Case Law Details
Future Generali India Insurance Company Ltd. Vs Commissioner of Customs (CESTAT Mumbai)
CESTAT Mumbai held that unless and until the assessment made at the dealer’s end is revised or altered, the Cenvat credit availed on the basis of invoices by the recipient’s unit cannot denied/whittled down.
Facts- The appellants herein, M/s Future Generali India Insurance Company Ltd., are engaged in the business of providing general insurance service pertaining to motor insurance, health insurance, property insurance, engineering insurance, liability insurance and other miscellaneous insurance services.
For providing motor insurance service to the vehicle owners, the appellants have entered into agreements with the motor car dealers for obtaining the facilities such as, infrastructure sharing like desktops; deployment of personnel at dealer’s premises for liasoning between the dealers and prospective buyers of vehicle; to key in the details of the customers in the portal of the appellants; to collect necessary premium from the customers and remit the same to the appellants; providing of space for display of posters, etc. The said facilities are used by the appellants to liaison with their customers and for servicing their insurance business within the dealer’s premises. Pursuant to the provision of infrastructural facilities provided to the appellants, the dealers issue invoices for the service charges along with service tax attributable to such services on the appellants. Since the appellants use the above facilities provided by the motor car dealers in furtherance to the provision of output service, they avail Cenvat credit of service tax paid on the aforesaid input services, on the basis of the invoices issued by the motor car dealers (service providers) and utilize such Cenvat credit for discharging the service tax liability on the output service provided by them.
The officers of DGCEI investigated into the matter of lawful availment of Cenvat credit by the appellants on the basis of the invoices issued by the motor vehicle dealers. On detailed investigation into the matter, the officials concluded that the invoices were prepared by the dealers on the directions of the appellants and do not convey the true and correct picture about the services provided to the appellants and that the said documents were fabricated to suit to the interest of the appellants.
Conclusion- The facts are not under dispute that the dealers of automobiles are registered with the service tax department for provision of the taxable output service(s) and that the service tax collected by them from the appellants were remitted into the Government exchequer. Since, the issue regarding payment of service tax and compliance of the statutory provisions, more specifically as contemplated under Rule 4A of the Service Tax Rules, 1994 have not been disputed by the jurisdictional service tax authorities at the service provider’s end, in our considered view, the same cannot be questioned or objected to by the service tax authorities, having jurisdiction over the premises of the appellants, as the recipient of such taxable service, at the time when the Cenvat credit of service tax was availed by them.
Held that unless and until the assessment made at the dealer’s end is revised or altered, the Cenvat credit availed on the basis of invoices by the recipient’s unit cannot denied/whittled down.
FULL TEXT OF THE CESTAT MUMBAI ORDER
Brief facts of the case, leading to this appeal, are as under :-
1.1 The appellants herein, M/s Future Generali India Insurance Company Ltd., are engaged inter alia, in the business of providing general insurance service pertaining to motor insurance, health insurance, property insurance, engineering insurance, liability insurance and other miscellaneous insurance services. The services provided by the appellants are categorized as taxable service, defined under the Finance Act, 1994. For providing such taxable services, the appellants got themselves registered with the service tax department. The appellants also avail Cenvat credit of service tax paid on the input services and utilize such credit for payment of service tax on the output services provided by them. For providing motor insurance service to the vehicle owners, the appellants have entered into agreements with the motor car dealers for obtaining the facilities such as, infrastructure sharing like desktops; deployment of personnel at dealer’s premises for liasoning between the dealers and prospective buyers of vehicle; to key in the details of the customers in the portal of the appellants; to collect necessary premium from the customers and remit the same to the appellants; providing of space for display of posters, etc. The said facilities are used by the appellants to liaison with their customers and for servicing their insurance business within the dealer’s premises. Pursuant to the provision of infrastructural facilities provided to the appellants, the dealers issue invoices for the service charges along with service tax attributable to such services on the appellants. Since the appellants use the above facilities provided by the motor car dealers in furtherance to the provision of output service, they avail Cenvat credit of service tax paid on the aforesaid input services, on the basis of the invoices issued by the motor car dealers (service providers) and utilize such Cenvat credit for discharging the service tax liability on the output service provided by them.
1.2 On the above back drop of the issue, the officers of DGCEI investigated into the matter of lawful availment of Cenvat credit by the appellants on the basis of the invoices issued by the motor vehicle dealers. On detailed investigation into the matter, the officials concluded that the invoices were prepared by the dealers on the directions of the appellants and do not convey the true and correct picture about the services provided to the appellants and that the said documents were fabricated to suit to the interest of the appellants. On the basis of said investigation, the service tax department had initiated show cause proceedings against the appellants, seeking recovery of irregularly availed Cenvat credit and also proposed for recovery of interest and for imposition of penalties on the appellants. In this regard, the department had issued the SCNs dated 09.10.2015, 23.04.2018 and 08.04.2019, proposing for confirmation of the demands for the period from 2010-11 to 2015-16 and April’ 2016 to June’ 2017. The matter arising out of the above SCNs were adjudicated by the learned Commissioner of CGST & Central Excise, Mumbai Central vide the Order-in-Original No. 20-22/COMMR/RS/CGST & CEX/MC/2020-21 dated 29.10.2020 (for short, referred to as the ‘impugned order’). Vide the impugned order, the learned adjudicating authority has approved the proposals made in the SCNs and accordingly, confirmed the demand of Rs. 20,88,85,344/- along with interest and also imposed penalties of Rs 10,000/- and Rs. 70,00,000/- under Sections 77 and 76 respectively read with Section 174 of the Central Goods & Service Tax Act, 2017 on the appellants.
1.3 Feeling aggrieved with the impugned order, the appellants have preferred this appeal before the Tribunal.
2. Shri Jay Chhedha, learned Advocate appearing for the appellants made the following submissions, during the course of hearing of appeal:
a) The dealers are indeed providing services to the Appellants and service tax has been correctly discharged on the said services. Therefore, Cenvat credit cannot be denied to the Appellants under any circumstances. Contractual supply is the essence of applicability of Service Tax;
b) without prejudice, the services provided by the dealers fall under the scope of ‘business support services’ as defined in Section 65(104c) of The Finance Act, 1994 and the Appellants are entitled to the Cenvat credit of the Anyway, classification is irrelevant post 01.07.2012;
c) manner of payment of consideration not relevant to decide the nature of service provided to the Appellants. Reliance placed on Senairam Doongarmall v. CIT 1961 42 ITR 392 (SC);
d) the nomenclature does not determine the nature of transaction, hence the incorrect description of services in the invoice does not render the invoice void;
e) without prejudice, the issue is not one of non‑ provision of service, but mis-classification of the service;
f) the Cenvat credit cannot be denied at the recipient’s end without opening the assessment at the service provider’s end. Reference is made to Modular Auto Ltd. V. CCE 2018 VIL 541 MAD ST, wherein the Hon’ble Madras High Court held that the credit cannot be denied at the recipient’s end without opening the assessment at the service provider’s end;
g) the present matter is squarely covered by the decisions of Hon’ble Tribunal in the following cases:
a. M/S Cholamandalam MS General Insurance Ltd vs CGST 2021-VIL-78-CESTAT-CHEST
b. M/S Cholamandalam MS General Insurance Ltd Vs CGST, 2021 (9) TMI 442-CESTAT Chennai
c. Bajaj Allianz General Insurance Co Ltd – Final Order No. A/86058-86059/2022-CU(DB) dated 19.10.2022 passed by Mumbai CESTAT.
3. On the contrary, Shri Anand Kumar, learned Authorised Representative appearing for the Revenue reiterated the findings recorded in the impugned order and in support of confirmation of the adjudged demands on the appellants, has stated that no taxable services were provided by the automobile dealers to the appellants and that based on the directions of the appellants, the invoices were issued without specifying the actual nature of services provided by the dealers. Thus, learned AR contended that in absence of provision of any taxable service, the appellants are not entitled to avail Cenvat credit in respect of service tax amount indicated in the invoices. He further submitted that the requirements of availment of Cenvat credit as provided under Rule 4A of the Service Tax Rules, 1994 have also not been complied with by the appellants and as such confirmation of the adjudged demands in the impugned order are proper and justified.
4. Heard both sides and perused the case records, including the written submission filed by the learned Advocate, during the course of hearing of appeal.
5. On careful examination of the case records, we find that the following issues are involved for consideration by the Tribunal:
(a) whether the service tax authorities at the service recipient’s end are correct in denying the cenvat benefit of service tax paid by the provider of service on the taxable services?
(b) when the disputed service tax amount has admittedly been paid by the provider of service to the Government exchequer, can the benefit of such tax element be denied to the appellants, as the receiver of such taxable service?
6. Sub-rule (1) of Rule 3 ibid is the enabling provision, which entitles a manufacturer or a provider of output service to take Cenvat credit on various duties and taxes paid on any inputs or capital goods received in the factory of manufacture of final product and on any input service received by the manufacturer of final product or by the provider of output service. The Cenvat credit availed as per the provisions of sub-rule (1) ibid, can be utilized for payment of various duties and taxes, itemized in sub-rule (4) of Rule 3 ibid. Further, the documents based on which the credit has to be availed has also been prescribed in Rule 9 ibid. On conjoint reading of the said statutory provisions, it would reveal that the responsibility of taking Cenvat credit in proper manner has been fixed on the assessee as recipient of input, capital goods and input service, on compliance of the provisions that the duties/taxes have been paid thereon and that the goods or services were received by the manufacturer of final product or by the provider of output service. The legislative intent behind enactment of the Cenvat statute is to avoid the cascading effect, meaning thereby that the element of excise duty or service tax paid on the goods/services, should be available to the intermediary manufacturer of final products or provider of output services as Cenvat credit, so that the ultimate consumer will not be hard hit by paying more money for the goods or services. In this case, it is an admitted fact on record that the automobile dealers are registered with the service tax department for providing the taxable services and that the disputed service tax amount was paid by them into the government exchequer. When that is the admitted position, then denial of the benefit of such tax amount as cenvat credit to the appellants as the recipient of such service, cannot be questioned by the jurisdictional service tax authorities.
7. Further, in this case, the impugned order has invoked the provisions of Rule 14 of the Cenvat Credit Rules, 2004 for effecting recovery of the Cenvat credit availed by the appellants. The provisions for recovery of the wrongly availed and utilisation of Cenvat credit are contained in Rule 14 It has been provided under the statute that where the Cenvat credit has been taken and utilised wrongly, the same shall be recovered along with interest from the provider of output service and for effecting such recovery, the provisions of Section 73 and 75 of the Finance Act, 1994 shall apply mutatis mutandis. On reading of such statutory provision, it reveals that the rigor provided under such statute has the applicability, in the eventuality, where the Cenvat credit of service tax has been taken and utilised wrongly by the assessee. In the present case, the department has not made any allegation regarding wrongful availment or utilisation of Cenvat credit by the appellants. Thus, in our considered view, the provisions of Rule 14 ibid do not have any application for recovery of the adjudged demands confirmed on the appellants.
8. We find that in the present case, the department has mainly proceeded against the appellants for confirmation of the adjudged demands on the ground that no services were provided by the automobile dealers and therefore, Cenvat credit is not available to the appellants, based on the invoices issued by such dealers. On the contrary, the facts are not under dispute that the dealers of automobiles are registered with the service tax department for provision of the taxable output service(s) and that the service tax collected by them from the appellants were remitted into the Government exchequer. Since, the issue regarding payment of service tax and compliance of the statutory provisions, more specifically as contemplated under Rule 4A of the Service Tax Rules, 1994 have not been disputed by the jurisdictional service tax authorities at the service provider’s end, in our considered view, the same cannot be questioned or objected to by the service tax authorities, having jurisdiction over the premises of the appellants, as the recipient of such taxable service, at the time when the Cenvat credit of service tax was availed by them.
9.1 We find that an identical issue came up for consideration by the Hon’ble Madras High Court, in the case of M/s. Modular Auto Ltd. -vs.- Commissioner of Central Excise, Chennai [2018-VIL-541-MAD-ST]. Upon analysis of the facts of the case vis-a-vis the statutory provisions, the Hon’ble High Court was pleased to admit the appeals and the following substantial questions of law were framed, for resolving the dispute:
“a) When the service provider was not before the Tribunal, whether the Tribunal can go into the question as to whether the said service provider had provided service to the appellant or not, more so when the said service provider has been assessed to service tax under Business Support Service for the service rendered by them to the appellant.
b) Is the Tribunal not in error in refusing credit to the appellant for service tax paid by them to service provider when payment of service tax by the appellant for the service rendered by service provider is not in dispute and that it is settled, the assessment to tax at the hands of the service provider end cannot be questioned in the hand of service receiver (appellant in this case)´
9.2 On proper analysis of the background of the matter involved in such decided case, the Hon’ble Court has answered to the above framed questions, by recording the following observations:
“11. The short question, which falls for consideration, is whether the department as well as Tribunal could have held what was availed by the assessees as credit is only a reimbursement and it is an attempt of BIL to pass costs incurred by them towards MPLS.
12. Aparna Nandakumar, learned Senior panel counsel for the Revenue, produced a lecture on Multi Protocol Label Switching with Quality of Service in High Speed Computer Network to explain as to what is Multi Protocol Label Switching (MPLS) and it has been stated therein that it is a method that directs data from one system node to the next based on short path lables rather than long network addresses in high-performance telecommunication association. Referring to a chart showing the working methodology, it is submitted that it is a facility created and the beneficiary is BIL and no input service is rendered by the BIL to the assessees for them to claim Input Tax Credit.
13. To test the correctness of the said submission, we give the following illustration, which is broadly the nature of transactions done by the assessees with BIL.
14. The BSNL / Reliance Communications Private Limited have provided the MPLS facility to BIL and assuming the amount to be paid is Rs.100/- towards the cost and 10/- towards the Service Tax, when the invoice is raised by the BSNL/Reliance Communication Private Limited for the said amount and the BIL has paid Rs. 110/- to BSNL/Reliance Communication Private Limited, which includes the cost as well as Service Tax element, the BIL, in turn, has raised an invoice on the assessees claiming proportionately the costs which they have incurred to BSNL/Reliance. By way of illustration, if Rs.20/- has been passed on to one of the assesses, a sum of Rs.2/- is collected as Service Tax and each of the assesses pays Rs.22/- to BIL, on which Rs.2/- is the Service Tax paid. The assessees have taken CENVAT credit on the said Rs.2/- paid by it as Service Tax to BIL. Therefore, the question would be as to whether the department can dispute the nature of transaction at this juncture, more particularly, when the assessment made on the BIL and the collection of Service Tax on them has not been reopened.
15. From the reasons assigned by the Commissioner (Appeals), we find that the Commissioner (Appeals) has travelled beyond the scope of allegation made in the show cause notices. By giving a different interpretation to the nature of transaction, which, in our considered view, could not have been done by the Appellate Authority in the light of the settled position with regard to the Service Tax liability admitted and paid by BIL. The fore, unless and until, the assessment on BIL had been reopened, the nature of transaction as referred by BIL has to be held to be wrong and the Commissioner (Appeals) could not have given a different interpretation to the nature of claim made by the BIL from the assessees by interpreting the terminalogy used in the invoice. The correct test, which ought to have been applied by the Adjudicating Authority, Appellate Authority and the Tribunal, is as to what is the character of payment made by the assessees on which they have availed the CENVAT credit.
16. In the instant cases, it is not in dispute that whatever the portion of Service Tax component which was collected from the assessees by BIL was only the amount on which the CENVAT credit has been claimed by the assessees. Therefore, unless and until the assessment made on BIL was revised, which obviously could have been done, at this juncture, on account of the expiry of the period of limitation, the interpretation given by the Commissioner (Appeals) as well as the Tribunal with regard to the nature of invoice raised on the assesses is unsustainable. Furthermore, we find that the reason assigned by the Tribunal in paragraph 6.2 stating that the activity performed by the BIL for monitoring of production activities of the assesses cannot by any stretch of imagination be considered as an input service or in relation to the manufacture of final products of the assesses, is a statement, which is unsubstantiated by any record. At best, it can be taken as a personal opinion of the Tribunal, which could not have been a reason to reverse the credit availed by the assesses.
17. What is important to note that the assessees’ specific case is that there has been a service by BIL to the assessees in the matter of retrieval of data and service tax has been collected and paid by BIL and the correctness, legality or otherwise of the tax paid by the subject providers cannot be called in question by the Central Excise Officer having the jurisdiction over the assesses availing the credit. This question has not been considered. If the impugned orders are allowed to stand, then it would in effect mean that the jurisdictional assessment officers of the assesses are sitting in the judgment over the assessment made on BIL, over which, they have no jurisdiction.”
9.3 It is observed that by placing reliance on the judgement of Hon’ble Madras High Court (supra), this Tribunal in the cases relied upon by the learned Counsel for the appellants has held that unless and until the assessment made at the dealer’s end is revised or altered, the Cenvat credit availed on the basis of invoices by the recipient’s unit cannot denied/whittled down.
10. In view of the foregoing discussions and analysis, we do not find any force in the impugned order, insofar as it has confirmed the adjudged demands on the appellants. Therefore, by setting aside the impugned order, the appeal is allowed in favour of the appellants.
(Pronounced in the open court on 13.04.2023)
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