Case Law Details
Explanation to Rule 6(1) of the Service Tax Rules provide that for removal of doubt, it is clarified that in case the value of taxable service is received before providing of the said service, then the service tax is required to be paid on the value of the service, then the service tax is required to be paid on the value of the service attributable for the relevant month or quarter as the case may be. Ld. Chartered Accountant for the appellants has also drawn our attention to the fact that the said explanation ceased to be on the statute book from 12th September, 2007.
In any case, the explanation merely states that the service tax could not be collected prior to the period for which the service tax is rendered. Being so, it apparently lends support to the contention sought to be canvassed on behalf of the appellants. If that be so, prima-facie, it is difficult to accept the contention of the Department that the commission paid in advance could be considered as the payment for the service provided even prior to actual rendering of the service. Needless to say that all the findings herein above are prima-facie findings for the purpose of decision in stay application.
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, BANGALORE
Application No. ST/St/488/2009
Appeal No. ST/801/2009
M/s SYNDICATE BANK
Vs
CCE, BANGALORE
Date of Decision: 06.09.2010
STAY ORDER NO. 741/2010
Per: R M S Khandeparkar:
Heard the ld. Chartered Accountant for the appellants and ld. DR for the respondent. The present application for stay has been filed in appeal arising from order dt. 26/6/2009 passed by the Commissioner of Central Excise, Mangalore. By the impugned order, Commissioner has disallowed cenvat credit to the tune of Rs. 5,09,85,560/- for the period April, 2007 to March, 2008 and the demand is confirmed in that regard along with interest thereon. The Commissioner has also confirmed the demand of service tax to the tune of Rs. 50,26,40,360/- along with Education cess of Rs. 1,00,52,807/- and Secondary & Higher Education Cess of Rs. 50,26,404/- for the period from April, 2007 to March, 2008. The tax amount of Rs. 39,51,99,505/- already paid by the assessee for the said period has been appropriated. The demand has been confirmed along with interest payable thereon. Besides penalty of Rs.200/- per day during which the failure continues or at the rate of 2% of such tax per month, whichever is higher, starting from the first date after due date till the date of actual payment of the outstanding tax has been imposed for failure to pay the service tax in time. Besides, penalty of Rs.2000/- under Rule 15(3) of Cenvat Credit Rules, 2004 has also been imposed.
2. The challenge to disallowance of the cenvat credit is essentially on the ground that though the show cause notice was issued on the allegation that the credit was availed without maintaining the necessary documentary proof regarding the availment and utilization of the credit, the impugned order by travelling beyond the scope of the said show cause notice has denied the credit on the ground that the appellants were not eligible to claim the credit. As regards the valuation aspect, the contention of the appellants is that the inclusion of commission received in advance is contrary to the provisions of law relating to the service tax liability as such tax can be recovered only in relation to the services provided and not in relation to services yet to be provided.
3. Ld. Chartered Accountant, drawing our attention to the impugned order and another order passed by the Commissioner in relation to earlier period viz. period from October, 2005 to September, 2006 in another matter of the appellants, submitted that in the said case the Commissioner had given finding in favour of the appellants case on the basis of the certified accounts by the auditors whereas the report submitted by the appellants on the basis of the auditors certificate in the case in hand has been rejected without any justifiable reason. He further submitted that as regards valuation aspect, the amount received in advance as commission, cannot constitute as an amount received for the services provided as such amount relates to the services yet to be provided and being so, cannot be subject matter of service tax. Attention was also drawn to the fact that such amount has been shown in the appellants accounts as the liability of the appellants and reliance is placed in the decision of the Hon’ble High Court of Gujarat in the matter of CCE&C, Vadodara-II Vs. Schott Glass India (P) Ltd. reported in 2009(21) STT 111 (Guj.).
4. On the other hand, the DR submitted that the Commissioner, considering the fact that the credit is sought to be availed on the items non-eligible for availment of credit, and that too without necessary documentary proof has rightly rejected the claim of the appellants in that regard. She further submits that as regards the valuation, the Commissioner has clearly relied upon the explanation clause to Rule 6(1) of the Service Tax Rules, 1994 and therefore, no fault can be found with the impugned order in that regard. She also submitted that the order passed by the Commissioner in relation to the earlier period relied upon by the appellants clearly shows that therein the Commissioner has denied the credit in relation to certain items and in relation to the similar items the credit has been denied under the present impugned order also.
5. As far as the point relating to dis allowance of the cenvat credit is concerned, the order passed for the earlier period by the Commissioner in relation to the appellants themselves discloses that in the similar facts situation though the proceedings were initiated for want of necessary documentary proof in support of the claim of cenvat credit, the Commissioner relied upon certificate of auditors and allowed the cenvat credit. In the case in hand also, the appellants had produced the audited certificate of the service tax statements and based on the said certificate, they had also furnished consolidated statement for the relevant period in relation to the credit availed and utilized. Undoubtedly in relation to the earlier period, there was direction by the Tribunal with the observation that “we are of the considered view that once a statutory auditor gives a certificate, the said certificate should be considered as an evidence for substantiation to the claim for eligibility to cenvat credit”. In other words, the Tribunal, in the appellants’s own case in relation to prior period, had directed the Commissioner to take into consideration the auditor’s certificate to decide as to whether there was a proof of av-ailment and utilisation of the cenvat credit in accordance with provisions of law. Nothing has been brought to our notice which could reveal that the said observation by the Tribunal had been subjected to review by the Tribunal itself or by any higher authority till this day. Besides perusal of the show cause notice and the impugned order, prima-facie, discloses that the proceedings were sought to be initiated for the want of documentary proof in relation to av-ailment and utilisation of the cenvat credit, whereas the denial under the impugned order appears to be on the basis of eligibility criteria for availing the cenvat credit.
6. As regards the valuation aspect is concerned, undoubtedly the explanation to Rule 6(1) of the Service Tax Rules provide that for removal of doubt, it is clarified that in case the value of taxable service is received before providing of the said service, then the service tax is required to be paid on the value of the service, then the service tax is required to be paid on the value of the service attributable for the relevant month or quarter as the case may be. Ld. Chartered Accountant for the appellants has also drawn our attention to the fact that the said explanation ceased to be on the statute book from 12th September, 2007. In any case, the explanation merely states that the service tax could not be collected prior to the period for which the service tax is rendered. Being so, it apparently lends support to the contention sought to be canvassed on behalf of the appellants. If that be so, prima-facie, it is difficult to accept the contention of the Department that the commission paid in advance could be considered as the payment for the service provided even prior to actual rendering of the service. Needless to say that all the findings herein above are prima-facie findings for the purpose of decision in stay application.
7. For the reasons stated above, therefore, we find prima-facie case has been made out by the appellants for grant of stay of the impugned order. Undisputedly in relation to certain items, tax has already been paid by the appellants and appropriated by the Department. In the result, therefore, the application is allowed and amount demanded under the impugned order is waived till the disposal of the appeal.
(Pronounced & dictated in open Court)
