Whether appellant is entitled to take suo motu credit of duty paid twice ?

PJ/CASE LAW/2015-16/2933

Case:- J.K. LAKSHMI CEMENT LTD. VERSUS C.C.E. & S.T. JAIPUR-II

Citation:- 2015 (40) S.T.R. 618 (Tri. - Del.)

Brief facts:- The appellant is in appeal against the impugned order wherein the suo motu credit taken by them has been denied by both the lower authorities.
The facts of the case are that during the period March, 2005 to March, 2006, the appellant utilized their cenvat credit amount for payment of output transportation service. As there was a Circular No. 97/08/2007, dated 23-8-2007 which directs that on output transportation service the service tax is to be paid in cash. But, the appellant utilized cenvat credit account for payment of the service tax, therefore, proceedings were initiated against the appellant and the adjudicating authority directed the appellant to pay service tax in cash. Against the said order, the appellant filed an appeal before the ld. Commissioner (Appeals) who directed to make a pre-deposit of the entire amount of service tax in dispute in cash which appellant complied with on 29-8-2011 and thereafter immediately he has taken the suo motu credit on 30-8-2011 of the service tax paid through cenvat credit account. Thereafter, a show cause notice was issued on 24-8-2012 to deny the suo motu credit taken by the appellant. Both the lower authorities denied the suo motu credit to the appellant, therefore, appellant is before Tribunal.

Appellant’s contention:- Shri K.K. Anand, ld. counsel for the appellant appeared and submits that the appellant has paid service tax through their cenvat credit account as well as in cash. Therefore, the service tax has been paid twice by them and they have taken suo motu credit thereof. In these circumstances, the short issue is for consideration is that the appellant is entitled for suo motu credit or not in the circumstances of the case. He also submits that the appellant is entitled to take suo motu credit. To support this contention he relied on the decisions in Esdee Paints Ltd. v. CCE, Ahemdabad - 2010 (249)E.L.T.225 (Tri. Ahmd.),S. Subrahmanyam & Co. v. CCE, Vadodara - 2011 (268)E.L.T.497 ( Tri-Ahmd.) which has been affirmed by Hon’ble High of Gujarat reported in Commissionerv. S. Subramanyan & Co. - 2013 (296) E.L.T. A123 (Gujarat), Sopariwala Exports Pvt. Ltd. v. CCE, Vadodra-I - 2013 (291)E.L.T.70 (Tri. Ahmd),CCE, Bangalore-IIIv. Motorola India Pvt. Ltd. - 2006 (206)E.L.T.90 (Kar.). He also submits that the Larger Bench decision of this Tribunal in the case of BDH Industries Ltd.v. CCE (Appeals), Mumbai-I - 2008 (229)E.L.T.364 (Tri.-LB)in the said case this Tribunal has not considered the decisions of the Hon’ble High Court of Karnataka in the case of Motorola India Pvt. Ltd. (supra). Therefore, he prayed that issue is no more res integra and impugned order be set aside.

Respondent’s contention:- On the other hand, ld. AR opposed the contention of the ld. counsel and submits that as per C.B.E. & C. Circular No. 97/8/2007, it is a cleared mandate that for output transportation service, service tax is payable in cash. Therefore, the appellant required to pay service tax in cash. Further, in compliance the direction of the ld. Commissioner (Appeals), they have paid the service tax in cash. But they have gone one step further by taking suo motu credit which was the subject matter at that time. Therefore, show cause notice required to be issued for taking suo motu credit by the appellant. It is also submitted that issue has been examined by the ld. Commissioner in detail and observed as under :
On going through the chronology of the case, it is seen that during the period March, 2005 to March, 2006 the appellant had paid service tax on GTA amounting to Rs. 37,86,455/- by utilizing Cenvat credit. The department objected to this, issued show cause notice C. No. V(25) 15/Off/Adj-II/JPR-II/228/08/928, dated 6-3-2009. The show cause notice was adjudicated and the appellants were asked to pay tax in cash. Rather than paying the service tax in cash, the appellants preferred and appeal before Commissioner (Appeals) who directed to them to make a pre-deposit of the disputed amount in cash vide stay order No. 96 (CB) Service Tax/JPR-II. The appellants in compliance with the stay order, paid the amount in cash on 29-8-2011 but on 31-8-2011, on their own took re-credit of amount debited earlier. The Commissioner (Appeals) while disposing of the appeal rejected it vide OIA dated 27-11-2012 on the ground that the suo motu re-credit was not allowed. Against the rejection of appeal by the Commissioner (Appeals) vide OIA dated 27-11-2012, the appellants should have filed an appeal before the Tribunal and they might have done so. Rather than enforcing the OIA issued by the Commissioner (Appeals), the Addl. Commissioner issued another show cause notice questioning suo motu re-credit under C. No V. 925 Adj-I/JPR-11/242/2012/2127, dated 24-8-2012 and adjudicated the same under OIO No. 10/2012 what is subject matter of the appeal. It is obvious from the factual matrix constructed about that soon after getting OIA, dated 27-11-2012 the appellants’ should have paid back the re-credit taken suo motu and filed proper refund claim or filed appeal against the OIA. For the Department also there was no need to issue another show cause notice but should have recovered the amount. On merit also, the action of appellant in re-crediting of amount after paying the GTA service tax in cash in compliance with stay order of the Commissioner (Appeals) was wrong and legally incorrect. The stay order only directed the appellants to pay in cash and did not permit re-credit of an equal amount. Therefore, the appeal cannot succeed, hence rejected.
She, further submits that the case was relied upon by the appellant are not applicable to the facts of this case as in those cases the issue of availment of cenvat credit on GTA service is not in question. She strongly relied on the decision of the Larger Bench in the case of BDH Industries Ltd. (supra). Therefore, she prayed that impugned order is to be upheld.

Reasoning of judgment:- In this case, facts are that the appellant is required to service tax on output transportation service during the period March, 2005 to March, 2006. The appellant utilized their cenvat credit account for payment for output transportation service. The Revenue sought to deny utilization of cenvat credit account for payment of output transportation service. To support this contention the ld. AR has relied on C.B.E. & C. Circular No. 97/8/2007, dated 23-8-2007. Admittedly, in this case the period in dispute March, 2006 to March, 2007 and CBEC has issued this Circular only on 23-8-2007 which is after the period in dispute. Therefore, the said circular has no relevance to the facts of this case. Further, they are not going into the issue that whether the appellant is entitled to avail cenvat credit account for payment of output transportation service during the impugned period or not. But the issue before them is that as the appellant has paid service tax on output transportation service twice : (a) by utilizing cenvat credit account; and (b) by payment in cash. In those circumstances, whether the appellant is entitled to take suo motu credit of duty paid twice or not.
The said issue came up before this Tribunal in the case of Esdee Paints Ltd. (supra) wherein this Tribunal has observed as under :
Admittedly during the relevant period the appellant paid the service tax by utilizing the credit. When such credit utilization was objected to by the Revenue, they paid the tax in cash and reversed the entries made in the credit account. In fact such reversal of entries amounts to correction of entries and not refund of the tax already paid. With the payment of service tax in cash, the debit entries already made in credit account for payment of service tax were required to be reversed. To be just and fair, Revenue should have on its own allowed such correction of entries, when the appellant paid the tax in cash. As such they do not find any justification in rejecting the appellant’s claim of reversal of entries on the ground that the same was done suo motu. There being otherwise no dispute about the fact that such reversal of debit entries was otherwise available to the assessee, raising of objection by the department is not sustainable. The impugned order is accordingly set aside and appeal is allowed with consequential relief to the applicant.
The ld. AR strongly has relied on the decision of Larger Bench in the case of BDH Industries Ltd. (supra) wherein it was held that the suo motu credit is not available but in the case of Motorola India Pvt. Ltd. (supra) the Hon’ble High Court of Karnataka already held that the suo motu credit can be taken in case of duty has been paid twice, which decision was delivered on 19-7-2006 and the said decision was not considered by the Larger Bench of this Tribunal in the BDH Industries Ltd. (Supra) which was delivered on 9-7-2008. Therefore, the decision of Larger Bench is per incuriam to the decision in or of Motorola India Pvt. Ltd (supra). Further, the issue has been examined by the Hon’ble Gujarat High Court in the case of S. Subramanyan & Co. (supra) also wherein the Hon’ble High Court affirmed the order of this Tribunal wherein this tribunal said that the suo motu credit can be taken by the assessee of duty paid twice or excess. In this case, it is not in dispute that appellant has paid service tax by availing cenvat credit as well as in cash. Therefore, the following decision of the Hon’ble High Court of Karnataka in the case of Motorola India Pvt. Ltd. (supra) and as S. Subramanyan & Co. (supra) of the Hon’ble High Court of Gujarat, they hold that appellant has correctly taken the suo motu credit.
In these circumstances, they set aside the impugned order and allow the appeal with consequential relief, if any.

Decision:- Appeal allowed.

Comment:- The substance of the case is that in view of the decision given by two High Courts, being, Karnataka High Court in the case of Motorola India Pvt. Ltd. and Gujarat High Court in the case of S Subramanyan & Co., the assessee is eligible to take suo motu credit of duty paid twice by them.
Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2933

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