21 STT 202 (MUM. - CESTAT)
CESTAT, MUMBAI BENCH
Ahmednagar Merchants Co-operative Bank Ltd.
Commissioner of Central Excise, Aurangabad
A.K. SRIVASTAVA, TECHNICAL MEMBER
ORDER NOS. A/174-175/WZB (MUM.) OF 2009/SMB/C-IV
APPEAL NOS. ST/141 OF 2008 AND E/714 OF 2008
MAY 4, 2009
Rule 4A of the Service Tax Rules, 1994, read with rule 9 of the Cenvat Credit Rules, 2004 - Taxable service to be provided or credit to be distributed on invoice, bill or challan - Period 1-10-2005 to 30-9-2006 - Assessee, provider of banking and other financial services, was availing Cenvat credit of service tax paid on telephone bills, courier charges, computer maintenance bills and commission paid to other banks - As said credit was taken on basis of worksheet enclosed with service tax return without any documentary proof like, invoice, bill or challan, etc., Assistant Commissioner, confirmed demand of service tax on assessee for wrong availment of Cenvat credit - Said order was upheld by Commissioner (Appeals) - Both lower authorities, had come to unanimous conclusion that documents produced by assessee before them did not bear Service Tax Registration No. or details of taxable service, taxable value and service tax amount, etc., and nowhere service tax had been shown to have been charged to assessee - Whether, in such circumstances, said documents could not be considered as valid documents to avail Cenvat credit because of non-fulfilment of requirements of provisions of rule 4A, read with rule 9, of Cenvat Credit Rules, 2004 - Held, yes - Whether, therefore, Cenvat credit had been rightly disallowed to assessee and demand had been rightly confirmed - Held, yes [Para 7]
Section 80, read with section 76, of the Finance Act, 1994 - Penalty - Not to be imposed in certain cases - Period 1-10-2005 to 30-9-2006 - Commissioner (Appeals) reduced amount of penalty imposed upon assessee under section 76, on ground that lots of ignorance prevailed at assessee’s level in field of service tax - Whether, in view of provisions of section 80, action of Commissioner (Appeals) to reduce penalty could not be considered as out of legal bounds - Held, yes [Para 10]
Circulars & Notifications : Notification No. 30/2004-ST, dated 22-9-2004
The assessee was a registered service provider under the category of ‘Banking and other financial services’. It was paying service tax on commission received from customers and also availing the Cenvat credit facility of service tax paid on telephone bills, courier charges and computer maintenance bills and commission paid to other banks. The adjudicating authority having noticed that the assessee had taken the Cenvat credit on the basis of work-sheet enclosed with ST-3 return without any documentary proof, i.e., documents prescribed under rule 9(1)(f) and (g) of the Cenvat Credit Rules, 2004 such as invoice, bill or challan, etc., and utilized the same for payment of service tax for the period from 1-10-2005 to 30-9-2006, issued a show cause-cum-demand notice to the assessee for having wrongly availed the Cenvat credit. On adjudication, it confirmed the demand of service tax along with interest and penalties. On appeal, the Commissioner (Appeals) upheld the demand of service tax and interest. However, he reduced the amount of penalty imposed under section 76.
On cross appeals :
Both the lower authorities, after perusing the documents produced before them by the assessee, had come to the unanimous conclusion that those documents did not bear Service Tax Registration No. or details of taxable service, taxable value and service tax amount, etc., and nowhere the service tax had been shown to have been charged to the assessee. It is obvious that service tax credit cannot be taken when the service tax has not been shown to have been paid by the service provider. Vide Notification No. 30 of 2004-ST, dated 22-9-2004, any document, irrespective of the fact whether or not serially numbered and whether or not containing address of the person receiving taxable services but containing other informations in such document as required in sub-rule (1) of rule 4A of the Service Tax Rules, 1994, is a valid document for taking credit. However, even the proviso inserted to rule 4A vide, Notification No. 30 of 2004-ST, dated 22-9-2004 was of no help to the assessee because the crucial information and the material particulars required for availing credit of service tax were not available in the documents. Hence, those documents were not valid documents to avail the credit because of the non-fulfilment of the requirements of the provisions of rule 4A, read with rule 9 of the Cenvat Credit Rules, 2004. Hence, the Cenvat credit had been rightly disallowed to the assessee and the demand had been rightly confirmed. [Para 7]
Admittedly, the assessee had taken the impugned Cenvat credit and had also utilized it for discharging its service tax liability as an output service provider. Once it is found that the Cenvat credit was irregularly availed by an assessee and by implication to that extent, service tax on the output service was short paid, it has to be recovered under rule 14 of the Cenvat Credit Rules, 2004. [Para 8]
Therefore, the show-cause notice invoking the provisions of rule 14 of the Cenvat Credit Rules, 2004, read with section 11A of the Central Excise Act, 1944 and section 73 of the Finance Act, 1994, read with section 11AB of the Central Excise Act, 1944 and section 75 of the Finance Act, 1994 for recovery of irregularly availed Cenvat credit and demanding interest, respectively, was perfectly in order and was within the framework of law. For the same reasons, proposal in the show-cause notice to impose penalty under rule 15 of the Cenvat Credit Rules, 2004, read with section 11AC of the Central Excise Act, 1944 and section 76 of the Finance Act, 1994, could not be found faulted with.
Therefore, the appeal filed by the assessee was to be rejected. The impugned order passed by the Commissioner (Appeals) was to be upheld. [Para 8]
The Commissioner (Appeals) had imposed a lesser penalty under section 76 on the ground that lots of ignorance prevailed at the assessee’s level in the field of service tax even then. There is no denying the fact that it is taking time for the assessees to come to grips with the service tax levy, which is of recent origin. The assessees are finding it difficult to properly comprehend and understand the nitty-gritty of the service tax laws and their nuances. Section 80 provides that notwithstanding anything contained in the provisions of section 76, 77 or 78, no penalty shall be imposable on an assessee for any failure referred to in the said provisions, if the assessee proves that there is a reasonable cause for the said failure. This is a unique provision and is not found in other statutes. This provision cannot be overlooked or ignored, while considering the quantum of penalty to be imposed on the assessee under section 76, 77 or 78. Although the Commissioner (Appeals) while reducing the penalty, had not cited this provision specifically, yet his action to reduce penalty, keeping in view section 80, could not be considered as out of legal bounds. If the discretion is there not to impose penalty under section 80, then the discretion is as well there to impose lesser penalty. Therefore, the order of the Commissioner (Appeals) imposing lesser penalty and giving reasons thereof could not be found faulted with. [Para 10]
CASES REFERRED TO
Union of India v. Dharmendra Textile Processors  166 Taxman 65 (SC) (para 9), Bhilai Engg. Co. Ltd. v. CCE  19 STT 325 (New Delhi - CESTAT) (para 9) and Chaitanya Advertising v. CCE&C  8 STT 235 (Ahd. - CESTAT) (para 9).
Anupam Dighe for the Appellant and P.K. Agarwal for the Respondent.