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Judgment
Present is an appeal against the Order-in-Original No. 56/KAM/PC/CGST/DSC/2018-19 dated 31 March, 2019. The facts in brief for the purpose
are that the appellant is a subsidiary of Religare Enterprises Ltd. and is engaged in rendering financial support to various small and medium
enterprises. Accordingly, was registered with the Service Tax Department under the category of Banking and Financial Services, Management and
Business Consultancy Services, Renting of Immovable Property Services etcT.he Meerut Unit of Directorate General of Goods and Service Tax
Intelligence (DGCEI) initiated an enquiry in January, 2017 against the appellant with respect to compliance of Rule 6(3B) of Cenvat Credit Rules,
2004. It was alleged that the appellant has not complied with the said provision in as much as it has failed to pay on monthly basis, an amount equal to
50% of the credit availed on inputs and input services used for provision of output service of banking and other financial services. Accordingly, a show
cause notice dated 07.07.2017 was issued for a period of October 2011 to September, 2012 demanding a Cenvat Credit of Rs.4,35,66,901/-alleging the
misrepresentation, suppression of facts and failure to furnish a document/ledger, allegedly with an intent to evade the payment of requisite amount.
Accordingly, penal interest and penalty was also proposed to be imposed upon the appellant. The order under challenge has confirmed for the partial
demand of Rs.22,71,183/- alongwith the interest and the penalty under Section 78 of the Finance Act. Being aggrieved, the appellant is before this
Tribunal.
I have heard Mr. Hemant Bajaj, Advocate and Ms. Sukriti Das, Advocate for the appellant and Mr.Yashvir Singh, learned Authorized
Representative for the Revenue.
It is submitted on behalf of the appellant that the Cenvat Credit on the inputs has been deposited monthly by the appellants. In-fact, the deposit is in
excess of 50% of the credit availed on inputs and input services used by the appellant during the period of dispute. It is impressed upon that all
requisite documents / Ledger Accounts were shown to the investigating Officer proving an excess payment of Rs.54,00,000/- (fifty four Lakhs)
approximately. It is further submitted that even the Department has acknowledged for the aforesaid excess deposits as is apparent from the order
under challenge itself. Still the payment by the appellant is alleged to be short by Rs.22,00,000/- (Twenty two Lakhs) approximately. It is submitted
that in view of the acknowledgement of excess deposit, the order of recovery even of said Rs.20,00,000 (twenty Lakhs) is bad in law.
3.1 It is submitted that whatever was the deficiency for the reversed amount of Cenvat Credit per month had been made good at the time of filing the
service tax returns. The returns are filed six monthly i.e. on 25th of April and 25th of October. It is impressed upon that the adjustment of duty liability
is legally permissible. The said adjustment is not only mentioned in Rule 6 itself i.e. 6(3A) of the Cenvat Credit Rules but is also mentioned in Rule
6(4A) of Service Tax Rules. Above all, the order under challenge is absolutely silent about the status of excess deposit of Rs.54,00,000/- (Fifty four
Lakhs) approximately being made by the appellant. Learned Counsel has relied upon the following case laws:-
M/s. Hindustan Zinc Ltd. vs. CCE, Udaipur reported in 2019 (12) TMI 850 â€" CESTAT NEW DELHI
The Principal Commissioner, CGST, Bhopal vs. M/s. Godrej Consumer Products Ltd. reported in 2019 (5) TMI 222 â€" Madhya
Pradesh High Court.
3.2 It is further impressed upon on behalf of the appellant that from no stretch of imagination the conduct of appellant can be alleged to be malafide
with intent to evade the payments. The admitted excess payment by the appellant in itself is sufficient to falsify the intent to evade the duty. It is
submitted that not only the penalty has wrongly been imposed but the show cause notice itself stands barred by time as the extended period has been
invoked on the false allegation of suppression of facts with intent to evade tax. He has relied upon the following case laws:-
a) M/s. Pappu Constructions vs. Commissioner, C.Ex., Cus. & S.T., Indore, 2020 (4) TMI 382 â€" CESTAT, NEW DELHI.
b) CCE, Mumbai â€"IV vs. Damnet Chemicals Pvt. Ltd. , 2007 (216) ELT 3 (S.C.)
c) CCE, Chandigarh vs. Punjab Laminates Pvt. Ltd., 2006 (202) ELT 578 (SC)
d) Cosmic Dye Chemical vs.Collector of c.Ex., Bombay â€" 1995 (75) ELT 721 (SC)
Based on these submissions, ld. Counsel for appellant has prayed for order under challenge to be set aside and appeal to be allowed.
Learned D.R. on the other hand has submitted that as per Rule 6(3B) the reversal of Cenvat Credit has to be made on monthly basis. The word
“shall†has been used in the provision to mandate the monthly reversal of Cenvat taken on the inputs / input services each month. It is impressed
upon that apparently and admittedly each month has some shortage as is otherwise apparent from the table in the order itself except for the month of
November, 2011 and March, 2012. Due to this mandate only, there is no error in the adjudicating order for confirming the demand of Rs.22,73,183/-.
With respect to the acknowledged excess payment by the appellant it is submitted by ld. D.R. that appellant had the appropriate remedy for getting the
refund. However, said submission has been objected on the ground that remedy of refund is by now time barred.
Endorsing the correctness in the order under challenge, appeal is prayed to be dismissed.
After hearing both the parties, considered opinion of mine is as follows:-
The issue in the present appeal pertains to reversal of credit by the appellant rendering Banking and other Financial Services in terms of Rule 6 (3B)
of Cenvat Credit Rules, 2004. The Rule reads as follows:-
“(3B) Notwithstanding anything contained in sub-rules (1), (2)and (3), a anking company and a financial institution including a non-
banking financial company engaged in providing services by way of extending deposits, loans or advances shall pay for every month an
amount equal to fifty percent of the CENVAT credit availed on inputs and input services in that monthâ€
The perusal of Rule makes it clear that it require reversal of Cenvat Credit availed on inputs and input services used for provision for output service
of Banking and Other Financial Services in each month but to an amount equal to 50% of the such credit availed. The Adjudicating authority below
has acknowledged the reversal of credit by the appellant. However has held that reversal is not the equivalent to 50% of the total credit as is required
under Rule 6(3B) of the Cenvat Credit Rules in some of the months and, accordingly, to the extent of short reversal, the demand has been confirmed.
It is also an admitted fact that at the time of filing Service Tax Returns after each six months, the short reversal of few of such months has been
made good. Not only this, it is also an admission on part of department that due to deposits made at the time of filing the Service Tax returns the
reversal becomes more than 50%. Thus, the issue stands squeezed to the effect as to whether adjustments of payment is permissible despite the
mandate of monthly reversal of Cenvat Credit for an amount equal to 50% of the credit availed.
Rule 6 of Cenvat Credit Rules itself has been brought to the notice:
Rule 6 (3A) (d) reads as follows:-
“the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount
determined as per condition (c) and the aggregate amount determined and paid as percondition (b), on or before the 30th June of the
succeeding financial year, where the amount determined as per condition (c) is more than the amount paid;
Sub-Rule 6 (3A) (f) reads as follows marked
Where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer
of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount;
Rule 6 (4A) of Service Tax Rules reads as follows:-
(4A)Notwithstanding anything contained in sub-rule
(4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service
tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax
liability for the succeeding month or quarter, as the case may be.
A conjoint reading of these Rules make it clear that the adjustments of excess reversal of credit with short reversal and vise verse to that extent is
statutorily permissible. This observation when clubbed with the admitted fact of excess reversal of Cenvat Credit by the appellant though at the time
of filing the return is sufficient to hold that the allegation of authority below and findings against appellant are not sustainable. In the case of AC
Nielson Org. Marg Pvt. Ltd. v. Commissioner of Service Tax, Mumbai-II reported in 2018 (12) GSTL 322 (Tri.-Mumbai) theT ribunal
had considered this issue. It has been specifically held in this case as follows:-
“we are of the view that if in a particular month against the liability of 20% if the appellant utilized less than 20% and the remaining
amount is available to the appellant for utilization and the same was utilized in subsequent month. On considering overall period, the total
utilization remains within 20% ceiling irrespective in same month utilization is less than 20% and in subsequent month, the utilization is more
than 20%, the conditions of Rule 6(3)(c) of Cenvat Credit Rules, 2002, in our view stand complied with.â€
In another case titled as Principal Commissioner, CGST and Central Excise Headquarters Bhopal vs. M/s. Godrej Consumer
Products Ltd. reported in 2019 (5) TMI 222 Madhya Pradesh High Court had considered the issue whether the Hon’ble Tribunal has
committed error of law in permitting adjustment of duty liability against the duty excess paid in the month, with the duty shortpaid in another month. It
has been held in this case that the determination of actual cause much later than the clearance of goods since resulted in certain adjustments the
payments at that time by the appellant are permissible.
Delhi Tribunal in the case of Jubilant Organosys Ltd. vs.Commissioner of C.Ex., Meerut-II reported in 2015 (38) S.T.R. 1230 (Tri.-
Del.) has looked into several judicial pronouncement wherein it has been held that the adjustment of Service Tax paid in excess in certain months
towards the Service Tax liability of subsequent months cannot be denied on technical grounds. The following adjudications were relied upon:
(1) CC, Patel & Associates Pvt. Ltd. v. Union of India - 2013 (32) S.T.R. 392 (Guj.)
(2) M/s. Bank of Rajasthan Ltd. v. CCE, Jaipur - 2010-TIOL-1171-CESTAT-DEL.
(3) Gujarat NRE Coke Ltd. v. CCE, Rajkot - 2012 (27) S.T.R. 372 (Tri-Ahmd.).
(4) BSNL v. CCE, Chandigarh - 2011 (24) S.T.R. 719 (Tri.).
(5) Nirma Architects & Valuers v. CCE, Ghaziabad - 2006 (1) S.T.R. 305 (Tri.).
The Tribunal held that the issue stands settled and is no more res-integra. Relying upon the said decisions, I am of the opinion that the adjustment
made towards the monthly service liability in the subsequent month of filing the return by the appellant cannot be denied to him. The Principal
Commissioner is opined to have formed a very rigid opinion on a rigid technical ground while confirming the demand even of Rs.22,73,183/-despite
acknowledging the excess reversal of Cenvat Credit amount by the appellant.
Further, I am of the opinion that once there is an excess payment, malafide intention that too of tax evasion cannot be alleged qua the appellant.
No doubt the period of one year of serving Show Cause Notice stands extended to 5 years had there been the intent to evade tax or there is
suppression of tax but from the above discussion it is apparently clear that there is no evasion of tax /duty, no question of intent to evade at all arises.
Admittedly entire Ledger Accounts duly supported by CA Certificate were submitted by the appellant to the authorities, the question of suppression of
facts that too willful does not at all arises. Present is therefore, the case which is not covered by the proviso of Section 73 of Central Excise Act.
Above all, mere failure to pay tax is not ajustification for imposition of penalty as has been held by Hon’ble Delhi High court in the case of Bharat
Hotels Limited vs. Commissioner, Central Excise (Adjudication), reported in2018 (2) RMI 23( Delhi- H.C.). Even the Principal Bench of
this Tribunal in the case of M/s. Pappu Construction vs. Commissioner, Central Excise reported in 2020 (4) TMI 382 while relying upon the
decisions of Bharat Hotels (supra),Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay 1995 (78) ELT 401
(S.C.), Uniworth Textile Limited vs. Commissioner of Central Excise, Raipur â€" 2013 (288) ELT 161 (SC), NRI Academy Guntur vs.
Union of India 2019 (20) GSTL 23 (A.P.) as also a decision of the Principal Bench of the Tribunal in Bharti Hexcom Limited vs.
Commissioner of Central Excise, Jaipur-I â€" 2019 (24) GSTL 588 (Tri.-Del.) has reiterated that the failure to pay tax is not a justification for
imposition of penalty. It has also been held that even when an assessee has suppressed facts the extended period of limitation can be invoked only
when suppression is shown to be wilfull with intent to evade the payment of Service Tax. As already discussed above, none is the case for the present
appellant. The imposition of penalty by the adjudicating authority below is also held to be baseless and to be in ignorance of the acknowledged/
admitted excess reversal of the Cenvat Credit. Learned Adjudicating authority has miserably ignored the statutory principles permitting adjustment of
monthly payments during a subsequent month.
In view of the entire above discussion, the order under challenge is hereby set aside. As a result, appeal stands allowed.
[Operative part pronounced in the open court]