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Judgment
The present appeal is directed against the impugned order dated 30.7.2019 passed by the Commissioner (A) whereby the Commissioner (A) has rejected the appeal of the appellant and upheld the Order-in-Original.
Briefly the facts of the present case are that the appellant is a manufacturer of pig iron and un-machined castings falling under Chapter 72 and 73 of the First Schedule to Central Excise Act, 1985 and has been availing CENVAT credit on inputs, capital goods and input services under provisions of CENVAT Credit Rules, 2004. During the course of audit by the departmental officer, it was observed that the appellant have availed CENVAT credit of service tax paid by Shri K. Basavaraj under the category of Cargo Handling Services during the period March 2016 on the basis of supplementary invoices issued by the service provider but verification conducted by the department revealed that the service provider Shri K. Basavaraj did not charge and collect service tax and filed nil return. Thereafter, on the advice of the jurisdictional Superintendent, Shri K. Basavaraj issued four supplementary invoices dated 4.3.2016 for collecting service tax of Rs.25,54,522/- for the service provided during the period 1.4.2013 to 30.10.2015. Thereafter, the appellant paid the service tax as per the supplementary invoices dated 4.3.2016 for the service received during the period 1.4.2013 to 30.10.2015. The service provider has remitted the service tax along with interest as due. The department entertained a view that the credit availed by the appellant is ineligible in terms of Rule 9(1)(bb) of CENVAT Credit Rules, 2004 and consequently, issued showcause notice dated 16.2.2017 demanding CENVAT Credit of Rs.25,54,522/- along with interest and also proposed penalty. After following the due process, the original authority confirmed the demand along with interest and imposed equal penalty. Aggrieved by the said order, appellant filed appeal before the Commissioner (A), and Commissioner (A) upheld the Order-inOriginal and rejected the appeal filed by the appellant. Hence, the present appeal.
Heard both sides and perused the records.
Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the binding judicial precedents. He further submitted that as per Rule 9 of CENVAT Credit Rules, 2004, supplementary invoices / bill or challan issued by a service provider is a valid document for taking CENVAT credit subject to exception contained therein. He further submitted that CENVAT credit is not admissible only when the amounts as contained in the supplementary invoices become irrecoverable from the provider of service on account of non-levy or non-payment or short-levy or short-payment by reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Finance Act, or Rules made thereunder with intent to evade payment of service tax as specified in Clause (bb) of Rule 9(1) of the CENVAT Credit Rules, 2004. He further submitted that the show-cause notice, Order-in-Original and Order-in-Appeal have not shown or brought on record or adduced any evidence that the Proper Officer has issued showcause notice for recovery of service tax to Shri K. Basavaraj, Service Provider alleging non-levy or non-payment of service tax on the Cargo Handling Service provided by him to the appellant during the period from 1.4.2013 to 30.10.2015 by reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Finance Act, 1994 or Rules made thereunder with intent to evade payment of service tax as provided under provisions to Section 73(1) of the Finance Act, 1994. He further submitted that no proceedings whatsoever was initiated under the proviso to Section 73(1) of the Finance Act, 1994 against the service provider and there is no adjudication that the service tax recovered under supplementary invoices were recovered from the service provider on account of non-levy or non-payment or short-levy or short-payment by reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Finance Act, or Rules made thereunder with intent to evade payment of service tax. It is further submitted that in the present case, the service provider was only advised by the Range Superintendent to pay service tax on the service provided to appellant along with interest and hence, service tax so paid by the service provider merely on the advice of the Range Superintendent does not satisfy the ingredients of the exceptions contained in Clause (bb) of Rule 9(1) to restrict the credit. Learned counsel submits that it is a settled law laid down by the apex court in the case Metal Forgings vs. Union of India: 2002 (146) ELT 241 (SC) wherein it has been held that issuance of show-cause notice in a particular format is necessary as required under law and not as a correspondence or part of an order. The said notice must specifically indicate the amount demanded and calls upon the assessee to show cause any objection for such demand. He also relied upon the decision rendered in the case of Dharampal Satyapal Ltd. vs. Deputy CCE, Guahati: 2015 (320) ELT 3 (SC) wherein the apex court has held that it is incumbent on the Department to issue show-cause notice and provide an opportunity of hearing before recovery of any duty. He further submitted that in the absence of issue of show-cause notice to the service provider, adjudication and confirmation of demand of service tax on the grounds of fraud, wilful mis-statement, suppression of facts, contravention of the Finance Act, 1994 with intention to evade payment of service tax embargo on eligibility for taking credit by the service recipient in terms of Clause (bb) of Rule 9(1) of the CENVAT Credit Rules, 2004 is not applicable and the entire proceedings are completely devoid of merit and contrary to settled law. He further submitted that this issue is no longer res integra as it has been settled by various decisions of the Tribunal that in the absence of show-cause notice and determination that the additional amount of duty or tax became recoverable when the tax amount paid by the service provider cannot be denied on the ground that provisions of Rule 9(1)(bb) of CENVAT Credit Rules, 2004 are attracted. In support of this submission, the appellant has relied upon the following decisions:
· CC, CE & ST, Hyderabad-IV vs. Virtusa India Pvt. Ltd. : 2017 (3) GSTL 359 (Tri.-Hyd.)
· Auto Window vs. CCE, Mumbai-II: 2016 (41) STR 518 (Tri.-Mum.)
· Century Rayon vs. CCE, Thane: 2005 (191) ELT 216 (Tri.-Mum.)
· CCE, Thane vs. Century Rayon: 2016 (339) ELT 242 (Bom.)
· Ultratech Cement vs. CCE-II: 2017 (47) STR 237 (Tri.-Del.)
· Bosch Chasis Systems Ltd. vs. CCE: 2017 (358) ELT 255 (Tri.-Chan.)
· CCE, Vapi vs. Castrol (I) Ltd.: 2008 (231) ELT 175 (Tri.-Ahmd.)
· Hindalco Industries Ltd. vs. CCE & ST: 2015 (323) ELT 414 (Tri.-Del.)
The ratio of the above said decisions are applicable to the facts of the case because in the present case, no proceedings has been initiated against the service provider in terms of proviso to Section 73(1) of the Finance Act, 1994 and hence, denial of CENVAT credit of service tax paid by the service recipient in terms of Rule 9(1)(bb) is patently erroneous. The learned counsel also submitted that the allegations of the department that the appellant has contravened the provisions of Rule 4A(1) of the Service Tax Rules, 1994 and Rule 3 of the Point of Taxation Rules, 2013 is not applicable to the appellant and they are applicable to the service provider only.
On the other hand, the learned AR defended the impugned order.
After considering the submissions of both the parties and perusal of the material on record I find that admittedly in the present case, no proceedings have been initiated against the service provider Shri K. Basavaraj by issuing any notice and there is no adjudication order against the service provider who paid the service tax on the advice of the jurisdictional Superintendent and issued the supplementary invoices dated 4.3.2016 and the appellant on the basis of the said supplementary invoices has taken the CENVAT credit. Further, I find that as per Rule 9 of CENVAT Credit Rules, 2004, supplementary invoices issued by the service provider is a valid and prescribed document for taking CENVAT credit and the only embargo for taking CENVAT credit is when the amounts as contained in the supplementary invoices become recoverable from the provider of service on account of non-levy or non-payment or short-payment or short-levy by reason of fraud, collusion, wilful mis-statement or suppression of facts and contravention of any of the provisions of the Finance Act, 1994 or Rules made thereunder with intention to evade payment of service tax as specified in Clause 9(1)(bb) of CENVAT Credit Rules, 2004. Further, I find that the show-cause notice, adjudication order and the Order-in-Appeal have not mentioned anything regarding the issuance of show-cause notice by the Proper Officer for recovery of service tax from the service provider Shri K. Basavaraj by invoking the proviso to Section 73(1) of the Finance Act, 1994. Further, in view of the judgment of Hon'ble apex court in the case of Metal Forgings vs. UOI cited supra wherein it has been held that it is necessary under law to issue a show-cause notice specifically indicating the amount demanded and calls upon the assessee to show-cause any objection for such demand, but the same has not been followed in the present case. Further, I find that it has been consistently held by the Tribunal in the various decisions cited supra that in the absence of show-cause notice and determination that the additional amount of duty or tax become recoverable, the tax amounts paid by the service provider cannot be denied on the ground that provisions of Rule 9(1)(bb) of CENVAT Credit Rules, 2004 are attracted. Further, I find that the allegations of adjudicating authority that the appellant have violated the provisions of Rule 4A(1) of CENVAT Credit Rules, 2004 and Rule 3 of the Point of Taxation Rules, is also erroneous because the said Rules are applicable to service provider and not to service recipient.
In view of my discussion above, I am of the considered opinion that the CENVAT credit of Rs.25,54,522/- paid voluntarily by the service provider on the strength of supplementary invoices is admissible to the appellant as credit in terms of Rule 9(1)(bb) of CENVAT Credit Rules, 2004. Hence, I set aside the impugned order and allow the appeal of the appellant.
(Order was pronounced in Open Court on 29/03/2021)