By TIOL News Service

MUMBAI, AUG 02, 2017: AGAINST an order passed by the CCE, Nagpur , the appellant is before the CESTAT.

The appellant informed the Bench that there are five different issues raised in these proceedings.

A: CENVAT Credit availed on fictitious invoices

+ The appellants admitted their liabilityand paid service tax of Rs.6,68,41,327/- along with interest of Rs.1,58,46,943/- before issuance of the show cause notice.

+ Within thirty days of the issuance of the SCN, they also paid penalty of Rs.1,67,10.332/-, @ 25% of the disputed credit.

+ Citing section 73(1A) and s.73(3) of the FA, 1994, they seek the benefit of reduced penalty which has been denied by the adjudicating authority on the ground that the appellant had not admitted their tax liability on all the five different charges leveled in the SCN. The appellant places reliance on the apex court decision in RMDChamarbaugwalla - (AIR) 1957 SC 628 to emphasize on the doctrine of severability.

B: CENVAT Credit of Rs.3,12,78,763/- taken on invoices of M/s. CP Systems Pvt. Ltd.

+ Appellant admitted that the purpose of alterations made by them in the invoices was to accommodate the fictitious transactions mentioned in the first issue.

+ Appellant argued that no alterations were made in the amount of service tax paid and the total assessable value in respect of these invoices.

+ That at the time of taking credit these were unaltered invoices.

+ That they are entitled to credit, as it is not disputed that they have received the services, they have paid service tax, the service provider has paid the service tax and the invoices have not been altered in any way in respect of mandatory details, as per Rule 4A of the Service Tax Rules. Moreover, even revenue had failed to establish that the original invoices obtained by them from the service provider showed different amounts of service tax paid.

C: Services provided by appellants to JSWJaigad Port Ltd.

+ Revenue allegation is that the activity is classifiable under Erection, commissioning and installation services and not commercial or industrial construction service/work contract service as claimed by the appellant.

+ The benefit of classification under Works contract service was denied solely on the ground that the items included in the contract are only (i) paint (ii) MS Grills (iii) Welding electrodes.

+ Appellant submitted that the consideration received for execution of this contract had been included in the return filed by them to VAT authorities, considering the transactions as works contract;that the contract price of Rs.12.60crores, as per clause 3 of the contract dated 22/08/2008 specifies that the same is including all taxes and duties, VAT/WCT; that in these circumstances, the service provided by them qualifies as Works Contract service and is, therefore, exempted vide Notification No. 25/07-ST dated 22/05/2007.

D: CENVATCredit of Rs.3,43,799/- taken on inputs when Works Contract composition scheme was availed.

+ As all the invoices bear the indication “Ratnagiri-Structure” which indicate that they are for Jaigad port, the impugned goods have been received and consumed in their Jaigad site where the benefit of consumption under works contract scheme has not been filed, therefore, credit cannot be denied.

E: ST demand on amount received allegedly as advances.

+ That the entire amount of service tax demanded along with interest and 25% penalty was paid within 30 days of the show-cause notice and, therefore, penalty cannot be imposed.

F: Penalties on persons.

+ At the material time, there was no Section 77 (2) in the statute or rules made thereunder for levying penalties on the person, therefore, penalty cannot be imposed on the second appellant viz. Director.

The AR justified the impugned order.

On the various issues raised, the Bench inter alia observed and held thus -

A: CENVAT Credit availed on fictitious invoices

++ Proviso to sub-section (2) (of section 73 of FA, 1994) talks about the liability accepted under Section (1A) and if only part liability is admitted under sub-section (1A), so far as the proviso to sub-section (2) is concerned, it becomes full liability. In these circumstances, we find that the appellants are entitled to the benefit of sub-section (1A) of Section 73 of the Finance Act, in respect of Cenvat Credit wrongly availed on fictitious invoices. Since the appellants have paid the entire amount of Cenvat Credit along with interest and 25% of penalty within one month of the issue of show-cause notice, all proceedings shall be deemed to be concluded in respect of that amount in terms of the proviso to sub-section (2) of section 73. On the above ground, the benefit of section 73(1A) read with subsection 73(2) is allowed insofar as it relates to the first issue.

++ Merely because a combined show cause notice covering various charges is issued the benefit of the section 73(1A) read with sub-section 73(2) cannot be denied.

++ If separate show cause notice was issued for this issue, the benefit of section 73(1A) read with subsection 73(2) would have been allowed as the appellant have paid the entire dues arising out of this issue along with interest and 25% of the penalty within the prescribed period. Thus the appellants are entitled to the benefit of Section 73(1A) read with sub-section 73(2), issue wise in respect of the amount admitted under section 73(1A).

B: CENVAT Credit of Rs.3,12,78,763/- taken on invoices of M/s. CP Systems Pvt. Ltd.

++ The case of the Revenue is that the credit on such invoices, which have been altered in any manner by the noticee cannot be allowed.

++ The case of the appellant is that the alteration was only in the quantity of service received and the rate of services. They had not altered the total assessable value or the total service tax paid; that the alteration was not made in any of the mandatory details prescribed under Rule 4A of the Service Tax Rules, 1994.

++ Provisions of service payment of service tax have already been confirmed and duplicate copies of invoices obtained from the service provider, the credit of such invoices in respect of services undisputedly received by the appellant cannot be denied.

++ Appeal on this count is consequently allowed.

C: Services provided by appellants to JSWJaigad Port Ltd.

++ It is apparent that the responsibility of providing of materials except raw materials is that of the appellants. In these circumstances, the character of the contract being a works contract cannot be denied. Consequently, the appellants should be entitled to the benefit of Notification No. 25/2007-ST. It is seen that the impugned order relies on the fact that the appellants has deposited the service tax at the time of visit of officers. We find that such fact cannot be held against the appellant.

D: CENVAT Credit of Rs.3,43,799/- taken on inputs when Works Contract composition scheme was availed.

++ The fourth issue pertains to availment of credit on documents where the billing address has been shown as JSWRatnagiri and the appellants have claimed the material has been used in their site at JSW and not at JSW Energy.

++ The Commissioner in the impugned order has held that the claim of the appellant that the goods were received at JSW and not at JSW Energy is not substantiated by the documentary evidence and, therefore, the credit has been denied.

++ It is apparent that in principle the impugned order agrees that if the goods were indeed supplied to the appellant's plant at JSWJaigad site, the credit would be available.

++ It appears that the documents presented before us were not presented before the original adjudicating authority. Since it is an issue regarding verification of facts, the demand is set aside and the matter remanded to the original adjudicating authority for verifying the facts with reference to all the documents and records that may be submitted by the appellants in this regard.

E: ST demand on amount received allegedly as advances.

++ The appellants have paid the entire amount of demand and interest along with 25% of the penalty. The appellants are seeking benefit of sub-section (3) of Section 73 and the benefit of Section 80 for waiver of penalty as they claimed to have a bonafide belief that no tax is liable on them.

++ It is held that the benefit of Section 73(1A) read with sub-section 73(2) cannot be denied to them as they have deposited the amount of duty demanded along with the interest and 25% penalty within the prescribed time.

F: Penalties on persons.

++ Penalty of Rs.5000/- has been imposed on the Director of the service provider.

++ It is seen that out of five charges against the service provider, two have been compounded in terms of Section 73(1A) read with proviso to sub-section 73(2) of FA, 1994. As a result proceedings against the co-noticees would not survive in respect of these charges.

++ In respect of two charges the proceedings have been set aside and appeal allowed. No penalty in respect of these charges can be imposed. In respect of fifth charge, the demand has been set aside and matter remanded. Thus, no cause exists for imposition of penalty on the Director.

In fine, the appeal filed by the assessee was disposed of and that by the Director was allowed.

(See 2017-TIOL-2735-CESTAT-MUM)