21 STT 266 (BANG. – CESTAT)
CESTAT, BANGALORE BENCH
Chandra Shipping & Trading Services v. Commissioner of Central Excise & Customs, Visakhapatnam-II +
DR. S.L. PEERAN, JUDICIAL MEMBER AND T.K. JAYARAMAN, TECHNICAL MEMBER
FINAL ORDER NO. 1108 OF 2008
IN APPEAL NO. ST/339/2007
AUGUST 25, 2008
T.K. Jayaraman, Technical Member. – This appeal has been filed against the Adjudication Order No. 15/2007 (VR), dated 17-5-2007 passed by the Commissioner of Central Excise & Customs, Visakhapatnam-II Commissionerate.
2. Shri MSV Prasad, the learned Advocate, appeared on behalf of the appellants and Ms. Sudha Koka, the learned SDR for the revenue.
3. We heard both sides.
4. The appellants M/s. Chandra Shipping and Trading Services are registered as “Custom House Agent”. They also have registration as GTA. Revenue proceeded against the appellants on the ground that they had not paid the proper amount of service tax for the period from 2001, 2002 to 2004, 2005. There was also an allegation of wrongful availment of input credit. The Adjudicating Authority after adjudication passed the impugned order. In the impugned order, the Commissioner confirmed the following amounts :
(a) An amount of Rs. 16,88,640 on the amount received by the appellant during the period from 2001, 2002-2004, 2005 and also Rs. 51,384 towards Service Tax on the extra amounts received during 2001, 2002 under proviso to section 73(1) read with section 66 and section 68 of the Finance Act, 1994.
(b) The following amounts alleged to have been taken as input credit irregularly :
(i) Rs. 9,56,600 during the year 2003-04 from May 2003 to March 2004.
(ii) An amount of Rs. 16,33,840 during the year 2004-05 from April 2004 to December 2004.
(iii) An amount of Rs. 26,66,213 during the year 2005-06 from January 2005 to December 2005.
(iv) Totally an amount of Rs. 52,56,653 under Proviso to section 73(1) of the Finance Act as amended read with rule 6 of the Service Tax Credit Rules, 2002 and rule 14 of the Cenvat Credit Rules, 2004. Interest was demanded. Penalties were demanded under sections 76 and 78 of the Act.
5. The learned Advocate urged the point that the demand is hit by time bar. It was stated that the Commissioner has given a finding at para 31 in page 50 that the assessee had shown certain nominal amount as service charges as value of taxable service in their ST-3 returns and that they had suppressed details of credits taken/utilized in respect of inputs services in their ST-3 returns filed and that the facts of actual value of taxable service provided and credit taken/utilized in respect of input services have come to light only during the course of audit by the audit party. It was stressed by the learned Consultant that this finding is factually incorrect, since the assessee had been filing ST-3 returns in the prescribed format showing the taxable value in terms of Board’s circular and had been filing Cenvat credit returns indicating the credits taken and utilized. Our attention was invited to pages 73-76 and 104 and 91 of the paper book Volume-II wherein they enclosed the copies of the ST-3 returns and the Cenvat credit returns submitted by them to the department. It was urged that the department was fully aware as to how the appellant is calculating the taxable value and using the input service credit. The detailed work sheets are available in the paper book Volume-II. It was also stated that the appellant was under the bona fide belief in view of the Board’s circular that reimbursable amounts need not be included in the value of service tax for purposes of service tax calculation. That is the understanding of the appellant and when they are not by law needed to pay tax on the reimbursable amounts, it was not necessary to show them. Therefore, it was strongly pleaded that the demand is time-barred except for the month of December 2005. On merits also, the learned Consultant argued both the points. The Commissioner has not allowed the reimbursements. Our attention was invited to Board’s circular dated 6-6-1997 wherein it has been clearly stated that the reimbursable charges are not to be included in the taxable value of the CHA services and where there is a lump sum amount charged 85 per cent abatement is permissible. However, the Commissioner has not allowed the reimbursement and also the 85 per cent. The learned Consultant pleaded that the Board’s circular cannot be brushed away by the Commissioner and it is binding on all field formations. He relied on the decision of Supreme Court in Ranadey Micronutrients v. Collector of Central Excise 1996 (87) ELT 19. It was also pleaded that the Board’s circular does not mention about requirement of any evidence to show to the department regarding the reimbursements. It was stated that if they are not reimbursable amounts why should the importer pay them to the CHA. There is no evidence that the reimbursements had not been received by the appellant. Moreover, the assessee had maintained detailed accounts of these expenses which were categorized and given to the audit party besides evidences of invoice raised and payments raised. The audit never questioned the correctness of the expenses shown or the records where they are entered. In respect of an amount of Rs. 9,61,335 it represents abatement of 85 per cent from lump sum service charges claimed in terms of para 2.5 of the Board’s Circular. This also the Commissioner has disallowed on the ground that the bills raised show separate breakup of expenses. It was pleaded that apart from the lump sum fee several activities were undertaken for discharge and clearance of cargo and whatever activity is not covered in the lump sum fee was charged separately and this should not be included in the value for service tax purposes. This was ignored by the learned Adjudicating Authority. As regards the denial of the credit of input services for the period from 2003 December to December 2004, it was stated that the Commissioner denied these credits on the following grounds:
(i) The credit was taken on the services not used.
(ii) Payments for the input service as well as the service tax, there are not to be paid by the importers/exporters.
(iii) Invoice issued by the service provider contains the names of concerned importer as well as the appellants and the appellants have not produced any evidence to prove that these importers/exporters have not availed the service tax credit.
6. The learned Consultant stated that in terms of rule 3(1) of Service Tax Credit Rules, 2002 and rule 3(1) of Cenvat Credit Rules, 2004, an output service provided shall be allowed to take credit of the service tax paid on input service. The grounds on which the credit was denied are extraneous to these rules which have to be interpreted strictly as they are. Whether the importer has taken the credit or not is required to be verified by the department and the credit cannot be denied to the appellant who had actually paid the service tax on input services from out of their account current maintained with the input service provider. Credit cannot be denied on suspicion. It was also pleaded that in view of their two issues covered by merit in favour of the appellants, the penalty cannot be imposed. However, the learned Consultant stated that they are prepared to pay an amount of Rs. 51,384 on extra amounts collected along with interest voluntarily.
7. The learned Departmental Representative reiterated impugned order. She stated that the Commissioner has given a very detailed finding regarding the suppression of facts and the justification for invoking the longer period.
8. On a very careful consideration of the issue, we find that the ST-3 returns and also the Cenvat credit returns have been filed regularly by the appellant. In view of this, the larger period cannot be invoked. Therefore, we are inclined to give the benefit of time bar to the appellants. Hence, all demands excepting for December 2005 are not sustainable. As for December 2005, demands are confirmed and the appellant has to pay them. As regards the merits of the case, we find that the Board’s circular allows deduction on account of reimbursable expenses and where lump sum amount is charged 85 per cent deduction can be claimed on account of reimbursable account. The CHA apart for taking his commission spends money on account of several statutory levies and charges which have to be paid to various other agencies, it would not be correct to charge service tax on these amounts. There is no evidence with department that the appellant had not spent these amounts. When the returns are filed, if there is any doubt the department has to verify the correctness of the particulars given in the returns, both ST-3 returns and also the Cenvat credit returns. The department has not done that. Therefore, the allegations that the appellants have not spent these amounts on reimbursement and have not made payment towards tax on input service are not sustainable. The appellants have stated that the service tax on input services have been paid from out of their own account maintained with the input service providers. These facts could have been verified by the revenue. In the absence of verification, we have to give the benefit of doubt to the appellant. It is for the department to prove the allegations with solid evidence. The burden of proof is always on the department. In view of this above findings, we do not find that there is any suppression of facts, especially when the appellants had filed service tax returns and Cenvat tax returns regularly. Hence, we allow the appeal with consequential relief. The penalties are set aside. Only the demand for December 2005 is to be paid along with interest.