Case Law Details
We are of the prima facie view that from the number of invoices, it is clear that the invoices dated 29.07.2005, 26.08.2005, 1.8.2005, 22.10.2005 and 26.11.2005 had been issued at a later date in 2006, as the invoice number of these invoices issued during July 2005 to November, 2005 period is of the year 2006 and under these invoices, the credit amounting to about Rs.60 lakhs had been taken.
While the question as to whether the remaining invoices issued during January, 2006 to July, 2006 period had also been issued in back date and whether the Cenvat credit could be taken by the appellant on the basis of the invoices issued by the service providers to their Delhi Office can be examined only at the time of regular hearing, in view of allegation of back dating of the invoices issued by Head Office as ISD, which appears to have some substance, this is not a case for total waiver.11. The appellants, therefore, are directed to deposit an amount of Rs.60 Lakhs within a period of eight weeks from the date of this order.
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST BLOCK NO.2, R K PURAM, NEW DELHI-110066
COURT NO.I
Excise Stay Application No.755 of 2010
Misc Application No.312 of 2010
Appeal No.724 of 2010
M/s HINDUSTAN COCA COLA BEVERAGES PVT LTD
Vs
CCE, MEERUT-II
Excise Stay Application No.756 of 2010
Appeal No.725 of 2010
SHRI SANDEEP BAHI, Sr FINANCE MANAGER
M/s HINDUSTAN COCA COLA BEVERAGES PVT LTD
Vs
CCE, MEERUT-II
Excise Stay Application No.757 of 2010
Appeal No.726 of 2010
SHRI VISHAL AGARWAL, MANAGER FINANCE
M/s HINDUSTAN COCA COLA BEVERAGES PVT LTD
Vs
CCE, MEERUT-II
Date of Decision: 20.12.2010
Appellants Rep by: Shri Tarun Gulati, Vikram Nankani & Sparsh Bhargava, Advs.
Respondent Rep by: Shri Virender Choudhary, DR
CORAM: R M S Khandeparkar, President
Rakesh Kumar, Member (T)
STAY ORDER NO.1016-1018/2010-EX
MISC ORDER NO.6987/2010-EX
Per: Rakesh Kumar:
Commissioner of Central Excise, Meerut – II vide order-in-original No. 67/Commr./M-II/2009 dated 29/12/2009 confirmed Cenvat credit of Rs. 1,26,60,631/- (Rupees One Crore Twenty Six Lakhs Sixty Thousand Six Hundred Thirty One) against M/s Hindustan Coca Cola Beverages Pvt. Ltd. (hereinafter referred to as the appellant company), alleged to have been wrongly taken during July 2005 to July 2006 period, alongwith interest on it at the applicable rate as per the provisions of Section 11AB, imposed penalty of equal amount on the appellant company under Rule 15 of Cenvat Credit Rules, 2004 (hereinafter referred to as CCR 2004 readwith Section 11AC of CEA 1944 and imposed penalty of Rupees ten lakhs and Rupees five lakhs under Rule 26 of Central Excise Rules 2002 on Shri Sandeep Bahl, Senior Finance Manager and Shri Vishal Agarwal, Manager Finance of the appellant company respectively. These appeals alongwith stay applications have been filed by the appellant company, Shri Sandeep Bahl and Shri Vishal Agarwal against the above order of the Commissioner of Central Excise, Meerut – II. In these stay applications, the appellants have prayed for waiver from the requirement of pre-deposit of the Cenvat credit demand, interest and penalty and also stay on recovery thereof till the disposal of the appeals. The Appellant company has also filed a miscellaneous application No. 312 of 2010-EX under Rule 23 of the CESTAT (Procedure) Rules, 1982 for admitting a certificate dated 22/3/2010 issued by Chartered Accountant as additional evidence.
1.2 The appellant company is engaged in manufacture of Aerated waters and mineral water chargeable to Central Excise Duty under sub-heading 22021010 and 22011020 respectively of Central Excise Tariff Act, 1985. The appellant company is also availing Cenvat credit of Central excise duty paid on various inputs and capital goods and of service tax paid on various input services used in or in relation to the manufacture of the final products, as per the provisions of CCR, 2004. The Cenvat credit demand is against the manufacturing unit of the appellant company located at 5th Mile stone, Masuri-Gulaothi Road, Hapur, District Ghaziabad. They have their head office located at Delhi.
1.3 On 10/9/04 CCR, 2004 were introduced vide Notification No. 23/04-CE (NT) superseding the Cenvat Credit Rules, 2002. Under the CCR, 2004 a manufacturer is allowed to take credit of Central Excise Duty paid on various inputs and capital goods and also of service tax paid on various inputs services used in or in relation to the manufacture of finished product. CCR, 2004 also introduced the concept of “Input Service Distributor” (ISD) who could issue invoices for passing on the service tax credit. In June 2005 Service tax (registration of special category of persons), Rules were notified according to which application for registration as ISD was to be made in prescribed format. Notification No. 28/05-CE (NT) dated 7th June 2005 provided for furnishing of half yearly returns by an ISD. The appellant company applied for registration as ISD on 4/5/06 in respect of its Delhi office and the registration was granted to them on 26/5/06. However, in course of scrutiny of the Central Excise records of the appellant company it was found that the Delhi office of the appellant company, even prior to 26/5/06, the date on which the ISD registration was granted to them, had issued invoices for passing on service tax credit and on the basis of those invoices, the Cenvat credit amounting had been taken by the manufacturing unit at Hapur, Ghaziabad, which did not appear to be correct. The explanation given for this by Shri Sandeep Bahl, Senior Finance Manager and Shri Vishal Agarwal, Manager Finance of the appellant company did not appear to be satisfactory. It also appeared that initially credit had been taken by the Appellant company’s factory at Hapur on the basis of Service tax invoices issued by the service providers to their Delhi office, but subsequently the entries regarding service tax credit availment on the basis of the service provider’s invoices were substituted by the invoices, issued by Delhi office as ISD. It is on this basis that a show cause notice dated 27/02/2009 was issued to the appellant company, Shri Sandeep Bahl and Shri Vishal Agarwal for –
(a) recovery of allegedly wrongly taken Cenvat credit amounting to Rs. 1,26,60,631/- alongwith interest during July 2005 to July 2006 period ;
(b) imposition of the penalty on the appellant company under Rule 15 of CCR, 2004 readwith Section 11AC of the Central Excise Act, 1944 ; and
(c) imposition of penalty on Shri Sandeep Bahl and Shri Vishal Agarwal under Rule 26 of the Central Excise Rules, 2002.
It is in respect of this show cause notice that the impugned order-in-original has been passed confirming the Cenvat credit demand alongwith interest and imposing penalty on the appellants.
2. Heard both the sides.
2.1 Shri Tarun Gulati, Shri Vikram Nankani and Shri Sparsh Bhargava, Advocates, the learned counsels for the appellants, pleaded that the head office of the appellant company and the factory are the part of the same company, that the input services had been received by the appellant company in respect of which the invoices have been received by the head office and hence the service tax credit has been correctly passed on by the head office by issuing the cenvatable invoices, that the department does not dispute that the input services, in respect of which the Cenvat credit has been taken, had not been received, that the adjudicating authority has failed to appreciate that under Rule 4A (2) of the Service Tax Rules, 1944, there is no requirement to state the registration number of the ISD on the ISD invoices, that though the provision for passing on of the credit by ISD was made in the CCR, 2004 w.e.f. 10/9/04, an ISD was required to make application for registration only vide notification No. 26/05-ST dated 7th June 2005 and the form for seeking registration were notified only on 20th October 2005, that in view of the policy of the Government to provide Cenvat credit of the service tax on input services on the basis of the invoices issued by an ISD, it would not be correct to state that registration was a pre-requisite for an ISD to enable him to issue the cenvatable invoices for passing on the Cenvat credit, that similar situation arose in past in April 1994 when dealers in excisable goods were for the first time allowed to take and transfer the Modvat credit on excisable goods under their invoices, but no mechanism was created for registration and furnishing of return by such dealers, and till the time such a mechanise was created the dealers had issued invoices and passed on Modvat credit to the consignee of the goods and when the department taking objection, sought to deny the credit to the consignees and such dispute reached the High Court, Hon’ble Gujarat High Court in the case of Vimal Enterprises vs. Union of India reported in 2006 (195) E.L.T. 267 held that it would be travesty of justice if the assessee is denied benefit to which he is otherwise entitled for none of his fault, that in the present case it is not in dispute that the services in respect of which the credit had been taken, had actually been received by the company, that through out the period when the credit was being taken, the same has been declared in the ER-1 returns and no objection was raised and thus the longer limitation period is not available to the department, that since there was no malafide on the part of the appellant, there is no justification for imposition of penalty on the appellant company under Rule 15 of this Cenvat Credit Rules, 2004 readwith Section 11AC of the Central Excise Act or on Shri Vishal Agarwal, Manager Finance and Sandeep Bahl, Senior Manager Finance of the appellant company, and that the appellant have a strong prima facie case and hence the requirement of pre-deposit may be waived for hearing of the appeals. He also prayed for admission, as additional evidence of a Chartered Accountant’s certificate dated 22/3/2010 certifying that no excess credit had been taken by the Appellant.
2.2 Shri Virender Choudhary, the learned Departmental Representative, opposing the appellant’s plea for waiver from the requirement of pre-deposit, pleaded that while the appellant’s Delhi office applied for registration of the ISD on 4/5/06 and was issued the registration certificate only on 26/5/06, even during prior to period 26/5/06, without even registration, the Delhi office had issued the invoices to the appellant’s factory in Hapur for passing on the service tax credit, that the invoices, thus, are invalid invoices and hence no Cenvat credit could be taken by the appellants factory on the basis of those invoices, that this is not a technical violation as the appellant company never informed the department that their office at Delhi is issuing invoices to their various factories as input service distributor for passing on the Cenvat credit, that in view of this, longer limitation period has been rightly invoked by the department and penalty under Rule 15 of Cenvat Credit Rules, 2004 readwith Section 11AC of the Central Excise Act has been rightly imposed, that the appellant do not have prima facie case in their favour and hence there is no merit in their plea for waiver from the requirement of pre-deposit of Cenvat credit demand, interest and penalty. The learned DR also opposed the admission, as additional evidence of the Chartered Accountant Certificate dated 22/3/2010 on the ground that the same was not available before the Commissioner.
3. We have carefully considered the submissions from both the sides and perused the records.
4. As regards the miscellaneous application for admission of additional evidence, the Appellant seek to introduce a Chartered Accountants certificate dated 22/3/2010, certifying that the Appellant’s factory at Masuri Gulawathi Road, Hapur has taken Cenvat credit on input services billed to the Delhi office only to the extent of amounts mentioned in the ISD invoices and no excess Cenvat credit has been taken. But since this certificate was not before the adjudicating authority, we agree with learned DR that at this stage, this document cannot be admitted as additional evidence. The miscellaneous petition No. E/Misc./312/2010-EX for admission of additional evidence is, therefore, dismissed.
5. Coming to the stay application, the just point of dispute in this case is as to whether during the period prior to 26/5/06, the Delhi office of the appellant company could issue invoices to their factory at Masuri-Gulaothi Road, Tehsil Hapur, District Ghaziabad for passing on service tax credit as input service distributor, when no registration in this regard had been obtained and whether such invoices not bearing any service tax registration number were valid documents for taking Cenvat credit.
6. Concept of Input Service Distributor was introduced for the first time in CCR, 2004 effective from 10/9/04 readwith Service Tax Rules, 1994. Rule 2 (m) of the CCR, 2004 defines an “Input Service Distributor” as an office of the manufacturer or producer of final product or provider of output service, which receives invoices issued under Rule 4A of the Service tax Rules, 1944 towards purchases of input services and issues invoices, bills or, as the case may be, challans for the purpose the distributing the credit of service tax paid or) the such services to such manufacturer or producer or provider, as the case may be. Under Rule 9 (1) (g) of Cenvat Credit Rules, 2004 an invoice, bill or challan issued by an Input Service Distributor under Rule 4A of Service Tax Rules, 1944 is a valid document for taking Cenvat credit. As per Rule 2 (1) (ccc) of the Service Tax Rules, 1994, the term “Input Service Distributor” has meaning assign to it in Clause (m) of Rule 2 of the Cenvat Credit Rules, 2004. Clause (ccc) of sub-Rule (1) of Rule 2 of the Service Tax Rules, 1944 had been inserted w.e.f. 10/9/04. Rule 4 of the Service Tax Rules, 1994 provides for obtaining registration by the persons liable for paying the Service Tax. This Rule did not contain any provision regarding obtaining of registration by Input Service Distributor and it provides for registration of only the persons liable for paying the service tax. Rule 4 of the Service Tax Rules, 1994 is reproduced below.
“Registration – (1) Every person liable for paying the service tax shall make an application to the [concerned Superintendent of Central Excise] in Form ST-1 for registration within a period of thirty days from the date on which the service tax under section 66 of the Finance Act, 1994 (32 of 1994) is levied:
Provided that where a person commences the business of providing a taxable service after such service tax has been levied, he shall make an application for registration within a period of thirty days from the date of such commencement;
[Provided further that a person liable for paying the service tax in the case of taxable services referred to in sub-section (4) or sub-section (5) of section 66 of the Finance Act, 1994 (32 of 1994) may make an application for registration on or before the 31st day of December 1998:]
[Provided also that a person liable for paying the service tax in the case of taxable services referred to in sub-clause (zzp) of clause (105) of section 65 of the Act may make an application for registration on or before the [31st day of March, 2005.]
[(2) Where a person, liable for paying service tax on a taxable service,
(i) provides such service from more than one premises or offices; or
(ii) receives such service in more than one premises or offices ; or,
(iii) is having more than one premises or offices, which are engaged in relation to such service in any other manner, making such person liable for paying service tax,
and has centralised billing system or centralised accounting system in respect of such service, and such centralised billing or centralised accounting system are located in one or more premises, he may, at his option, register such premises or offices from where centralised billing or centralised accounting systems are located.
(3) The registration under sub-rule (2), shall be granted by the Commissioner of Central Excise in whose jurisdiction the premises or offices, from where centralised billing or accounting is done, are located :
Provided that nothing contained in this sub-rule shall have any effect on the registration granted to the premises or offices having such centralised billing or centralised accounting system, prior to the 2nd day of November, 2006.]
(3A) Where an assessee is providing a taxable service from more than one premises or offices, and does not have any centralized billing or systems or centralized accounting systems, as the case may be, he shall make separate applications for registration in respect of each of such premises or offices to the jurisdictional Superintendent of Central Excise.]
(4) Where an assessee is providing more than one taxable service, he may make a single application, mentioning therein all the taxable services provided by him, to the concerned [Superintendent of Central Excise].
(5) The [Superintendent of Central Excise] shall after due verification of the application form, [or an intimation under sub-rule (5A), as the case may be,] grant a certificate of registration in Form ST-2 within seven days from the date of receipt of the application [or the intimation]. If the registration certificate is not granted within the said period, the registration application for shall be deemed to have been granted.
[(5A) Where there is a change in any information or details furnished by an assessee in Form ST-1 at the time of obtaining registration or he intends to furnish any additional information or detail, such change or information or details shall be intimated, in writing, by the assessee, to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, within a period of thirty days of such change.]
(6) Where a registered assessee transfers his business to another person, the transferee shall obtain a fresh certificate of registration.
(7) Every registered assessee, who ceases to provide the taxable service for which he is registered, shall surrender his registration certificate immediately [to the Superintendent of Central Excise].
(8) On receipt of the certificate under sub-rule (7), the Superintendent of Central Excise shall ensure that the assessee has paid all monies due to the Central Government under the provisions of the Act, and the rules and the notifications issued thereunder, and thereupon cancel the registration certificate.]”
7. Rule 4A of the Service Tax Rules 1994 provided for issue of invoices by the person providing taxable service or Input Service Distributors. Sub-rule (2) of Rule 4A describe in detail as to how and in what manner an input service distributor will issue invoice, bill or challan. For ready reference, the sub-Rule (2) of Rule 4A in which we are concerned is reproduced below.
“(2) Every input service distributor distributing credit of taxable services shall, in respect of credit distributed, issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorised by him, for each of the recipient of the credit distributed, and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely :-
(i) the name, address and registration number of the person providing input services and the serial number and date of invoice, bill, or as the case may be, challan issued under sub-rule (1);
(ii) the name and address of the said input service distributor;
(iii) the name and address of the recipient of the credit distributed ;
(iv) the amount of the credit distributed:
Provided that in case the input service distributor is an office of a banking company or a financial institution including a non-banking financial company, or any other body corporate or [any other person], providing service to a customer, in relation to banking and other financial services, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered but containing other information in such documents as required under this sub-rule.]”
7.1 From a plain reading of this sub-Rule, it is clear that there is no provision in this sub-Rule that an Input Service Distributor before issue of invoice, bill or challan for passing on the service tax credit must have a registration and quote such registration number in the invoices, bills or challans issued by him. Though Rule 4A in its present form had come into effect from 10/09/04, there is no provision in sub-Rule (2) of Rule 4A that this sub-Rule will be effective only when the procedure for obtaining registration by Input Service Distributor is notified or that it is necessary for an “Input Service Distributor”, as defined in Rule 2 (1) (ccc) of the Service Tax Rules, 1994 readwith Rule 2 (m) of the Cenvat Credit Rules, 2004, to obtain registration before he could issue the invoices, bills or challans for passing on the Cenvat credit.
8. By Notification No. 27/05-ST dated 7th June 2005, Service tax (registration of special category of persons) Rules, 2005 were notified and Rule 3 (1) of these rules provided for an Input Service Distributor to make an application to the Jurisdictional Central Excise Superintendent for obtaining registration within period of thirty days from the commencement of business or 16th day of June 2005, whichever is later. Simultaneous with the issue of Notification No. 27/05-CE (NT) dated 7th June 2005, another Notification No. 28/05-CE (NT) dated 7th June 2005 was issued by which Cenvat Credit Rules, 2004 were amended and in Rule 9 (1) of the Cenvat Credit Rules, 2004, Clause (e) was amended and sub-Rule (10) of Rule 9 was substituted by new rule which provided that the Input Service Distributor shall furnish a half yearly return in such form as may be prescribed by notification issued by the Board.
9. Thus, during the period from 10/09/04 to 06/6/05, though there was definition of “Input Service Distributor” in Service Tax Rules, 1994 as well as in the Cenvat Credit Rules, 2004 and while Rule 4A (2) provided for issue of invoices, bills or challans by Input Service Distributor and Rule 9 (1) (g) of the Cenvat Credit Rules, 2004 provided that the invoice, bill or challan issued by Input Service Distributor is a valid document for availing Cenvat credit, neither in Rule 4 of Service Tax Rules, 1994 there was any provision for obtaining registration by Input Service Distributor nor in Rule 4A (2) was there any prohibition that an Input Service Distributor without obtaining registration cannot issue the invoices, bills or challans for passing on the Cenvat credit. The provision for registration for Input Service Distributor was introduced only w.e.f. 7th June 2005 by Service Tax (registration of special category of persons) Rules, 2005 and w.e.f. this date only a provision was made in the Cenvat Credit Rules, 2004 for filing of a return by the Input Service Distributor in a prescribed form. The question arises as to whether during the period from 10/9/04 to 6/6/05 Cenvat credit could be taken on the basis of invoice, bill or challan issued by an Input Service Distributor. From a reading of Rule 9 (1) (g) readwith Rule 2 (m) of CCR, 2004 and Rule 4 and Rule 4A (2) of the Service Tax Rules, 1994, we are of the prima facie view that during this period, there was no provision that an Input Service Distributor before issuing an invoice, bill or challan had to obtain registration or that without such registration he cannot issue such invoices. We are, therefore, of prima facie view that Cenvat credit during the period of dispute cannot be denied to the appellant just because their Delhi office had not obtained service tax registration as ISD for the simple reason that during this period neither there was any provision for an ISD to obtain a registration nor any procedure in this regard has been prescribed.
10. The Department’s allegation against the appellant, however, is that during the period of dispute they had initially taken the service tax credit on the basis of invoices issued by service providers in the name of their Delhi office, which was not permissible, but on this irregularity being pointed out by the audit, they replaced those entries by the entries based on the invoices issued by Delhi Office as ISD and that the invoices by Delhi office as ISD had been issued much later in back date and that on the dates on which Cenvat credit had been taken, there were no invoices issued by Delhi office as ISD. According to the Department, the invoice numbers of the 12 invoices issued by Head Office during July, 2005-2006 period – Invoice No. HCCB/ 005/2006 dated 29.07.2005, Invoice No.HCCB/006/2006 dated 26.08.05; Invoice No.HCCB/007/2006 dated 01.08.05; Invoice No.HCCB/008/2006/ dated 22.10.05; Invoice No.HCCB/009/2006 dated 26.11.05; Invoice No.HCCB/010/2006 dated 03.01.06; Invoice No. HCCB/011/2006 dated 28.01.06; Invoice No.HCCB/012/2006 dated 20.02.06; Invoice No.HCCB/013/2006 dated 31.03.06; Invoice No.HCCB/014/2006 dated 26.04.06; Invoice No.HCCB/015/2006 dated 16.06.06 and Invoice No.HCCB/016/2006 dated 04.07.06 clearly indicate that the same had been issued at a stretch on a subsequent date. We are of the prima facie view that from the number of invoices, it is clear that the invoices dated 29.07.2005, 26.08.2005, 1.8.2005, 22.10.2005 and 26.11.2005 had been issued at a later date in 2006, as the invoice number of these invoices issued during July 2005 to November, 2005 period is of the year 2006 and under these invoices, the credit amounting to about Rs.60 lakhs had been taken. While the question as to whether the remaining invoices issued during January, 2006 to July, 2006 period had also been issued in back date and whether the Cenvat credit could be taken by the appellant on the basis of the invoices issued by the service providers to their Delhi Office can be examined only at the time of regular hearing, in view of allegation of back dating of the invoices issued by Head Office as ISD, which appears to have some substance, this is not a case for total waiver.
11. The appellants, therefore, are directed to deposit an amount of Rs.60 Lakhs within a period of eight weeks from the date of this order. Compliance to be reported on 28.3.2011. On deposit of this amount within the stipulated period, the requirement of pre-deposit of balance amount of Cenvat credit demand, interest and penalty shall stand waived and recovery thereof stayed till the disposal of the appeal.
(Pronounced in open court on 20.12.2010.)
