Full Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI MONDAY, THE 22ND DAY OF AUGUST 2022 / 31ST SRAVANA, 1944 C.E.APPEAL NO. 8 OF 2019 (AGAINST FINAL ORDER 21353/2018 IN APPEAL ST/1252/2010 OF CESTAT BANGALORE)
APPELLANT/S: THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, (NOW PRINCIPAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE), C.R.BUILDING, I.S.PRESS ROAD, ERNAKULAM, KOCHI - 682 018. BY ADV SMT.PREETHA S. NAIR, SC, CENTRAL BOARD OF EXCISE AND CUSTOMS RESPONDENT/S: TRANS ASIAN SHIPPING SERVICE PVT LTD., TRANS ASIA CORPORATE PARK, XIV/396-C, SEA PORT AIR PORT ROAD, CHITTETHUKARA, KAKKANAD, COCHIN - 682 037. BY ADVS. SRI.A.KUMAR SRI.P.J.ANILKUMAR (A-1768) SMTG.MINI(1748) SHRI.JOB ABRAHAM SRI.AJAY V.ANAND SRI.P.S.SREE PRASAD THIS CENTRAL EXICISE APPEAL HAVING COME UP FOR ADMISSION ON 22.08.2022 ALONG WITH CEA 5/19 & CNNCTD CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -2-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI MONDAY, THE 22ND DAY OF AUGUST 2022 / 31ST SRAVANA, 1944 C.E.APPEAL NO. 5 OF 2019 (AGAINST FINAL ORDER 21355/2018 IN APPEAL ST/1700/2012 OF CESTAT BANGALORE)
APPELLANT/S: THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, (NOW PRINCIPAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE), C.R.BUILDING, I.S.PRESS ROAD, ERNAKULAM, KOCHI - 682 018. BY ADV SMT.PREETHA S. NAIR, SC, CENTRAL BOARD OF EXCISE AND CUSTOMS RESPONDENT/S: M/S. TRANS ASIAN SHIPPING SERVICES PVT LTD., TRANS ASIA CORPORATE PARK, XIV/396-C, SEA PORT AIR PORT ROAD, CHITTETHUKARA, KAKKANAD, COCHIN - 682 037. BY ADVS.SRI.A.KUMAR SRI.P.J.ANILKUMAR SMTG.MINI(1748) SRI.P.S.SREE PRASAD SHRI.JOB ABRAHAM SRI.AJAY V.ANAND THIS CENTRAL EXICISE APPEAL HAVING COME UP FOR ADMISSION ON 22.08.2022 ALONG WITH CEA 8/19 & CNNCTD CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -3-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI MONDAY, THE 22ND DAY OF AUGUST 2022 / 31ST SRAVANA, 1944 C.E.APPEAL NO. 6 OF 2019 (AGAINST FINAL ORDER 21354/2018 IN APPEAL ST/1721/2011 OF CESTAT BANGALORE)
APPELLANT/S: THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, (NOW PRINCIPAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE), C.R.BUILDING, I.S.PRESS ROAD, ERNAKULAM, KOCHI - 682 018. BY ADV SMT.PREETHA S. NAIR, SC, CENTRAL BOARD OF EXCISE AND CUSTOMS RESPONDENT/S: TRANS ASIAN SHIPPING SERVICES PVT LTD., TRANS ASIA CORPORATE PARK, XIV/396-C, SEA PORT AIR PORT ROAD, CHITTETHUKARA, KAKKANAD, COCHIN - 682 037. BY ADVS.SRI.A.KUMAR SRI.P.J.ANILKUMAR SMTG.MINI(1748) SRI.P.S.SREE PRASAD SRI.AJAY V.ANAND THIS CENTRAL EXICISE APPEAL HAVING COME UP FOR ADMISSION ON 22.08.2022 ALONG WITH CEA 8/19 & CNNCTD CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -4-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI MONDAY, THE 22ND DAY OF AUGUST 2022 / 31ST SRAVANA, 1944 C.E.APPEAL NO. 7 OF 2019 (AGAINST FINAL ORDER 21356/2018 IN APPEAL ST/1721/11 OF CESTAT BANGALORE)
APPELLANT/S: THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, (NOW PRINCIPAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE), C.R.BUILDING, I.S.PRESS ROAD, ERNAKULAM, KOCHI - 682 018. BY ADV PREETHA S.NAIR RESPONDENT/S: M/S.TRANS ASIAN SHIPPING SERVICES PVT LTD., TRANS ASIS CORPORATE PARK, XIV/396-C, SEA PORT AIR PORT ROAD, CHITTETHUKARA, KAKKANAD, COCHIN - 682 037. BY ADVS.SRI.A.KUMAR SRI.SABU S.KALLARAMOOLA SRI.LEEJOY MATHEW.V. SRI.P.J.ANILKUMAR SRI.AJAY V.ANAND THIS CENTRAL EXICISE APPEAL HAVING COME UP FOR ADMISSION ON 22.08.2022 ALONG WITH CEA 8/19 & CNNCTD CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -5-
S.V.BHATTI & BASANT BALAJI, JJ. - - - - - - - - - - - - - - -- - - -- - - - - - - - - - -- - - - - - - - - CEA Nos.5, 6, 7 and 8 of 2019 - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - -
JUDGMENT
(Dated this the 22nd day of August 2022) Basant Balaji J., All the appeals are heard together since the questions raised relate to Cenvat credit of service Tax for different years, as CEA Nos.5, 6, 7 and 8 of 2019 are filed against the show cause notice for the years 2009-2010, 2008-2009, 2010-2011 and 2006-2008 respectively. C.E.A. No.8 of 2019 is taken as the leading case.
2. The respondent is a company engaged in the service
of 'Transport of goods by road' and allied services with registration number AABCT 2760 JST004 is availing credit -6- under Cenvat Credit Rules 2004 (for short 'the Rules') on the Service Tax paid on input services and utilised the same for the payment of service tax on output services provided by them. The assessee had taken registration and started payment of tax from 1.5.2006 onwards. CENVAT Credit on various input services were utilised from that day onwards. The assessment for the period 1.5.2006 to 31.3.2008 was subject to detailed scrutiny and it is seen that in the ST3 returns filed during the relevant period provide for both taxable and exempted services. On a detailed verification for the period from 1.5.2006 to 31.3.2008, it is seen that the assessee was not maintaining separate accounts as envisaged in Rule 6(2) of the Rules. Hence, show cause notice was issued on 19.3.2009 calling upon the respondent as to why service tax should not be -7- demanded and recovered from them. The show cause notice reads as follows:
“(i) the excess credit amount of Rs 5,17,85,203/- (Rupees Five Crores Seventeen Lakhs Eighty Five Thousand Two Hundred and Three Only) taken and utilised wrongly during the period 01.05.2006 to 31.03.2008 for payment of Service Tax should not be demanded and recovered from them under the provisions of Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Section 78(1) of Finance Act, 1994.
(ii) the amount of Rs.23 04,355/(Rupees Twenty Three Lakhs Four Thousand. Three Hundred and Fifty Five Only) paid on 13.06.2008 should not be appropriated towards the demand raised at Sl.No:(i) above:
(iii) Interest at the appropriate rate on the amount mentioned at Sl. No. (i)above, should not be paid by them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.
(iv) an amount of Rs.3.98,281 (Rupees Three Lakhs Ninety Eight Thousand Two Hundred and Eighty One Only) paid by them should not be appropriated towards interest demanded at Sl. No.
(ii) above::
(v) Penalty under Section 76 of the Finance Act, -8- 1994 should not be imposed on them.”
3. To the show cause notice, the assessee filed reply in
all the cases. In the reply, it was submitted that for the relevant period it has maintained separate accounts and had availed and utilised credit strictly in terms of conditions and safeguards in the Rules and that they have not taken or utilised credit which it otherwise was ineligible for. It was stated that it had identified the taxes paid on the services attributable output services on the basis of the separate accounts maintained by it and has taken credit in terms of Rules 6(5) of the CSR. A contention regarding the limitation was also raised. Personal hearing was granted to the assesee on 7.12.2009.
4. The Commissioner of Central Excise, Customs and -9- Service Tax, thereafter passed an order in original No.16/10/ST on 15.3.2012 in CEA 8 of 2019 as follows:
(1) I hereby confirm the demand of excess
credit amount of Rs.5,17,85,203/- (Rupees Five Crore Seventeen Lakh Eighty Five Thousand Two Hundred and Three Only) taken and utilized wrongly during the period from 01.05.2006 to 31.03.2008 for payment of Service Tax, on the assessee, under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73
(2) of the Finance Act, 1994;
(2) I hereby appropriate an amount of
Rs.23,04,355/- (Rupees Twenty Three Lakh Four Thousand Three Hundred and Fifty Five Only) paid by the assessee on 13.06.2008 towards the amount confirmed at Sl.No.(1) above;
(3) I hereby order that the assessee shall pay
interest at the appropriate rate on the amount confirmed at Sl.No.(1) above under Rule 14 of Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act,1994; (4)I hereby appropriate an amount of Rs.3,98,281/- (Rupees Three Lakh Ninety Eight Thousand Two Hundred and Eighty One Only) paid by the assessee on 13.06.2008 towards the interest confirmed at Sl.No.(3) above; 5.I hereby impose a penalty on the assessee
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under Section 76 of the Finance Act, 1994 calculated at the rate of Rs.200/- (Rupees Two Hundred Only) for every day during which such failure continues or at the rate of two percent of such tax, per month, whichever is higher,starting with the first day after the due date till the date of actual payment of the outstanding amount of Service Tax provided that the total amount of penalty payable in terms of this Section shall not exceed the amount of Rs.5,17,85,203/-; (6)I hereby impose a penalty of Rs.2,000/- (Rupees Two Thousand on the assessee under Rule 15 (3) of Cenvat Credit Rules, 2004.
(7) I hereby impose a penalty of
Rs.5,17,85,203/- (Rupees Five Crore Five Thousand Two Hundred and Three Only)on the assessee under Rule 15 (4) of Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 with an option to pay twenty five percent of this penalty if the demands confirmed at Sl.No.(1)above, interest confirmed at Sl.No.(3) above and reduced penalty are paid within 30 days from the date of communication of this order.”
5. The Commissioner passed separate original orders in other appeals confirmed the demand raised in the respective show cause notices. -11-
6. Aggrieved by the order of the Commissioner, separate appeals were filed before the CESTAT, Bangalore. The Tribunal by the impugned order, held as follows:
“6.3 Therefore, in view of the above, we find that the appellants have maintained separate records and as such, there is force in the arguments made by learned counsel for the appellant-assessee. However, on going through the summary submitted by the counsel for the appellants, we find that there is an amount of Rs.29,24,565/- which remains to be reversed by them. Thus, this amount requires to be reversed along with interest. The credit being attributable to exempted services, the bifurcation of the same is as follows:
Appeal No Period Reversal which will negate demand ST/1252/2010 May 2006 to March 2008 Rs.14,29,064/- ST/1721/2011 April 2008 to March 2009 Rs.5,81,009/- ST/1700/2012 April 2009 to March 2010 Rs.3,54,607/- ST/3466/2012 1.4.2010 to 31.3.2011 Rs.5,59,885/- Total Rs.29,24,565/- -12-
7. In view of the above, we allow the appeals filed by
the appellants ST/1252/2010-DB; ST/1721/2011; ST/1700 /2012; and ST/3466/2012; subject to payment of Rs.29,24,565/- along with interest by the appellants and reject the appeal No.ST/21676/2014 filed by the department.”
7. It is impugning the said order, the Commissioner of CESTAT, Bangalore, the Commissioner of Central Excise Customs and Service Tax filed this appeal. The substantial questions raised read as follows:
“i)Whether on the facts and circumstances of the case Appellate Tribunal was justified in allowing the appeal of the respondent? ii)Whether availing of Cenvat Credit of service tax paid on services used for providing both taxable and exempted services and subsequent reversal of credit attributable to exempted service at the end of the month in the ratio of the previous years' taxable turnover to the total turnover figures, which can in no way be connected with the actual quantum of credit attributable to the exempted services of the current
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month, amounts to compliance of Rule 6(2) of the Cenvat Credit Rules 2004. Such a procedure is not specified by the Rulesand hence not sustainable under the Law. iii) Whether that Hon'ble CESTAT was justified in holding that the respondent had maintained separate accounts in terms of Rule 6(2) of Cenvat Credit Rules 2004 which is contrary to evidence on record.”
8. Heard the Adv.Preetha S Nair and Adv.A Kumar for the parties.
9. The main ground raised by the counsel for the
appellant is that the Tribunal, after finding that the Commissioner has not appreciated the evidence put forward by the assesee regarding the maintenance of separate accounts for each year ought not have relied on the Chartered Accountant's certificate. The certificate certifies that the assessee was maintaining separate accounts and relying on the order of the Commissioner in -14- respect of the period from 1.4.2011 to 31.3.2012 in which it was held that on the report of the Range Officer it was seen that separate accounts were maintained. The assessee has not availed CENVAT credit of exempted service and they were utilising only the input service credit relating to taxable output services and the whole of the CENVAT credit availed on common service relating to the provision of both taxable and exempted services are reversed in the end of each month in the private accounting systems. The net amount relating to service used exclusively for taxable services is mentioned and reflected in the ST-3 returns. The Tribunal simply relying on the order of the Commissioner, extended the same benefit without looking into the records or got verified through the jurisdictional range officer to assess the claim that it is maintaining -15- accounts and were utilising CENVAT credit strictly as per eligibility.
10. Section 35(b) Central Excise Act 1954 is the
provision for appeals to the Appellate Tribunal which reads that any person aggrieved by any of the filing orders of the Appellate Tribunal against such orders. “(a) a decision or the order passed by the court of [Principal Commissioner of Central Excise or Commissioner of Central Excise] as an adjudicating authority. b).... c).... d).....”
11. Clause (7) to Section 129C of the Customs Act 1962 deals with the procedure of the Appellate Tribunal. The Section reads as follows:- “(7) The Appellate Tribunal shall, for the purpose of discharging functions have the same powers as are vested in the court under the Code of Civil Procedure, -16- 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:-
(a) discovery and inspection
(b) enforcing the attendance of any person and examining him on oath:
(c) compelling the production of books of accounts and other documents and
(d) issuing commissions.”
12. The Tribunal by allowing the appeal concluded that
though the Chartered Accountant's certificates were produced before the learned Commissioner. It is noted however that only in one case the Commissioner has caused a factual enquiry and has dropped the proceedings. It is not understood as to why such an enquiry was not conducted in respect of other show cause notices by the Commissioner and the Tribunal. Notwithstanding an reasoning into the veracity of the claim of respondent on the CENVAT credit, the Tribunal went on to hold that the -17- Chartered Accountant's certificate produced shows that separate accounts are maintained. This reasoning constituted the substantial basis for allowing the appeals, subject to the condition that an amount of Rs.29,24,565/- is reversed by the assessee along with interest. Clause (c) of Sub Rule (7) to Section 129C of the Customs Act gives power to the Tribunal to compel the production of books of accounts and other documents. It may be legally tenable that separate books of accounts are not required to be maintained for availing CENVAT credit or the rules suggest a particular way of maintaining accounts. The said circumstance is not an answer to the issue viz., whether the credit claimed by the respondent firstly is trustified matter of fact. In our considered view, the issue is the credit claim of respondent while payment on output is tenable or not. -18- The Range Officer’s report is earlier is the basis for presumption for subsequent years. There is no reasoning by the Commissioner in this behalf and though the Tribunal is empowered by Section 129C sub section 7(c) of the Customs Act to compel the production of accounts and other documents etc., the respondent did not avail the option, or the Tribunal exercised its jurisdiction to compel the production of records. Be that as it appears. The crux omitted by the Tribunal is non-production of accounts certainly would make the difference on the quality of finding recorded in this behalf. Explained the maintenance of CENVAT credit balance at the beginning and ending of the month is one of the deciding factors to accept reply of respondent. The finding on the failure of Commissioner in calling for Range Officer’s report are important. The -19- Tribunal in our considered view has recorded inchoate finding on the entitlement of credit by the respondent allowed the appeals without taking recourse to available procedure under Section 129C subsection 7(c) of Customs Act. On going through the order of the Tribunal, we see that the Tribunal has not gone through the books of accounts or other documents produced by the assessee to enter into a finding that separate accounts are maintained by them, but simply relied on the certificate issued by the Chartered Accountant blindly and also relying on the original order passed by the Commissioner in respect of the assessee for the year 1.4.2011 to 31.3.2012 allowed the appeal. The said finding ought not have been entered by the Tribunal without going into the records as done by the Commissioner for the period 2011 to 2012. In view of the -20- above, we are of the considered opinion that the order of the Tribunal has to be set aside and matters are sent back to the Tribunal for fresh consideration. In the result, the Appeals are allowed and the impugned orders are set aside and the matter is remitted to the Tribunal for fresh consideration in accordance with law, within a period of four months from the date of receipt of a certified copy of this judgment. It is open to the respondent herein to establish its claim on the facts-in-issue between the parties under Section 129C sub section (7) of the Customs Act. SD/ - S.V.BHATTI, JUDGE SD/- BASANT BALAJI, JUDGE dl/