CENVAT Credit Allowed on Employee Travel, Guest House & Health Insurance for Business Use

Delhi Cargo Service Centre Private Limited Vs Principal Commissioner of Central Goods And Service Tax (CESTAT Delhi)

The Customs, Excise and Service Tax Appellate Tribunal examined an appeal against an order confirming service tax demand of Rs.2,70,80,797 along with interest and equal penalty under Section 78 of the Finance Act, 1994. The dispute arose from audit objections covering multiple issues including non-reversal of CENVAT credit on exempt supplies, reverse charge liability on rent-a-cab services, admissibility of CENVAT credit on certain services and debit notes, taxability of refund of license fees, and interest on advance receipts.

The department alleged that the appellant was providing both taxable and exempt services, including services to SEZ units, while availing full CENVAT credit without maintaining separate accounts or reversing proportionate credit under Rule 6(3) of the Cenvat Credit Rules, 2004. It was also alleged that service tax under reverse charge had not been paid on rent-a-cab services, inadmissible CENVAT credit had been availed on rent-a-cab, health insurance and guest house-related services, credit had been wrongly availed on debit notes, and credit had been taken on works contract services relating to building and civil structures. Further, the department treated refund of license fees received from Delhi International Airport Private Limited for delayed handover of land as consideration for “tolerating an act” taxable under Section 66E(e). Interest was also demanded on advance receipts on which tax was paid later at the time of invoicing.

On non-reversal of CENVAT credit, the Tribunal noted that it was admitted that taxable as well as exempt services were provided and separate accounts were not maintained. Therefore, liability under Rule 6(3) arose, and demand of 7% on exempted services was upheld for the normal period. Likewise, reverse charge liability on rent-a-cab services was upheld for the normal period in terms of the applicable notification.

However, on CENVAT credit availed on rent-a-cab, security/caretaker services for guest houses, and health insurance, the Tribunal held in favour of the appellant. It observed that rent-a-cab services used for business travel by employees and professionals were eligible input services. On guest house-related services, invoices showed that caretaker services were supplied for guest houses used by employees and visiting professionals for official purposes, and there was no material showing personal use. Health insurance credit was also allowed, with the Tribunal noting that group health and insurance policies for employees supported business operations and fulfilled employer obligations. Accordingly, credit on these services was held admissible.

On CENVAT credit availed on debit notes, the Tribunal held that credit could not be denied merely because the document was styled as a debit note, so long as it contained all mandatory particulars required under Rule 9(1) of the Cenvat Credit Rules and Rule 4A of the Service Tax Rules. Since the Revenue failed to establish absence of mandatory details, the credit was allowed.

The Tribunal also allowed credit on works contract-related expenditure after examining the nature of the work, which included terrace repairs, miscellaneous repairs, agent sitting rooms, and other maintenance activities at the cargo terminal site. It held that repair, renovation, and maintenance services relating to premises of the output service provider were specifically eligible input services, and therefore the credit was admissible.

On the largest demand relating to remission or refund of license fees, the Tribunal rejected the department’s view that the amount represented consideration for tolerating delayed handover of land. It found that the amount received was refund or reversal of excess license fees paid because land was not handed over on time. This represented reversal of an earlier cost or expense and not consideration for any service or for agreeing to tolerate an act. Since there was no provision of service by the appellant, the demand raised under Section 66E(e) was set aside.

On interest for advance receipts, the Tribunal upheld the demand. Referring to Rule 3 of the Point of Taxation Rules, 2011, it held that where advance is received towards provision of taxable service, liability to pay service tax arises on receipt of such advance. Since tax was paid only at the time of invoice issuance, interest on delayed payment was payable.

On limitation, the Tribunal held that invocation of the extended period was not sustainable. It observed that major demands had failed on merits, the appellant was otherwise eligible for substantial CENVAT credit, and there was no evidence showing deliberate suppression of facts or mala fide intent to evade tax. Mere omission was insufficient to invoke the extended period, which required deliberate withholding of correct information. Accordingly, extended limitation and consequential penal consequences were not sustained. The appeal was partly allowed and the impugned order modified accordingly.

FULL TEXT OF THE CESTAT DELHI ORDER

The present appeal has been filed by M/s. Delhi Cargo Service Centre Private Limited’, against the Order-in-Original No.68/TPS/PC/CGST/DSC/2020-21 dated 09.02.2021 passed by the Principal Commissioner of Central Goods and Service Tax, Delhi South, New Delhi, which confirmed the demand of service tax amounting to Rs.2,70,80,797/-; along with interest and imposed penalty of Rs.2,70,80,797/- under Section 78 of the Finance Act, 1994.

2. The brief facts are that the Appellant were registered with service tax department for rendering taxable services viz., Cargo handling services as defined under Section 65(105) of the Finance Act, 1994. During the course of audit and verification of the records, the Department observed the that the Appellant were providing taxable as well as exempted (services provided to SEZ) services and taking full Cenvat credit without maintaining separate records, nor has reversed such Cenvat credit under Rule 6(3) of the Cenvat Credit Rules. Further on scrutiny of documents, the audit observed that the Appellant had not paid service tax under reverse charge for procuring services of renting of motor vehicle. It was also noted that the Appellant had availed Cenvat credit on bills related to services of rent a cab, health insurance and security services provided at the guest house owned by the Appellant. The Appellant had also availed Cenvat Credit on debit notes which was not prescribed document for taking Cenvat credit. Audit also noted that Cenvat Credit was taken on works contract related to building and civil structures which was inadmissible as per Rule 2(1) of Cenvat Credit Rules, 2004. Further credit notes amounting to Rs.11,29,72,594/- was received towards final settlement of its claim lodged with Delhi International Airport Private Limited² for remission and refund of License fees on account of delay in handling over vacant possession of certain portion of land. Similarly, the Appellant received an amount of Rs.4,15,52,209/- during 2013-14 from DIAL on account of delay in handing over a piece of land. It appeared that the activity of the Appellant for tolerating late handing over of land by DIAL was liable for service tax under Section 66E(e) of the Finance Act, 1994. On scrutiny of documents, the department observed that the Appellant had taken advance from customers, but had paid service tax only at the time of issue of the bill. Thereafter, a Show Cause Notice dated 22.04.2019 was issued to the Appellant for demand of Service tax of Rs.2,70,80,797/- along with applicable interest; interest of Rs.1,05,681/- under section 75 for advance payment received and alleging penalty under section 76,77 & 78 of the Finance Act, 1994. The said show cause notice was adjudicated vide Order-in-Original No. 68/TPS/PC/CGST/DSC/2020-21 dated 09.02.2021, wherein adjudicating authority has confirmed the demand of Rs.2,70,80,797/-, interest of Rs.1,05,681/- & imposed penalty of Rs.2,70,80,797/-under Section 78 of the Finance Act, 1994. Aggrieved by the said impugned order, the Appellant has filed the present Appeal before this Tribunal.

3. Learned counsel submitted that the parent company of the Appellant, Cargo Service Centre (India) Private Limited³ had entered in to Concession Agreement with DIAL on November 19, 2009, for design, finance, development, construction, operation, maintenance and management of Cargo Terminal at Delhi Airport. In terms of the said Concession Agreement, CSC incorporated the Appellant as a Special Purpose Vehicle (SPV). A novation agreement was entered into between CSC, DIAL & the Appellant. He submitted that DIAL was responsible to handing over 48,500 Sq. mtrs. to the Appellant on execution of the Concession Agreement. Learned counsel also submitted that DIAL was to remain the Custodian of the Cargo Terminal during the entire concession period, and as a condition precedent, to receive all clearances required for the custodianship, clearance for import/export and transshipment of goods and cargo. Further, learned counsel stated that the Appellant was required to pay licence fees in advance to DIAL computed at the rate of Rs. 2,098 per square meter of the land area to be granted in terms of the concession agreement. The Appellant had regularly paid license fees to DIAL for the cargo terminal site from the effective date of the Concession Agreement. On December 15, 2012 the appellant lodged a claim of Rs. 15,43,26,072/- with DIAL, on the grounds of incomplete and delayed handover of land which had led to inordinate delays in the completion of the construction and development works at Cargo terminal site. Ld Counsel submitted that the Appellant had submitted to DIAL that they should not be charged Land License Fee for the duration of delay in handing over the complete site, and filed a claim for the refund of license fees already paid on such portion of land not handed over to the Appellant. After several rounds of discussions, the claims were finally settled and DIAL issued credit notes referred below towards refund of license fees paid by the Appellant to DIAL;

3.1 Learned counsel contended that the present case clearly represented deficient service and renegotiation of consideration resulting in refund of excess amount paid. This issue was covered by Rule 6(3)(a) of the Service Tax Rules, 1994, which specifically covered renegotiation of amount due to deficient provision of service. He further contended that in order to qualify as declared service under Section 66E(e) of the Finance Act, 1994, there had to be a service by the Appellant to DIAL. Learned counsel further stated that the Show Cause Notice and the impugned order had stated that Appellant has received refund of licence fees. Clearly, such refund has been claimed on account of excess license fees paid by the Appellant to DIAL. The Appellant has not provided any services or tolerated any specific act of DIAL. He further stated that the Appellant had incurred this expenditure towards group health policy of its employees at large.

3.2. Learned counsel submitted that the issue of eligibility of CENVAT on health insurance of employees had already been decided by this Tribunal in M/s. Essjay Ericsson (P) Ltd. Versus Commissioner of CGST, Delhi East⁴, which has been affirmed by Hon’ble High Court of Delhi, in the matter of Commissioner of CST Delhi East Versus M/s. Essjay Ericsson P. Ltd.⁵. Similarly, Learned counsel placed reliance on Tribunal’s decision in M/s Rajratan Global Wire Ltd. Versus Commissioner, Central Goods & Service Tax, Ujjain⁶, wherein CENVAT credit availed on insurance services has been allowed since there was no evidence that these services were for personal use of the Appellant. He further submitted that the Tribunal and the hon’ble High Court have relied upon the decision of the larger bench of CESTAT Mumbai, in the case of Reliance Industries as well as the judgment of Hon’ble High Court of Karnataka in the matter of Millipore India Pt Ltd. and held that CENVAT credit availed on Group Personal Accident Policy, Group Term Life Policy and Group Mediclaim Policy taken for employees is eligible for credit and cannot be disallowed. Learned counsel stated that the Appellant had availed CENVAT on Group Health & Group Personal Accident Policy. He further stated that the Appellant had availed services of a caretaker from one supplier towards guest house for use by the employees and other professionals who visited Delhi to oversee the development of Cargo terminal at the airport. Learned Counsel contended that such visits were imperative for smooth operation of the Cargo terminal and Cargo handling services provided by the Appellant. In this context, Learned counsel placed reliance on the judgment of CESTAT Chandigarh, in the matter of M/s. Honda Motorcycle & Scooter India P. Ltd. Versus CCE, Delhi-III’. The aforementioned judgment was relied upon by the CESTAT Chandigarh, in the matter of M/s Freudenberg Nok Pvt. Ltd. (Formerly Known As Sigma Freudenberg Nok Pvt Ltd) Versus CCE & ST-Chandigarh-I⁸, wherein CENVAT credit on use of guest houses was allowed as credit.

3.3 Learned counsel further submitted that as regards credit taken on rent-a-cab services, travel arrangements were made for company employees and other professionals when they would travel out of Delhi, for business purposes. Such travel was carried for business purposes and was necessary for providing output services. In this connection he placed reliance on the judgment of the Tribunal in the matter of M/s. Marvel Vinyls Ltd. Versus C.C.E. Indore⁹. He stated that arranging necessary and required travel for the employees was imperative towards cargo handling and airport services given by the Appellant. He submitted that the Impugned Order had erred by not appreciating the inclusive limb of the definition which clearly provides that any service used for providing output service is eligible for credit.

3.4 Learned counsel also submitted that the Appellant had incurred expenditure on routine repair work, maintenance and interior renovation work of the cargo terminal site, on which operations are performed by the Appellant. He placed reliance on the CBEC Circular No. 943/4/2011-CX dated 29.04.2011. In this regard, Ld Counsel relied on the decision of the Tribunal in the matter of M/s Sarda Energy and Minerals Ltd. Versus Commissioner of Central Excise (Appeals), Raipur¹⁹.

3.5 As regards the denial of Cenvat credit taken on the basis of Debit Notes, learned counsel stated that the finding was that debit notes was not mentioned among the list of documents in Rule 9 of the CENVAT Credit Rules, 2004, CENVAT availed on such debit notes has be disallowed. Learned counsel submitted that in Ad-Manum Packaging Pvt. Ltd. Versus Commissioner of C. Ex., Indore^ll and Commissioner of C. Ex., Indore Versus Gwalior Chemicals Industries Ltd.’², the Tribunal had allowed CENVAT credit taken on debit notes, and had set aside the demand.

3.6. Learned counsel further contended that the department had contended that the deposits by agents were in nature of advance receipts and the Appellant has delayed in payment of service tax on such advance receipts. He stated that in terms of Explanation Rule 3 of the Point of Taxation Rules, 2011. Learned counsel contended that the amount received by the Appellant from agents as deposit cannot be treated as advances towards provision of taxable service, since on the date of receipt of such deposits the Appellant is not in a position to ascertain whether such amount will be utilised or not for the provision of service or refunded to the agent.

3.7. As regards the invocation of extended period, learned counsel placed reliance on decision of the Tribunal in the matter of M/s. GD Goenka Private Limited vs. Commissioner of Central Goods and Service Tax, Delhi. Learned counsel submitted that CESTAT in several decisions have repeatedly held that extended period of limitation cannot be invoked in the absence of conscious and deliberate withholding of information by the Appellant. He also submitted that provisions to Section 78 of the Finance Act, 1994 can be invoked only in cases of fraud or collusion or wilful misstatement or suppression of facts by the Appellant. The Impugned Order has failed to establish elements for invoking penalty under Section 78 of the Finance Act, 1994.

4. At the outset, the learned authorized representative of the department reiterated the findings given in the Order-in-Original and in the Order-in-Appeal. He also submitted that under Rule 9 of the Cenvat Credit Rules, 2004, debit notes were not valid documents for taking Cenvat Credit. In absence of documents prescribed under Rule 9 Cenvat Credit cannot be allowed to be taken.

4.1 Learned authorized representative further contended that as per Rule 3 of Point of Taxation Rules, 2011, the liability is to pay service tax arises when advance was received. Thus, the Appellant was liable to pay tax on the date of receipt of such advance, and hence was liable to pay interest on delayed payment of service tax. As regards the submissions that a pre-Show cause Notice consultation was mandatory, but a bare reading of the Circular dated 10.03.2017 would show that the pre-consultation Notice was not mandatory for the cases booked under fraud, collusion, wilful mis­statement, suppression of facts, evasion of tax etc. which was further clarified by the Board vide Circular No.1079/03/2021-CX dated 11.11.2021. In the impugned case the demand had been issued under confirmed on extended period of limitation and imposed penalty under Section 78 of the Act, therefore it falls under exclusion of mandatory pre-Show Cause Notice consultation.

4.2 Learned authorized representative contended that the Appellant had never disclosed the facts to the Department, and these facts came to the notice of the Department only at the time of audit of records. As the Appellant was working under self-assessment system, they are bound by service tax law to correct assess their service tax liability and thereafter file their ST-3 returns properly. The appellant did not assess the correct amount of service tax and have also not shown the actual amount in the relevant ST-3 returns and availed inadmissible Cenvat credit. He contended that the appellant had willfully suppressed the facts from the department with intention to evade the payment of service tax. Therefore, extended period and penalty under section 78 is invokable. In view of the above, he prayed that present appeal may be dismissed.

5. We have heard the learned counsel for the appellant and the learned authorized representative for the Department. The following issues are presently under consideration:

6. We will consider each issue individually as per the table above:

6.1 (i) Non-reversal of CENVAT Credit: We find that it is an admitted fact that the appellant was providing both taxable and exempted services, and it is also admitted fact that the appellant was not maintaining separate accounts. Hence, the liability to pay 7% of exempted service arises in view of Rule 6(3) of the Cenvat Credit Rules, 2004. The demand is upheld for the normal period.

6.1 (ii) RCM on Rent-a-Cab: Learned counsel has contended that this demand was for the extended period and cannot be sustained in view of the Tribunal decision in G.D. Goenka (supra). In this context, we note that the impugned order has noted that the appellant is liable to pay service tax under RCM in compliance of SI. No.7(b) of Notification No. 30/2012 dated 20.06.2012. In view of the legal position, we uphold this demand for the normal period.

6.1 (iii) Cenvat credit taken on Rent-a-Cab, security and health insurance- As regards credit taken on rent-a-cab service, we find that the issue is no more res-integra. We find that the Tribunal in several decisions has permitted such credit on rent-a-cab service, which are as follows:

a. Marvel Vinyls Ltd. CCE¹³:

b. Electronics Technology Parks CCE¹⁴:

c. Plant Tech Midcontinent India Pvt. Ltd. CCE¹⁵:

d. Macurex Sensors Pvt. Ltd. CCE¹⁶:

e. CCE Maa Communications Bozel Ltd.¹⁷

f. CCE Nihilent Technologies Pvt. Ltd.¹⁸:

g. Piramal Enterprise Ltd. CCE¹⁵

h. Godawari Power Ltd. CCE”:

Hence, we set aside this demand following the ratio of the above decisions.

Security Service: It has been contended by the learned counsel that the credit was taken for supply of caretakers for the guest house used by the professionals & employees visiting for official purposes. He stated that the Department had incorrectly held it as security services. In this context, we note that the Bombay High Court in Associated Capsules P Ltd. vs. Commissioner, Thane-III²¹, held as follows:

“5. Having heard the learned Counsel for the parties and having perused the documents on record, we notice that the term ‘input service’ contained in CENVAT Credit Rules 2004, contains certain exclusion clause. Clause (C), inter alia, excludes travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily, for personal use or consumption of any employee. Accordingly, if the guest houses were utilized by the Assessee for extending benefit to the employees, for the personal use or consumption, the Assessee was not entitled to avail CENVAT credit thereof. This, even Assessee does not dispute. The case of the Assessee, however, is that, none of the guest houses were used for the personal use or consumption of the employees. In order to test this premise, Tribunal itself formulated the test that those guest houses which are situated next to the manufacturing unit of the Assessee, would qualify for the benefits. The rest would not. This, may appear to provide a rough and ready formula, in our opinion, the same is not entirely satisfactorily.

6. Even in relation to a guest house which may not have been situated close to the manufacturing unit of the Assessee, if it is pointed out that the use thereof was not for the personal use or consumption of the employees, exclusion clause in the definition of input service, may not apply…… “

In the instant case, we note that a perusal of the invoices (RUDs) clearly shows that it was raised for supply of caretaker to guest houses. Hence the credit was eligible to the appellant as held in the Tribunal decisions (supra). Health Insurance: Learned counsel has contended that group health insurance for employees for not for personal use and hence credit is eligible. We note that this Tribunal in several of its decisions has held that Cenvat credit is available for group mediclaim and insurance policies covering employees as these support the business and also fulfills employer obligation. We further draw support from the judgment of Karnataka High Court in Commissioner of Central Excise & Service Tax, LTU vs. M/s. Micro Labs Ltd.²² dated 09.06.2011, wherein the Hon’ble High Court held as follows:

“4. The question for consideration therefore is as to whether the assessees are liable to avail Cenvat credit towards payment of service tax on the Group Insurance Health policy. An identical question came up for consideration before the Division Bench in CEA 96/2009 and connected matters which were disposed off on 8-4-2011. The question considered therein was as to whether the assessees are entitled to claim Cenvat credit for the service tax paid on Insurance/Health Insurance policy. The Division Bench held that in so far as Insurance coverage to the employees is concerned in the course of employment if the employees suffer injury or dies, there is a vicarious liability imposed on the employer to compensate the employee. If the employer employs its own transportation facility in order to cover the risk which also includes the risk of workers who are covered in that statutory establishment, he has to take the insurance policy with which the vehicle cannot go on the road. Even for entering into the premises to meet the obligations under the workmen’s compensation Act he has to obtain the Insurance Policy covering the risk of the employees. The employee State Insurance Act takes care of the health of the employees also and casts an obligation on the employer to provide insurance services. Under these circumstances, this Group Insurance Health Policy though is also a welfare measure is an obligation which is cast under the Statute that the employer has to obey. Section 38 of the Employees State Insurance Act, 1948, mandates that subject to the provisions of the Act, all employees in factories or establishments to which this Act applies shall be insured in the manner provided by this Act. May be the employees also have to contribute but the employer is under an obligation to take an Insurance policy and contribute his share. Therefore, the said Group Insurance Health Policy taken by the assessee is a service which would constitute an activity relating to business which is specifically included in the input service definition.

5. Therefore, merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessees are not entitled to the benefit of CENVAT credit. Infect, Rule 3 of the Cenvat Rules, 2004, specifically provides that the manufacturer of final products shall be allowed to take credit. The service tax is leviable under Section 66 of the Finance Act and paid on any input service received by the manufacturer of a final product. Therefore under the scheme of the Cenvat Credit Rules, 2004, the service tax paid on all those services which the assessee has utilized directly or indirectly in or in relation to the final product is entitled to claim the credit. Therefore, the Judgment of the Tribunal is legal and valid and is in accordance with law and does not suffer from any legal infirmity which calls for any interference.

6. Therefore it is evident that the assessees are entitled to avail Cenvat credit of the service tax on Group Medical Policy and Group Insurance Health Policy. Under these circumstances, the question of law that arises for consideration in this appeal having since been answered by the Division Bench as mentioned hereinabove, this appeal is dismissed in view of the aforesaid reasons.”

In view of the foregoing, we hold that the appellant is eligible to avail credit of the same.

6.1 (iv) Credit taken on debit notes: It has been submitted by learned counsel that the debit note contains all relevant particulars as found in the invoice. Hence credit should not be denied. The impugned order has relied on Rule 9 of the Credit Rules which specify the documents on which Cenvat credit can be taken. In this context, we note that this Tribunal has consistently held that as long as debit notes contained all requisite information as prescribed under Rule 9(1), these should be considered on par with invoices and hence credit cannot be denied. Some of the decisions are as follows:

i. CCE, Indore Gwalior Chemicals Industry Ltd.²³

ii. Vodafone Essar Spacetel Ltd. Commissioner of Central Excise, Customs & Service Tax- BBSR-I²⁴

In this present context, we note that as long as all mandatory details of valid tax invoice as per Rule 4A of Service Tax Rules, 1994 and Rule 9 of CCR, 2004 are available, credit cannot be denied especially when the tax has been paid by the provider. There is no evidence led by Revenue to establish that all mandatory details were not available in such debit notes. Hence, we hold that such credit taken on debit notes is correct.

6.1 v. Inadmissible Credit on WCS: Learned counsel has submitted that this expenditure was incurred on routine repair work, maintenance and interior renovation work of the cargo terminal site. A perusal of the relevant RUD to the show cause notice clearly lists the nature of the work carried out, which, inter alia, include Repair Work of terrace, miscellaneous repair work, agent sitting rooms and other similar maintenance related work. We note that the CBEC Circular No.943/4/2011-CX dated 29.04.2011 classified as follows:

We note that it is settled legal position that Cenvat Credit availed repair, renovation maintenance is eligible for Cenvat credit. We draw support from the decision of this Tribunal in M/s. Sarda Energy & Minerals vs. Commissioner, Central Excise, Raipur²⁵

“In the light of these decisions when read with the definitions as collected above, it becomes abruptly clear is that the specific disallowance of availment of Cenvat credit with respect to such construction/erection, installation and commission, services which are with respect to the new construction if undertaken by the assessee, however, there is no such specific disallowance in Rule 2 (i) of CCR, 2004 with respect to repair and maintenance work of the premises of the manufacturer: I draw support from decision of this Tribunal in the case of Balkrishna Industries Ltd. versus Commissioner of CGST & C. Ex., Alwar reported as 2022(65) G.S.T.L. 247 (Tri. – Del.).”

In view of the above, we hold that the said credit is eligible to the appellant.

6.1 vi. Remission of license fees: The impugned order has held that such refund is an income to Appellant on account of tolerating an act of DIAL in the form of late handing over of possession of land. Section 66E of the Finance Act, 1994 lists specific declared services’ taxable under service tax such services, inter alia , include renting of immovable property construction services, agreeing to tolerate an act or situation. However, refund of license fees does not qualify as any of these declared services, as it represents a reversal of prior collections rather than consideration for a new taxable activity or provision of service. The description of the declared service in
question viz., agreeing to an obligation to refrain from an act or to tolerate an act or a situation. In this instant case, the refund of license fees was on the ground that the same was not due to be paid owing to delay in handing over by DIAL. This is merely a reversal of an earlier cost or expense and not consideration of service. We draw support from the decision of the Supreme Court in Her Shankar vs. Excise and Taxation Commissioner²⁶, wherein the Court held that license fee is not subject to tax as the same is not for any service. We are inclined to agree with the learned counsel’s submissions that it is an admitted fact that the said amount was refund of license fee and not for provision of any service or for tolerating any act. The demand on this count is liable to be set aside.

6.1 vii. Interest on advance: We note that as per Rule 3 of Point of Taxation Rules, 2011, the appellant was liable to pay tax on the date of receipt of such advance. Section 3 of the Point of Taxation Rules, 2011, which says that:

“Section 3 of Point of Taxation Rules 2011

Determination of point of taxation – For the purposes of these rules, unless otherwise provided, ‘point of taxation’ shall he,-

(a) the time when the invoice for the service provided or agreed to be provided is issued: Provided that where the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules, 1994, the point of taxation shall be the date of completion of provision of the service.

(b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.

Provided that for the purposes of clauses (a) and (b),-

(i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service;

(ii) wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a).

Explanation For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.”

it is amply clear that the liability to pay service tax arises when advance is received. Therefore, the liability to pay service tax arose when the Noticee received advance but in the instant case the Noticee paid the Service tax later on at the time of issuance of invoice. Thus, I find that they are liable to pay interest on late payment of service tax on advance receipt and liable to pay interest to the tune of Rs.1,05,681/-.”

In view of the above, we uphold that the interest amount confirmed in the impugned order.

7. Extended Period: In this context, we note that the learned counsel submitted that the demand cannot be confirmed in view of the G.D. Goenka Pvt Ltd. (supra) decision of this Tribunal. However, the impugned order has noted that the appellant had not declared all the details in the ST-3 returns. From the above discussions, we note that the appellant was eligible for Cenvat Credit on the services alleged by the Department to be ineligible. We also note that major portion of the demand confirmed under section 66E of the Finance Act is liable to be set aside. There is no evidence on record to indicate that the appellant did not file ST-3 returns regularly or failed to reflect the Cenvat Credit figures incorrectly. We also note that it is settled law that extended period can be invoked only when there is evidence of intent to evade. The Revenue has not been able to establish the said intent. We draw support from Supreme Court’s decision in Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Mumbai”, the Supreme Court examined Section 11A of the Central Excise Act, 1944 which is pari materia to Section 73 of the Finance Act, 1994 and held as follows:

“4. Section 11.A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”

In this instant case, there is nothing on record to establish that the appellant had suppressed the information with the malafide intent to evade. Hence the invocation of extended period cannot be sustained.

8. In view of the above, we hold as follows:

i. Non-reversal of CENVAT Credit: The demand of 7% under Rule 6(3) of the Cenvat Credit Rules, 2004 is upheld for the normal period.

ii. RCM on Rent-a-Cab: The demand on payment of tax under RCM on rent-a-cab is upheld for the normal period.

iii. Cenvat credit taken on Rent-a-Cab, security and health insurance: The Cenvat credit taken on rent-a-cab, Security Services and Health Insurance is allowed.

iv. Credit taken on debit notes: Cenvat Credit taken on debit notes is allowed.

v. Inadmissible Credit on WCS: The credit taken on WCS is allowed.

vi. Remission of license fees: Demand on refund of license fees is set aside.

vii. Interest on advance: The demand of interest on advance is upheld.

9. The impugned order stands modified as above and the appeal is allowed to the extent indicated above.

(Order pronounced on 24.04.2026)

Notes:

¹ the Appellant

² DIAL

³ CSC

⁴ 2023(7) TMI261 – CESTAT NEW DELHI

⁵ 2024 (9) TMI 1084 – DELHI HIGH COURT

⁶ 2021(4) TMI 400 – CESTAT NEW DELHI

⁷ 2019(4) TMI 927 – CESTATCHANDIGARH

⁸ 2019 (11) TMI 536 – CESTAT CHANDIGARH

⁹ 2016(11) TMI 1126 – CESTAT NEW DELHI

¹⁰ 2023(7) TMI 631 – CESTAT NEW DELHI

¹¹ 2017(4) TMI 209 – CESTAT NEW DELHI

¹² 2012 (5) TMI 352 – CESTAT, NEW DELHI

¹³ 2017(49) STR 424

¹⁴ 2019(1) TMI 1246

¹⁵ 2019(1) TMI 1239

¹⁶ 2018(5) TMI 544

¹⁷ 2018(3) TI 995

¹⁸ 2017(8) TMI 1049

¹⁹ 2018(1) TMI 460

²⁰ 2017(12) TMI 894

²¹ 2019(20)GSTL 346 (Born.)

²² (2011)06 KAR CK 0038

²³ 2011(274) ELT 97 (Tri.-Del.)

²⁴ 2016 (43)STR 124 (Tri.-Kol.)

²⁵ 2023 (7)TMI 631- CESTAT-NEW Delhi

²⁶ (1975) 1 SCC 737

²⁷ 1995 (78) E.L.T. 401 (S.C.)