CX - Since SCN did not bring forward any evidence to establish that there has been collusion between appellant and service provider for evasion of ST and for availing inadmissible CENVAT credit, invocation of extended period is unsustainable: CESTAT
By TIOL News Service
ALLAHABAD, JAN 05, 2017: THE appellants entered into an agreement with M/s BVIHR Practice Private Limited for supply of 'Manpower'. In the said agreement, the appellant inserted a clause that BVI shall obtain inter alia Service Tax registration and that BVI shall ensure timely and correct payment of tax applicable from time to time and that proof of deposit of applicable taxes shall be required to be produced to the appellants as and when asked for.
On the basis of such invoices issued by BVI, the assessee took CENVAT credit of Service Tax paid as stated in the said invoices on 'Manpower or Supply Agency Services'.
On investigation, Revenue learnt that BVI had not made the payment of Service Tax stated on the invoices issued to the appellant.
Consequently, SCN was issued on 09.05.2012 for denial of CENVAT credit amounting to Rs.3,32,76,600/- allegedly wrongly availed during the period from April, 2007 to March, 2009. There was allegation in the said SCN that appellants connived with the service provider that is M/s BVIHR Practice Private Limited for evasion of Service Tax and for availing inadmissible CENVAT credit and as a result extended period was invokable.
The demand was confirmed by the CCE, Noida along with imposition of penalty on the appellant as well as the authorized signatory.
Before the CESTAT, the appellant submitted -
+ invoices issued by M/s BVI were containing all the particulars prescribed under Rule 4(A) of STR, 1944, which is in conformity with provisions of rule 9 of CCR and that appellants paid Service Tax to M/s BVI for services provided and since these services are Input services credit has been rightly availed;
+ in terms of sub-rule 4(7) of CCR, credit on input services can be availed once payment has been made on the full value of the service including Service Tax and this is how they were eligible;
+ it is practically not feasible for any service recipient to ask each and every service provider to show the proof of the tax deposited by it with the Government and that non-deposit of tax by the service provider cannot be a ground to deny credit to the service recipient.
+ through Section 73 &73A of FA, 1994, law has provided legal remedy to the Department for recovery of Service Tax not paid as well as Service Tax collected but not deposited with the exchequer and it is not the responsibility of the service receiver to ensure payment of Service Tax by service provider.
+ allegation made in SCN of connivance with the service provider is not supported by any evidence.
+ that it would be impractical to require the assessee to go behind the records maintained by the first stage dealer and that assessee if acts with all reasonable diligence in its dealing with the first stage dealer within the meaning of Rule 9(3) of Cenvat Credit Rules, 2004 obligation is limited to that.
+ once it is demonstrated that reasonable steps have been taken as required within the meaning of Rule 9(3) of Cenvat Credit Rules, 2004 it would be contrary to the Rules to casting an impossible or impractical burden of going on the assessee issuing invoices to verify his records. [Juhi Alloys Ltd. refers]
+ It is unreasonable to expect buyer of such inputs to go and verify accounts of supplier or to find out from Central Excise Department whether actually duty had been paid on inputs. [Tata Motors Ltd. refers]
The AR supported the Order-in-Original.
The Bench observed -
++ We find that the Show Cause Notice did not bring forward any evidence to establish that there has been collusion between the appellant and the service provider for evasion of Service Tax and for availing inadmissible Cenvat credit. Therefore, the invocation of extended period in the said Show Cause Notice is not sustainable.
++ We, therefore, hold that the said Show Cause Notice, so far as, relates to denial of Cenvat credit to the appellant, imposition of penalty on appellant, proposal for imposition of penalty on its Authorized Signatory & proposal of demanding interest from the appellant is unsustainable.
++ We, therefore, modify the impugned Order-in-Original to the extent that the demand confirmed in respect of Cenvat credit of Rs. 3,32,76,600/- is set aside, order for recovery of interest on the said demand is set aside, imposition of penalty of Rs. 3,32,76,600/- on appellant is set aside, imposition of penalty of Rs. 10 lakhs on the appellant is set aside & imposition of Rs. 5 lakhs on Authorized Signatory is set aside.
Both the appeals were allowed.
(See 2017-TIOL-53-CESTAT-ALL)
