? of the Tribunal is in our opinion patently erroneous and contrary to the decision of the five Member Larger Bench of the Tribunal as well as three member bench of the Tribunal, and is also contrary to the ratio of the decision of the Supreme Court in the case of Chandrapur Magnet Wire (supra).

Therefore, the argument advanced by the ld. Departmental Representative that if reversal is made before point of taxation only then the tax exemption is available is not acceptable to us. Further, we find that a similar issue came before this Tribunal in the case of Khyati Tours & Travels (supra),wherein this Tribunal has observed as under:-

4.?It is seen that the appellant had reversed the wrongly availed Modvat credit along with interest, the same will have the effect as if no credit was availed by the appellants. The law on the above point is very clear and stands settled by various decisions of judicial as also the quasi judicial authorities. For the sake of convenience we may refer to the order passed by Commissioner (Appeals) in the case of Om Shanti Travels, Ahmedabad being Order-in-Appeal No. 197/2010(STC)/MM/ Commr(A)/Ahd dated 9-8-2010, wherein after summarising the entire case law, the benefit stands extended to the assessee. We reproduce the relevant paragraphs from the said order :-

8.?The appellant cited the case of M/s. Hello Minerals Water Private Limited v. UOI reported in 2004 (174) E.L.T. 422 (Allahabad). I have gone through this judgment. In Para 18 of this judgment it has been held by the High Court that if the exemption is subject to non-availment of modvat credit on inputs, the subsequent reversal of modvat credit amounts to non-taking of credit on inputs and the benefit of exemption notification number 15/94-C.E., is to be granted, even when reversal of credit on inputs was done at Tribunal stage.

8.1?The above judgment of the High Court is based on five member bench decision of the Tribunal in the case of Franco Italian Company Private Limited v. C.C.E., 2000 (120) E.L.T. 792. This judgment in turn based on the Supreme Court judgment in the case of Chandrapur Magnet Wire Private Limited v. C.C.E., Nagpur, 1996 (81) E.L.T. 3.

8.2?I have gone through the Honble Supreme Court of Indias judgment in the above mentioned case, and I find that it has been laid down/held that debit entry in modvat credit account indicates as if no credit was taken on such inputs. This judgment has been followed in a number of Tribunal judgments. The latest has been a case of the Commissionerate of Service Tax itself in the case of CST, Ahmedabad v. M/s. Amola Holdings Private Limited. This judgment was given in order No. A/1148/WZB/AHD/09 dated 1-6-2009. This judgment also stands accepted by the Commissionerate and hence I follow the same and hold that reversal or debit of modvat credit in this case of 9595 rupees amounts to non-availment of modvat credit and accordingly, the appellant is eligible to the benefit under Notification No. 1/2006.

8. The facts of this case are similar to the Khyati Tours & Travels (supra), wherein the Tribunal has held that if the assessee has reversed the Cenvat credit availed along with interest, the same shall amount to non-availment of Cenvat credit. Consequently, the assessee is entitled for the benefit of exemption Notification No.1/2006-ST ibid. Admittedly, in this case the appellant has reversed the Cenvat credit of their own. On being realisation that they are not entitled to take the Cenvat credit if they are availing the benefit of exemption Notification No.1/2006-ST. Therefore, we hold that the reversal of Cenvat credit by the appellant amounts to non-availment of Cenvat credit. Consequently, appellant is entitled for the benefit of Notification No.1/2006-ST. In these terms the demand of service tax along with interest and equivalent amount of penalty are set aside on this issue.

9. With regard to the issue of payment of interest for delayed payments, we find that Rule 6(2A) of the Service Tax Rules, 1994 deals the situation, which is reproduced below:-

Rule 6(2A): For the purpose of this rule, if the assessee deposits the service tax by cheque, the date of presentation of cheque to the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which service tax has been paid subject to realisation of that cheque.

Admittedly, in this case, the appellant has paid the service tax through cheque on due dates and the same stand realised on a later date. Therefore, the date of deposited the cheque into the treasury is the date of payment of service tax as per Rule 6(2A) of the said Rules. In these circumstances, we hold that the appellant has paid the service tax in time. Consequently, demand of interest on delayed payments is not sustainable.

10. In view of both the issues are answered in favour of the appellant, therefore, we set aside the impugned order and allow the appeal with consequential relief, if any, to the appellant

(Ashok Jindal)

Member (Judicial)

(R.K. Singh)

Member (Technical)

SSK

-10-