Appellant have already paid service tax from their Modvat credit, the deposit of the service tax collected from the buyers would amount to double payment. It may be noted that the proceedings are for confirmation of demand in terms of section 73A of the Finance Act which relates to the tax collected by an assessee from the buyers, which is not required to be collected. However, the appellant having already paid such collected amount to the Revenue (though through Cenvat credit), they cannot be made to deposit the same again with the Revenue.
CESTAT, New Delhi Bench
Sangam India Ltd.
Commissioner of Central Excise, Jaipur-II
FINAL ORDER NOS. 988-989 OF 2012-SM (BR)
APPEAL NOS. ST/125-126 OF 2011-(SM)
JULY 18, 2012
1. The appellant was engaged in the manufacture of Man-made Blended Yarn falling under Chapter 55 of the schedule to the Central Excise Tariff Act, 1985 and availing Cenvat credit. The appellant appears to have irregularly availed Cenvat credit of Rs.4,93,999/- on cargo handling service during September, 2008 to March, 2009. It appears that the appellant is clearing Coal Ash at nil rate of duty to their various customers. For the handling of coal ash, the assessee has obtained registration under service tax in the category of Cargo Handling Services. It appeared that coal ash (fly ash) is generated during the course of generation of electricity from the thermal power plant installed in the unit of appellant. The unit had entered into contract with M/s J.K. Cement, Nimbahera, and others. The para-1 of the specimen contract made with M/s J.K. Cement Works, dated 14.11.2008 reveal that the appellant has developed a fly ash system within their factory premises for loading of fly ash in the trucks etc. and charging Rs. 110/- PMT from their customers. Further, M/s J.K. Cement, Nimbahera and others are lifting fly ash and are paying Rs. 110/- PMT as charges for maintenance for fly ash system and loading expenses to the appellant. The transportation of fly ash from the factory premises of the appellant is being arranged by the buyers to their plant. That the appellant has developed a system for loading the fly ash and they were doing all these activities for themselves within the factory premises for clearance of fly ash. As the fly ash has been cleared at factory gate and the said system of the appellant mere enables them to deliver the said goods at factory gate, they are providing service to themselves. Hence, the appellant cannot be termed as service provider. Therefore, they are not liable to pay service tax on the loading/lifting of fly ash at their unit.
2. As per Rule 2(p) of Cenvat Credit Rules “output service” means any taxable service, excluding the taxable service referred to in sub-clause (zzp) of clause 105 of section 65 of the Finance Act, provided by the provider of taxable service, to a customer, client, subscriber, policyholder or any other person, as the case may be and the expressions ‘provider’ and ‘provided’ shall he construed accordingly. As such the service tax paid by the appellant is not in order. The appellant is paying service tax under the category of ‘Cargo Handling Services’. In the instant case they have collected service tax from M/s J.K. Cement Works and others which they are liable to deposit with the government account. Whereas section 73A of Chapter V of the Finance Act, 1994 provides that where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Govt. Further section 73B of Chapter V of the Finance Act, 1994 provides that where an amount has been collected in excess of the tax assessed or determined and paid or any taxable service under this Chapter or the rules made thereunder from the recipient of such service, the person who is liable to pay such amount as determined under sub-section 4 of section 73A, shall, in addition to the amount, be liable to pay interest. Accordingly the appellant was issued a show-cause notice dated 30.09.09. After considering the submissions of the appellant, the adjudicating authority confirmed the demand of service tax amounting to Rs. 4,93,999/-along with interest under section 73A and 73B of the Finance Act, 1994. Penalties under section 76 and 77 of the Finance Act, 1994 were also imposed on the appellant.
Appeal against the above order of the adjudicating authority did not succeed before Commissioner (Appeals), hence the present appeal.
3. After hearing both sides, I find that the short issue involved in the present appeal is as to whether the amount of service tax collected by the appellant from their customers is required to be deposited with the department in terms of provisions of section 73A of Finance Act, 1994 on the ground that the appellant was not required to pay service tax, which they have paid by using the Cenvat credit. Irrespective of the fact that whether the appellant was required to pay service tax or not, the facts remain that service tax stands paid by them through Cenvat credit. Can it be said in such circumstances that the appellants have retained the service tax collected by them from their customers so as to deposit the same with the Revenue in terms of the provisions of section 73A.
4. A more or less identical issue was considered by the Larger Bench of the Tribunal in the case of Unison Metals Ltd. v. CCE 2006 (204) ELT 323 (Tri. – LB). The assessee in that case was reversing 8 per cent of the Cenvat credit in respect of the exempted goods cleared by them. Such reversal was being made in terms of erstwhile provisions of Rule 57CC of Central Excise Rules, 1944. Such 8 per cent was being collected by the assessee from their customers in cash. Revenue entertained a view that such recovery of 8 per cent by the assessee is required to be deposited in terms of section 11D of Central Excise Act, 1944.
5. The Larger Bench of the Tribunal in the above referred case held that by reversing the amount of 8 percent, the assessee has paid that amount to the Revenue. Though such amount was strictly not excise duty but the recovery of the said 8 per cent from the buyers cannot be held to be again deposited with the Revenue u/s 11D. By applying the ratio of the above decision to the facts of the present case, it is held that as the appellant have already paid service tax from their Modvat credit, the deposit of the service tax collected from the buyers would amount to double payment. It may be noted that the proceedings are for confirmation of demand in terms of section 73A of the Finance Act which relates to the tax collected by an assessee from the buyers, which is not required to be collected. However, the appellant having already paid such collected amount to the Revenue (though through Cenvat credit), they cannot be made to deposit the same again with the Revenue.
6. In view of the foregoing discussion, I set aside the impugned order and allow the appeal with consequential relief to the appellant.