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Judgment
The present appeal is directed against the impugned order dated 24/12/2019 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has upheld the Order-in-Original dated 31/12/2018 and rejected the appeal of the appellant. The particulars of the appeals and the confirmation of demand are given herein below:
Impugned order
Order-in-Appeal 339/2019 dated 24/12/2019
Sl. No.
Period
Category of Service/Issue
Demand amount (Rs.)
Interest
Penalty
1
October 2011 to March 2016
Reversal of cenvat credit under Rule 6(3((i) of CCR, 2004
33,70,342/-
Section 75
Section 76 r/w Rule 15 of CCR
2
October 2011 to September 2015
Cenvat credit disallowed
1,60,095/-
Briefly the facts of the present case are that the appellant is registered with Service Tax and provides taxable services like Event Management Service, Business Exhibition Service, Business Auxiliary Service and are availing credit on eligible inputs and input services in terms of CCR, 2004. In the course of rendering taxable services, appellant is also engaged in the activity of sale of time/space for advertisement in print media and for rendering such services appellant availed cenvat credit on common input services attributable to such services like internet charges, mobile/telephone charges, air fare, taxi hire charges, travelling expenses, server hosting charges, courier charges, stationary etc. as eligible credit in terms of CCR, 2004. Audit was conducted by the Audit Commissionerate for the period October 2011 to September 2015 during July and August 2016 wherein the following discrepancies were noticed-
i. It is alleged in the show-cause notice that appellant was engaged in both taxable as well as exempted services and have not maintained separate accounts for availing cenvat credit as per Rule 6(2) and have neither reversed proportionate credit under Rule 6(3A) of CCR, 2004. Therefore, appellant is liable to reverse credit availed on exempted services as per Rule 6(3)(i) @ 6/7%.
ii. Resultantly, on non-payment of amount as per Rule 6(3)(i) CCR, 2004 in respect of common input services used for exempted services [as alleged in para 6.2 of show-cause notice, service tax was demanded amounting to Rs. 44,22,026/- (Rupees Forty Four Lakhs Twenty Two Thousand and Twenty Six only)].
iii. It is further alleged that appellant has wrongly availed cenvat credit on input services which are not covered within the ambit of "input service" under Rule 2(l) of CCR, 2004.
Based on the audit observations, a show-cause notice dated 09/12/2016 was issued proposing to demand wrong availment of cenvat credit amounting to Rs. 2,88,678/- (Rupees Two Lakhs Eighty Eight Thousand Six Hundred and Seventy Eight only) and reversal of cenvat credit under Rule 6(3)(i) of CCR amounting to Rs. 44,22,026/- (Rupees Forty Four Lakhs Twenty Two Thousand and Twenty Six only). After following the due process, the original authority passed Order-in-Original dated 31/12/2018 allowing cenvat credit of Rs. 1,28,588/- (Rupees One Lakh Twenty Eight Thousand Five Hundred and Eighty Eight only) and disallowing credit of Rs. 1,60,095/- (Rupees One Lakh Sixty Thousand and Ninety Five only) wrongly availed on input services and confirmed reversal under Rule 6(3)(i) of CCR amounting to Rs. 33,70,342/- (Rupees Thirty Three Lakhs Seventy Thousand Three Hundred and Forty Two only). Aggrieved by the said order, appellant filed appeal before the Commissioner who rejected the appeal. Hence, the present appeal.
Heard both the parties and perused the records.
Learned consultant appearing for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the provisions of Rule 6(3) of CCR, 2004 and also without considering the precedent decisions of the Tribunal and the High Court on this issue. He further submitted that the activity of sale of space or time for advertisement in print media is specifically covered under the negative list in terms of Section 66D (g) of the Finance Act, 1994 and when the activity is perceived, not a service, the same cannot be treated as an exempted service in terms of Rule 2(e) of CCR, 2004. He also submitted that when the service is not an exempted service, application of Rule 6(2) and Rule 6(3)(i) is itself not proper. Accordingly, appellant availed the common credits. He further submitted that for the purpose of computing reversal of credit, the show-cause notice has computed reversal @6/7% on total credits whereas appellant has never availed credit on inputs directly attributable for the activity of selling of space in print media. He further submitted that both the authorities have wrongly come to the conclusion that the appellant has not maintained separate accounts under Rule 6(2) whereas the fact of the matter is that the appellants for each Division has accounted income and expenditure separately and therefore requirement for maintenance of separate accounts for credit attributed towards taxable, exempted and common credit is complied as per Rule 6(2). He also submitted that because of the maintenance of separate account, it was possible for the appellant to identify credits attributable towards common and taxable services. He further submitted that for the sake of assuming but not admitting that sale of space is an exempted service even then the appellant has reversed cenvat credit amounting to Rs. 60,672/- (Rupees Sixty Thousand Six Hundred and Seventy Two only) along with interest as computed under Rule 6(3A) of CCR, 2004 on the proportionate common credit vide general voucher No. 267 dated 14/09/2016 along with interest of Rs. 41,637/- (Rupees Forty One Thousand Six Hundred and Thirty Seven only) vide challan No. 00074 dated 21/09/2016 and the fact of proportionate reversal is also noted in para 14.2.6 of the Order-in-Original. He further submitted that for considering the proportionate reversal of credit in their revised computation, the appellant has considered the turnover details as per the audit financial and considered certain deductions but the same was not considered in the show-cause notice for computing exempted turn over. He also submitted that Rule 6 of CCR, 2004 provides for options available to the assessee for reversing the credit and the appellant has reversed the credit on the common input services as per Rule 6(3A). He then referred to Rule 6(3) of CCR, 2004 and submitted that the said Rule is applicable only when separate accounts are not maintained whereas this is not the case in the present case. Appellant has clearly identified the inputs used for taxable services and common input services and have availed the option of reversing credit under Rule 6(3A) of CCR, 2004. The option for reversal under Rule 6(3)(i) cannot be arbitrarily imposed when the statute gives an option to the appellant to avail any one option. For this submission he relied upon the decision in the case of B. Mangharam Foods Pvt. Ltd. V. CCE, Indore - 2010 (258) E.L.T. 575 (Tri.-Del.) wherein it has been held that Rule 6(3) clearly given an option and it is for the manufacturer to make a choice. On this point he also relied upon the following decisions:
· Mercedes Benz India P. Ltd. Vs. CCE - 2015 (40) S.T.R. 381 (Tri.-Mumbai) affirmed in 2016 (41) S.T.R. 577 (Bom.)
· Foods, Fats, Fertilizer Ltd. Vs. CCE - 2011 (22) S.T.R. 484 (Tri.-Bang.)
· Cranes & Structural Engineers Vs. CCE - 2017 (347) E.L.T. 112 (Tri.-Bang.)
· CCE, Bangalore-II Vs. ETA Technology Pvt. Ltd. - 2017 (346) E.L.T. 57 (Kar.)
· M/s. Reliance Industries Ltd. Vs. CCE & ST, Rajkot - 2019-TIOL-1593-CESTAT-AHM.
4.1. He also submitted that the allegation of the Department is that the appellant has not availed the benefit of Rule 6(3A) in the beginning of the Financial Year which is only a procedural lapse as was held in the case of Marcedes Benz India (cited supra). He also submitted that as per the revised computation for reversal as per Rule 6(3A), appellant is liable to reverse an amount of Rs. 54,772/- (Rupees Fifty Four Thousand Seven Hundred and Seventy Two only) as per the detailed computation chart attached with the writeen submissions whereas the appellant has already deposited total tax amounting to Rs. 3,53,043/- (Rupees Three Lakhs Fifty Three Thousand and Forty Three only). Learned consultant for the appellant submitted that when the appellant has reversed the credit with interest at the point of audit inquiry, show-cause notice should not have been issued in terms of Section 73(3) of the Finance Act, 1994. For this, he relied upon the decision in the case of CCE Vs. M/s. Adecco Flexion E Workforce Solutions Ltd. - 2012 (26) S.T.R. 3 (Kar.). As far as second issue involved in the present case is whether the appellant is entitled to avail the cenvat credit on input services which has been denied by the Department. The impugned order disallowed cenvat credit amounting to Rs. 1,60,095/- (Rupees One Lakh Sixty Thousand and Ninety Five only) availed in respect of Air Travel/Visa Charges, Taxi Hire Charges, Accommodation Charges, AMC for flats and telecom charges on understanding that they are not covered within the definition of "input services" in Rule 2(l) of the CCR, 2004 and does not bear any nexus with the output services. In this regard, appellant submitted that he was under bonafide belief that services on which cenvat credit availed are directly attributable to the output service and thus eligible. He further submitted that appellant has not collected or recovered cost of such services from the employees and to that effect he has also attached declaration with his written submissions. In order to establish a correlation between the input service and the output service, appellant submitted that in the case of Taxi hire charges for Rs. 10,681/- (Rupees Ten Thousand Six Hundred and Eighty One only) he has reversed the entire amount in order to avoid the dispute but with regard to Air Travel and Visa amounting to Rs. 24,648/- (Rupees Twenty Four Thousand Six Hundred and Forty Eight only) and Accommodation charges Rs. 51,086/- (Rupees Fifty One Lakhs and Eighty Six only), he submitted that since the appellant is engaged in the business of event management and for that purpose appellant has to organize business exhibition and the employees are expected to travel to different places. Hence, the travel is in relation to output service provided and it bears a direct nexus with the output service. For this, he relied upon the decision in the case of Emcom Technologies Pvt. Ltd. Vs. CCE, Bangalore - 2013 (31) S.T.R. 441 (Tri.-Bang.) wherein it was held that if the air travels were undertaken by the company, executives for business purposes, the necessary nexus between the service and the business activities of the appellant does exist. He also relied upon the following decisions:
· CCE Vs. Fine Care Biosystems - 2009 (244) E.L.T. 372 (Tri.- Ahmd.)
· Goodluck Steel Tubes Ltd. Vs. CC Ex. Noida - 2013 (32) S.T.R. 123 (Tri.-Del.)
4.2. Further in the case of input service of AMC for flat at Delhi amounting to Rs. 5,178/- (Rupees Five Thousand One Hundred and Seventy Eight only), consultant submitted that AMC incurred is towards a flat in Delhi which is used by the employees on their frequent visit to Delhi in connection with execution and management of various exhibitions. He further submitted that when the accommodation bears a direct nexus with the output service, so does the AMC charges and submitted the copies of AMCs and submitted that the cenvat credit has been denied on the ground that the service was provided in unregistered premises. He relied upon the decision of the Karnataka High Court in Mportal India Wireless Solutions Pvt. Ltd. Vs. CST, Bangalore - 2012 (27) S.T.R. 134 (Kar.) wherein it was held that registration with the Department is not a pre-requisite for claiming the credit. Learned counsel also submitted that extended period of limitation has been wrongly invoked because show-cause notice was issued on the basis of departmental audit undertaken for the period October 2011 to September 2015 and all the facts were already within the knowledge of the Department. For this, he relied upon the following decisions:
· LANDIS + GYR Ltd. Vs. CCE - 2013 (290) E.L.T. 47 (Tri.- Kolkata)
· GAC Shipping India Pvt. Ltd. Vs. CCE - 2017 (49) S.T.R. 242 (Tri.-Bang.)
· BHEL Vs. CCE & ST - 2020 (43) GSTL 395 (Tri.-Hyd.)
4.3. As far as interest and penalty is concerned, the appellant submitted that they have already reversed proportionately common credits, hence there is no short payment or non-payment of service tax under Rule 6(3)(i) of CCR, 2004. Hence, no interest and penalty is payable.
On the other hand, the learned AR reiterated the findings of the impugned order.
After considering the submissions of both the parties and on perusal of the material on record, I find that the issue for consideration in the present appeal is (a) applicability of Rule 6(3) of CCR, 2004 to exempted activity of sale of space or time for advertisement in print media (b) inadmissible cenvat credit of input services availed in respect of Air travel, accommodation charges, taxi hire charges, AMC for flat at Delhi and (c) limitation. As far as applicability of Rule 6(3) of CCR is concerned, I find as per the Department noted in the impugned order in para 7.1 by relying upon Notification 15/2006-ST dated 24/04/2006 read with Notification 03/2011-CE dated 01/03/2011, the definition of "exempted service" has been granted to the effect that an explanation has been inserted to the said rule clarifying that exempted service includes sale of space or time for advertisement in print media. This finding according to me is incorrect because the extract of Notification 3/2011 dated 01/03/2011 provides by way of explanation which renders "for the removal of doubt it is hereby clarified that exempted service includes trading." Further I find that activity of sale of space or time for advertisement in print media is specifically covered under the negative list in terms of Section 66D of the Finance Act, 1994 and therefore the same cannot be said to be an exempted service and the provisions of Rule 6(3) is not applicable to an activity which is in the negative list. Further, I find that the appellant during the stage of the audit itself has produced record before the audit saying that appellant has duly prepared separate accounts for cenvat credit availed in respect of taxable service, common credit availed for exempted services and taxable services. Further, I find that the appellant at the time of audit itself reversed the cenvat credit amounting to Rs. 60,672 (Rupees Sixty Thousand Six Hundred and Seventy Two only) along with interest of Rs. 41,637/- (Rupees Forty One Thousand Six Hundred and Thirty Seven only) on proportionate common credit and this fact has been noted in para 14.2.6 of the Order-in-Original and once the appellant has reversed the proportionate credit as per Rule 6(3A) of CCR, 2004 then it was not incumbent on the Department to issue a show-cause notice demanding reversal of 6/7% of the exempted turnover. Further, I find that it has been consistently held by the Tribunal in various decisions cited supra that Rule 6(3) clearly gives an option and it is for the manufacturer/service provider to make a choice and not intimating the Department regarding the choice is only a procedural lapse which will not defeat the substantive right of the appellant to avail the option provided under Rule 6(3). I also find that as per the revised computation for reversal as per Rule 6(3A), appellant was only liable to reverse an amount of Rs. 54,772/- (Rupees Fifty Four Thousand Seven Hundred and Seventy Two only) whereas he had already reversed during the audit Rs. 60,672/- (Rupees Sixty Thousand Six Hundred and Seventy Two only) along with interest. In view of the above discussion, with regard to issue no. (1) I hold that appellant has complied with the requirement of 6(3A) by reversing the amount which was required to be reversed. As far as wrong availment of credit on input service is concerned, I find that as far as Air travel/visa, accommodation and AMC for flat at Delhi is concerned, keeping in view the nature of output service rendered by the appellant the employees have to travel to places to organize business exhibitions and events and hence the travel is in relation to the output service provided and moreover these services have been held to be input service in the case of Emcom Technologies Pvt. Ltd. and Fine Care Biosystems and Goodluck Steel Tubes Ltd. (cited supra.).
6.1. Further, I find that when the accommodation bears a direct nexus with the output service, hence the AMC charges for the flat will also fall within the input service and registration of the premises where the said service is availed is not required in view of the decision of the Karnataka High Court in the case of Mportal India Wireless Solutions Pvt. Ltd. (cited supra). In this regard, I would cite the decision of Tally Solutions Pvt. Ltd. Vs. CCE - 2020 (41) GSTL 520 (Tri.-Bang.) wherein it has been held that "there is no one to one correlation and cross utilisation of credit is permissible clarification from 10-9-2004. C.B.E. & C. vide Letter F. No. 381/23/2010/862, dated 30-3-2010, clarified that Cenvat credit on inputs, capital goods and input services which are used for manufacture of goods or for provision of services is available in a common pool and can be used for payment of Excise duty and/or Service Tax. Credit accumulated by the service provider or manufacturer on the input services availed as well as inputs is available for payment of Excise duty or Service Tax. Any contra view taken would defeat the very scheme of credit. It has been held in numbers of cases that as far as the inputs or input services are availed on payment of duty and as long as they are capable of being used in the provision of Service Tax and manufacture of excisable goods credit cannot be denied; there is no requirement of one-to-one correlation."
6.2. Further as far as extended period of limitation is concerned, I find that in view of the decision cited by the appellant, extended period cannot be invoked because the show-cause notice was issued on the basis of departmental audit undertaken for the period October 2011 to September 2015 and all the facts were disclosed in the audit. Hence, suppression of fact with intent to evade service tax cannot be alleged against the appellant. Further, I find that the appellant has also produced a certificate from the CA computing the cenvat credit to be reversed under Rule 6(3A) of CCR, 2004 and has reversed more than what was required to be reversed.
In view of my discussion above and keeping in view the decisions rendered by the Tribunal cited supra, I am of the view that the impugned order is not sustainable in law and the same is set aside by allowing the appeal of the appellant with consequential relief, if any.
(Order was pronounced in Open Court on 22/03/2021)