Case Law Details
GP Petroleums Ltd Vs Commissioner of CGST (CESTAT Mumbai)
CESTAT Mumbai held that legality or admissibility of credit can only be question to the Input Service Distributor, since at the receiver end no detail would be available regarding the nature of services.
Facts-
The issue involved herein is about the availment of Service Tax credit by the appellant against the invoices issued by Input Service Distributor (hereinafter referred to as “ISD”). As per case records since in separate proceedings for the period from March, 2013 to April, 2015 the Adjudicating Authority therein vide Order-in-Original dated 23.12.2016 disallowed the Cenvat credit to the appellant under proviso to Section 11A of the Act, therefore according to Revenue in the instant proceedings for the period in issue i.e. May, 2016 to March, 2017 also the appellants have wrongly availed the service tax credit of Rs.3,28,395/- and accordingly a show cause notice dated 05.05.2017 was issued to the appellants for recovering the said amount along with interest and penalty which has been confirmed and upheld by the authorities below.
Conclusion-
It is incumbent upon the ISD to prove the eligibility or otherwise the Service Tax credit, since at the receiver end no detail would be available regarding the nature of services. Further in view of Swastik Tin Works judgment, cited supra, a clear finding has emerged that Additional Commissioner (Audit) has no jurisdictional assessment and no power to issue show-cause notice to raise demand, that to invoking extended period of limitation. For both the reasons, the appeal would succeed.
Held that legality or admissibility of credit can only be question to the ISD by its jurisdictional authority, I am of the considered view that appellant’s appeal merits consideration in favour of its acceptance. Hence the Order.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal has been filed by the appellant assailing the order dated 27.02.2018 passed by the Commissioner (Appeals-III), CGST & Central Excise, Mumbai in Order-in-Appeal No NA/GST A-III/MUM/430/17-18 by which the Commissioner (Appeals) rejected the appeal filed by the appellant.
2. The issue involved herein is about the availment of Service Tax credit by the appellant against the invoices issued by Input Service Distributor (hereinafter referred to as “ISD”). As per case records since in separate proceedings for the period from March, 2013 to April, 2015 the Adjudicating Authority therein vide Order-in-Original dated 23.12.2016 disallowed the Cenvat credit to the appellant under proviso to Section 11A of the Act, therefore according to Revenue in the instant proceedings for the period in issue i.e. May, 2016 to March, 2017 also the appellants have wrongly availed the service tax credit of Rs.3,28,395/- and accordingly a show cause notice dated 05.05.2017 was issued to the appellants for recovering the said amount along with interest and penalty which has been confirmed and upheld by the authorities below.
3. I have heard learned Chartered Accountant for the appellant and learned Authorised Representative for the Revenue and perused the case records including the written submissions and case laws. It is borne out from the case records, that the main reason for initiating the current proceedings against the appellant is the Order-in-Original dated 23.12.2016 in appellants own case for the earlier period i.e. March, 2013 to April, 2015 on the same issue and the show cause notice herein dated 5th May, 2017 has specifically recorded in the concluding paragraphs as under:-
“5. The demand cum Penalty notice is based on the Order-in-Original No.PKS/30/2016-17 dated 23.12.2016 and the information/details of Service Tax Credit availed for the period from May, 2015 to March, 2017 submitted by the assessee vide their letter dated 28.4.2017 received on 02.05.2017.
6. M/s. GP Petroleums Ltd. would be heard in person only on the limited issue of appropriateness in quantification of duty demanded, as the issue of non-eligibility of Service tax Credit has already been decided on merit by the Deputy Commissioner in his order dated 23.12.2016.”
Not only that the learned Commissioner herein while passing the impugned order has recorded a specific finding that in spite of the fact that the issue has been decided in adjudicating for previous period in favour of the department and the appellants are under obligation to pay the proper duty, they are still defying the orders and not paying the duty.
4. Learned Chartered Accountant appearing for the appellant drew my attention towards the Final Order No. A/85416/2019 dated 28.2.2019 in appellant’s own case viz. Appeal No. E/86761/2018 M/s. G.P. Petroleum Ltd. vs. CCE&ST, Raigad in which this Tribunal in a challenge arising out of Order-in-Appeal dated 27.3.2018 [arising out of Order-in-Original dated 23.12.2016 which is the root cause for initiating the instant proceedings against the appellant by the department] allowed the appeal filed by the appellant for the earlier period i.e. March, 2013 to April, 2015. The relevant paragraphs of the said order of the Tribunal are reproduced hereunder:-
“2. Factual backdrop of the case is that appellant has its corporate and registered office at Mumbai which had got Input Service Distributor (ISD) registration. Central Excise department had carried out audit in August, 2015 of the records of appellant located at Vasai for the period between February 2014 and June, 2015. It was put to show-cause notice on the allegation that some of the credits likes Estate Agent Services, Chamber Membership fees, Personal Accident Insurance services etc. were in the exclusion clause, one invoice of Rs. 39,608/- was issued in the address of appellant at Daman unit and the manner of distribution of Service Tax credit was improper. The appellant challenged the same, matter was adjudicated and duty demand was confirmed in the Order-in-Original and Order-in-Appeal by way of dismissal of appellant’s appeal before the Commissioner (Appeals) and the matter has ultimately reached the Tribunal.
3. In the memo of appeal and during the course of hearing of appeal, learned Counsel for the appellant Shri Prabhat Kumar has submitted that in view of Rule 2(M) and Rule 7 of CENVAT Credit Rules, 2004 the ISD receives invoices under Rule 4A of the Service Tax Rules, 1994 towards purchase of input services and issues challans for the purpose of distributing the credit of Service Tax paid on the said services to its manufacturing unit. In view of the decision of Ahmedabad CESTAT in Godfrey Philips India Limited reported in [(2009) 14 STR 375], since ISD only provides service provider’s details to the units and Rule 4A(2) of Service Tax Rules does not stipulate mentioning of the nature of the services provided and the detail of services availed, determination of ineligibility emanates at the end of the ISD, and not at the end of the manufacturing unit, who should be questioned on the admissibility or inadmissibility of such credit. In submitting detail of correlation between the input services and output services vis-a-vis manufacturing of goods, on alternative plea was also made to justify that those services were also availed in relation to the output. Further, he contended that part of the demand is barred by limitation, since availment of input credit period was between March, 2013 and April, 2015 whereas show-cause was issued in the month of April, 2016 by extending limited period arbitrarily, when the basis of such show-cause was audit objection for which he prays to set aside the order of Commissioner (Appeals), besides the fact that he challenged that jurisdiction of Dy. Commissioner of Central Excise to adjudicate on show-cause notice issued by Additional Commissioner (Audit) and placed his reliance on Tribunal’s judgment reported in [1986 (5) ELT 798 (Tri.)] in the case of Swastik Tin Works Vs. CCE.
4. Learned Authorised Representative for the respondent-department Shri A.B. Kulgod, Assistant Commissioner has reiterated the reasoning and rationality found in the order of Commissioner (Appeals) and submitted that appellant had admittedly availed inadmissible credits, some of which were specifically excluded by way of amendment introduced to CENVAT Credit Rules in 2011 for which interference in the order of Commissioner (Appeals) is uncalled for.
5. Heard from both sides at length and perused the case records as well as the judgment of Godfrey Philips India Limited (supra) on which heavy reliance had been placed by the appellant. The relevant portion of the said judgment at para 5 reads as here under:-
“5. When we look at the functions of the input service distributor and the documents to be issued by him for passing on the credit, it becomes quite clear that the document issued by him for passing on the credit does not contain the nature of service provided and the details of services. It contains the service provider’s details, distributor’s details and the amount. Obviously the eligibility or otherwise of the service tax credit has to be examined at the end of input service distributor only. This is further supported by the fact that both Central Excise assessees and Service Tax assessees are under the regime of self-assessment and therefore it is the assessee himself who has to specify that the credit availed by him is admissible. Therefore the input service distributor cannot say that he is not required to prove the eligibility or otherwise of the service tax credit since at the receiver’s end which could be a branch or a factory of the distributor, no details would be available regarding the nature of service. Therefore the preliminary objection raised by the ld. Advocate has to be rejected and it has to be held that it is the responsibility of the jurisdictional officer with whom input service distributor has registered to decide the dispute regarding eligibility or otherwise of the service tax credit that the input service distributor has taken and proposes to pass on to others.”
In view of above finding of the Tribunal, it is incumbent upon the ISD to prove the eligibility or otherwise the Service Tax credit, since at the receiver end no detail would be available regarding the nature of services. Further in view of Swastik Tin Works judgment, cited supra, a clear finding has emerged that Additional Commissioner (Audit) has no jurisdictional assessment and no power to issue show-cause notice to raise demand, that to invoking extended period of limitation. For both the reasons, the appeal would succeed.
6. So far as audit is concerned now coming to the statutory audit procedure, the purpose of audit, as available in the Manual published by the Institute of Chartered Accountants of India in respect of EA audit and CERA audit under Chapter 17 is that the idea behind such conduct of verification is to reasonably ensure that no amount, which under the central excise law is chargeable as duty, escapes taxation and the process of verification is always carried out in the presence of assessee and in the process, the auditor is required to discuss the matter with the assessee and advice him to follow correct procedure in future. It is also referred in the said manual that after such submission of audit report, in cases where the disputed amount have not already been paid by the assessee at the spot, demand notices are issued by the department for their recoveries. EA 2000 audit was therefore held to be participative audit. Likewise CERA audit is conducted by the Comptroller and Auditor General of India in respect of receipt and expenditure of the Government of India. It also discharges revenue audit which covers central excise, service tax and customs laws during which time the assesses were examined by CERA audit party to point out the deficiencies, leakage of revenue and non recoveries of dues by the Central Excise Department. Therefore, it cannot be said that only because audit party had found some credit availed as inadmissible, suppression of fact is made out.
Further it is not established that appellant had any malafide intention to suppress its duty liability from the department.
7. In view of above observation and in view of the fact that legality or admissibility of credit can only be question to the ISD by its jurisdictional authority, I am of the considered view that appellant’s appeal merits consideration in favour of its acceptance. Hence the Order.
ORDER
8. The appeal is allowed and order of the Commissioner of CGST & Central Excise (Appeals), Mumbai in Order-in-Appeal No. SM/CGST & CX/Bhiwandi/APP-38/17-18 dated 27.02.2018 is here by set aside.”
5. In view of the aforesaid decision of the Tribunal, since the basis of the initiation of the current proceedings by the department for the period in issue itself has gone, the current proceedings can’t survive. Therefore in the peculiar facts of this case, following the aforesaid decision of the Tribunal, I am inclined to set aside the impugned order. Resultantly, the appeal filed by the appellant is allowed with consequential relief, if any, as per law.
(Pronounced in open Court on 23.11.2022)
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