Benefit of Small service provider exemption notification cannot be denied if Cenvat credit initially availed on input service but reversed later on
Commissioner of Central Excise, Ludhiana Vs. Cool Collections [2014 (8) TMI 472 - CESTA T NEW DELHI]
Cool Collections ("the Assessee") are registered under Service tax as Consignment agent and Sales agent. The Assessee deposited Service tax of Rs. 19,155/- on the value of taxable services amounting to Rs. 1,87,409/- during the period 2005-06 ("the period"). Further, the Assessee had availed Cenvat credit of Service tax paid on telephone service ("input service") during the period. Later on, the Assessee reversed the Cenvat credit so availed on the input service and filed refund claim of the Service tax deposited on the ground that since during the period, the value of their taxable services remained below the monetary limit of Rs. 4 lakhs and they were covered under erstwhile Small Service Provider Exemption Notification No. 6/2005-ST dated March 1, 2005 ("SSI Exemption Notification"), this is now replaced by the Notification No. 33/2012-ST dated. June, 20, 2012, exempts taxable services of aggregate value not exceeding Rs. 10 lakhs in any financial year.
However, the Adjudicating Authority denied the refund claim on the ground that as per condition no. (ii) of the SSI Exemption Notification, the provider of taxable service should not avail the Cenvat credit of Service tax paid on any input services. As it is apparent from the records that the Assessee had availed the credit on input service, they were not entitled for the benefit of the said Notification.
On appeal, the Commissioner (Appeals) relying upon the decision of the Apex Court in the case of Shri Hari Chemical Exports Ltd. Vs. UOI [2006 (193) E.L.T. 257 (S.C.)] ("the Hari Chemical case") allowed the refund claim. Being aggrieved by the said order, the Revenue preferred an appeal before the Hon'ble CESTAT, Delhi.
The Hon'ble CESTAT, Delhi also relied upon the Hari Chemical case wherein it was held that "only because in his books of accounts entries are made for taking of the credit in terms of one provision of the Rules, the same if ultimately found to be inapplicable and return of the credit is taken effect, we are of the opinion that there cannot be any legal bar in claiming the exemption under another rule". Thus, the Hon'ble Tribunal observed that though the Assessee has taken credit on input service during the period but have not utilized the same and have reversed later on, benefit of the SSI Exemption Notification cannot be denied and decided against Revenue.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Refund of excess duty paid on provisional basis won't attract doctrine of unjust enrichment
Commissioner of Customs, Pune Vs. Atlantic Shipping (P.) Ltd. [(2014) 47 taxmann.com 204 (Mumbai-CESTAT)]
In the instant case, shipping agent of the Atlantic Shipping (P.) Ltd. (the Respondent) paid the provisionally assessed Customs duty on estimated quantity of bunker fuel to be consumed during the coastal run. On completion of the final assessment, the Respondent filed a refund application as duty had earlier been paid in excess on provisional assessment basis. The Assistant Commissioner observed that for refund of the duty paid on provisional basis, unjust enrichment is not attracted. It was further observed that the refund claim on imported goods on which duty was paid provisionally were used captively. Accordingly, the Assistant Commissioner sanctioned refund of the excess duty paid on provisional basis.
However, the Revenue filed an appeal before the Commissioner (Appeals) on the ground that the provision of unjust enrichmentis attracted in the facts and circumstances of the case as the Respondent might have transferred the cost indirectly for the services rendered during the coastal run.
The Commissioner (Appeals) dismissed the appeal of the Revenue on the premise that the duty leviable on Bunker estimated to be consumed during coastal run of the vessel has been recovered by Department on provisional assessment of Bill of Entry in terms of Board's Circular No. 58/97 dated November 6, 1997 ("the Circular").
Similarly, steamer agent is entitled to refund of duty in case of unutilized duty paid in terms of the Circular read with Board's letter F. No. 450/66/2005-Cus-IV dated November 24, 2005. Further, reliance was placed on the ruling of the Hon'ble Ahmedabad Tribunal in the case of Commissioner of Customs Vs. Ambica Maritime Ltd. [2007 (220) ELT 887 (Trib - Ahd.)], wherein it was held that while vessel is convened from foreign run to coastal run and Customs duty on ship stores deposited on provisional assessment basis on their estimated consumption during coastal run, the payment was based on estimate. It was held that such payment is not duty but only a deposit or notional amount on which doctrine of unjust enrichment is not applicable as provided under Section 27 read with Section 28D of the Customs Act, 1962.
The Revenue filed an appeal before the Hon'ble Mumbai Tribunal͘.
The Respondent relied on the Circular and the ruling of the Hon'ble Karnataka High Court in the case of Commissioner of Customs Vs. Agrotech Foods Ltd. [2010 (249) ELT 348] wherein it was held that on the adjustment of amount paid on provisional basis, doctrine of unjust enrichment is not attracted.
The Hon'ble Tribunal rejected the contention of the Revenue on the ground that if the contention of the Department was agreed to, it would render the entire scheme of provisional assessment meaningless.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Excess Service tax paid can be adjusted with future Service Tax liability
Excess Service tax paid can be adjusted with future Service Tax liability and cannot be denied on the ground of not having centralised registration or can be subjected to monetary limit.
General Manager (CMTS) Vs. Commissioner of Central Excise [2014 (8) TMI 589 - CESTAT NEW DELHI]
General Manager (CMTS) ("the Appellant") are engaged in providing taxable services in the category of telephone services. During scrutiny of their ST-3 Returns for the period October, 2006 to March, 2007, it was found that while paying Service tax for the month of November, 2006 they had adjusted an amount of Rs. 9,13,200/- which was paid in excess earlier and further, in the month of January, 2007, they adjusted an amount of Rs. 4,72,907/- against Education Cess.
The Adjudicating Authority vide its order dated March 20, 2008 confirmed demand of Service tax and Education Cess amounting to Rs. 3,86,107/- along with interest and penalty and held that only the assessee who provides taxable service from more than one premises or offices and having centralized registration,, can adjust the excess Service tax paid against their future Service tax liability for subsequent period under Rule 6(4A) read with Rule 6(4B) of the Service Tax Rules, 1994 ("the Service Tax Rules"). It was further contended that an assessee with centralized registration under Rule 4(2) of the Service Tax Rules can adjust excess payment in one month against the tax liability in other months without any limit and for other assessee, there is a monetary limit of Rs. 1 lakh for such adjustment.
On appeal being filed, the Commissioner (Appeals) upheld the contentions of the Adjudicating Authority and confirmed the demand on the Appellant. Being aggrieved, the Appellant preferred an appeal before the Hon'ble CESTAT, Delhi͘
It was held by the Hon'ble CESTAT, Delhi that the excess payment referred to in Rule 6(4A) read with Rule 6(4B) of the Service Tax Rules is like advance payment under Rule 6(1A) thereof for which there cannot be any monetary limit and there is no condition in Rule 6(4A) read with Rule 6(4B) of the Service Tax Rules for availing the adjustment facility, the assessee must have opted for centralized registration.
It was further held by the Hon'ble Tribunal that when an assessee during certain months, for reasons other than interpretation of law, taxability and classification, valuation or applicability of exemption, has paid Service tax in excess of his actual tax liability, the Government cannot retain the excess tax paid by the assessee by refusing its adjustment against his tax liability for future months and such refusal of adjustment would amount to collection of tax without the authority of law which is contrary for the provisions of Article 265 of the Constitution of India.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Cenvat Credit cannot be denied of Service tax wrongly paid under reverse charge
Cenvat Credit of the Service tax wrongly paid under reverse charge is nothing but refund of the erroneously paid Service tax which cannot be denied
Bajaj Allianz General Insurance Co. Ltd. Vs. Commissioner of Central Excise, Pune-III [2014-TIOL-1540-CESTAT-MUM]
Bajaj Allianz General Insurance Co. Ltd. ("the Appellant") is engaged in the business of providing General insurance service ("insurance service") throughout India. The head office of the Appellant is located at Pune and is centrally registered with the Service Tax Department for discharge of Service tax liability on insurance service. To promote their business, the Appellant had appointed independent insurance auxiliary agents ("insurance agents") providing services to the Appellant taxable under the category of 'Insurance auxiliary services' under Section 65(105)(zl) of the Finance Act, 1994. Since, in terms of Rule 2(1)(d)(iii) of the Service Tax Rules, 1994, the service receiver was liable to pay Service tax on Insurance auxiliary services, the Appellant was duly discharging its Service tax liability as a receiver of service from the insurance agents.
Amongst other places, the Appellant also appointed insurance agents in Jammu & Kashmir ("J&K") for procuring the policies for the clients/ assets located in J&K. Though the said services provided by the insurance agents in J&K were not taxable, the Appellant wrongly discharged the Service tax as a recipient of service and thereafter taken Cenvat credit of the same as input service. During the course of audit, the Department took objection that the Appellant have wrongly availed the Cenvat credit on Service tax paid on Insurance auxiliary services rendered in J&K on the ground that the services are exclusively used in the State of J&K on which no Service tax is liable to be discharged and the Service tax, if at all, paid by the Appellant is not available as Cenvat credit to the Appellant.
Accordingly, the Cenvat credit availed by the Appellant was denied and recovery proceedings were initiated. Being aggrieved, the Appellant preferred an appeal with the Hon'ble CESTAT, Mumbai and submitted that since the services rendered by the insurance agents in J&K were not taxable, Service tax deposited on the same was refundable to the Appellant and accordingly, they have taken credit of the same. The Appellant also relied on the judgment of Hon'ble Apex Court in the case of CIT Vs. Mahalakshmi Textile Mills Ltd. [1967 (66) ITR 710 (SC)] ("Mahalakshmi Textile") and Nitco Tiles Ltd. Vs. CCE Mumbai [2007 (220) ELT 827 (Tri. Mum)] ("Nitco Tiles").
The Hon'ble CESTAT, Mumbai determined the place of provision of the service rendered by the insurance agents located in J&K and held that the Insurance auxiliary services provided by the insurance agents in the State of J&K were not taxable and therefore, the Appellant was not liable to pay Service tax͘ Further, the Hon'ble Tribunal relied upon the decisions in the case of Mahalakshmi Textile and Nitco Tiles and held that the Cenvat credit taken by the Appellant is nothing but refund of the Service tax paid by them on the services on which they were not required to pay Service tax and the same cannot be denied.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Mere possibility of doing any commercial activity by trust couldn't cause rejection of Sec. 80G approval
September 3, 2014[2014] 48 taxmann.com 116 (Agra - Trib.)
IT : Even if there was a possibility that assessee institution would engage in a commercial activity with help of community centre assessee was building, this could not be reason enough to decline assessee's application for grant of approval under section 80G
HC disallows deduction of bad-debts as assessee had made fake book entries to evade taxes
September 3, 2014[2014] 48 taxmann.com 105 (Bombay)
IT : Assessee's claim for bad debt could not be allowed where false book entries were made to avoid tax liability
Cenvat credit is available on capital goods even if they are moved out temporarily from factory
Commissioner of Central Excise & Service Tax, Daman Vs. Aarti Industries Ltd. [(2014) 47 taxmann.com 148 (Ahmedabad - CESTAT)]
Aarti Industries Limited (the Respondent) was engaged in the manufacture of Organic and Inorganic chemicals and purchased hydrogen gas cylinders (Cylinders) to store hydrogen gas for use in the process of manufacture of various chemicals in its factory. The hydrogen gas is procured from various suppliers and in this process the empty Cylinders have to move out from the Respondent's factory frequently for refilling of hydrogen gas. After refilling, these Cylinders are received back in the Respondent's factory and put to use for manufacture of final products.
The Cylinders are installed on hired vehicles and interconnected to form hydrogen cylinder bank for ease of the transportation and use within the factory.
The Respondent took Cenvat credit of the Excise duty paid on Cylinders under the category of "Capital Goods" during the period from October, 2004 to May, 2007.
The Department argued that the Respondent wasn't eligible to avail the Cenvat credit on following grounds:
(a) Capital goods were not installed within factory; and
(b) Procedure under Rule 3(5) Cenvat Credit Rules, 2004 ("the Credit Rules") relating to reversal and re-credit was not followed; and
(c) Procedure under Rule 4(5)(a) of the Credit Rules was also not followed.
Accordingly, the Adjudicating Authority disallowed the Cenvat credit to the Respondent and raised demand for recovery of such Cenvat credit along with interest and penalty of equivalent amount under Section 11AC of the Central Excise Act, 1944.
The first Appellate Authority allowed the Respondent's appeal by setting aside the Order of the Adjudicating Authority.
Being aggrieved, the Department filed an appeal before the Hon'ble CESTAT.
The Hon'ble CESTAT observed that Rule 2(a) of the Credit Rules provide that the condition for availing Cenvat credit on capital goods is their use within the factory of the manufacturer of final products. It was held that there was no requirement under the Credit Rules that the capital goods must be installed within the factory of production.
Further, the Hon'ble Tribunal held that temporary to and fro movement of Cylinders for the purpose of refilling of hydrogen gas is covered by Rule 4(5)(a) of the Credit Rules. Furthermore, reversal of credit at time of removal of Cylinders and availment of credit at time of receipt of duly filled Cylinders is a revenue neutral exercise.
However, the Hon'ble CESTAT held that the arguments of the Department pertaining to Rule 4(5)(a) and 3(5) were not sustainable because the same were not invoked in the Show Cause Notice. Hence, Adjudication proceedings and appeal proceedings cannot go beyond scope of show cause notice.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Assessee Can choose most beneficial Notification when 2 Notifications simultaneously applicable at a time
Arvind Ltd. Vs. Commissioner of Central Excise, Ahmadabad-III [(2014) 47 taxmann.com 91 (Ahmadabad - CESTAT)]
Arvind Ltd. ("the Appellant") was a composite textile mill engaged in the manufacture of 100% cotton fabrics which were cleared for export as well as for home consumption.
The Appellant was simultaneously availing exemption under Notification No.29/2004- CE-Tariff dated July 9, 2004 ("the Notification No.29/2004") and 30/2004-CE‑Tariff dated July 9, 2004 ("the Notification No.30/2004").
Notification No. 29/2004 prescribed concessional rate of duty at the rate of 4% ad valorem unconditionally for 100% cotton fabrics and in this case, the Appellant availed Cenvat credit of duty paid on inputs, capital goods and input services used in the manufacture of 100% cotton fabrics, which were exported.
On the other hand, Notification No. 30/2004 prescribed Nil rate of duty on 100 per cent cotton fabrics subject to the condition that no Cenvat credit of duty paid on inputs shall be availed and the Appellant availed exemption under this Notification also in respect of 100% cotton fabrics cleared for home consumption.
Notification No.29/2004 was amended vide Notification No.58/2008-CE-Tariff dated December 7, 2008 ("the Notification No. 58/2008") and the rate of duty on the said goods was reduced to Nil unconditionally.
Further, a fresh Notification No. 59/2008-CE ("the Notification No. 59/2008") was simultaneously issued on December 7, 2008, which prescribed 4% rate of duty on the said goods without imposing any condition. The Department denied credit on ground that since goods were unconditionally exempted in terms of Notification No. 29/2004, which was mandatory and by virtue of sub-section (1A) of Section 5A of the Central Excise Act, 1944, the Appellant couldn't opt for payment of duty @ 4% on export of 100% cotton Fabrics under Notification No. 59/2008 when the goods were unconditionally exempted from payment of duty under Notification No.29/2004 as amended on December 7, 2008.
Accordingly, the Revenue issued Show Cause Notices for recovery of Cenvat credit availed by the Appellant on the grounds that the Appellant were not eligible for the same in view of the provisions of Rule 6(1) and Rule 6(4) of the Cenvat Credit Rules, 2004 ("the Credit Rules"). The Revenue argued that the Appellant was not entitled for Cenvat credit on 100% Cotton Fabrics since it was unconditionally exempt from payment of duty under the Notification No.29/2004 as amended on December 7, 2008. The demand was upheld by the Adjudicating authority and the Commissioner (Appeals). The Appellant filed an appeal before the Hon'ble Tribunal͘ The Hon'ble Tribunal held that when two exemption notifications,one granting absolute unconditional exemption to excisable goods and other granting unconditional partial exemption to said goods, are operative simultaneously, it is choice of assessee to opt for that notification which is more beneficial to him and provisions of section 5A(1A) of the Central Excise Act, 1944 would not apply. Further, as per Rule 6(6) of Credit Rules, since said goods (even if considered as exempted) were exported, credit could not be denied.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
Where assessee had deposited sale consideration in his bank account and himself had filed complaint about deficiency in stamp duty in sale deed and witness to sale deed and bank manager had confirmed stand taken by assessee, sale consideration could not be treated as undisclosed income of assessee
We, therefore, find it appropriate to direct the Registrar General of the Court to forward a copy of this judgment to the Chairman of the Central Board of Direct Taxes to cause an enquiry into the conduct and motives of Shri Yaduvansh Yadav, Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner__._,_.___
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