Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/CASE LAW/2016-17/3121

Whether credit of common input services be availed when assessee is also indulged in trading of cars?

Case:-M/s KUNDAN CARS PVT LTDVs COMMISSIONER OF CENTRAL EXCISE, PUNE

Citation: - 2016-TIOL-1088-CESTAT-MUM

Brief facts:-The appeal was directed against Order-in-Appeal No. PUN-EXCUS-001-APP-0102-15-16 dt. 15 th October 2015 passed by the Commissioner (Appeals-I) Central Excise, Pune, whereby the Ld. Commissioner upholding the Order-in-Original No. P-I/ADC/ST/123/2013 dt. 27.12.2013 upheld the disallowance of Cenvat Credit of Rs.8,74,955/- and recovery of interest under Section 75 of the Act. However set aside the penalty imposed under Section 78 of the Finance Act read with Rule 15 (3) of Cenvat Credit Rules.

The fact of the case was that the appellant was engaged in providing the services namely Authorized Service Station, Business Auxiliary Services and Servicing of Motor Vehicles. They were also engaged in trading activity of passenger cars purchased from the manufacturer supplier. The appellant were availing Cenvat Credit on various common input service. Show cause notice was issued proposing denial of Cenvat credit attributed to the trading activity of the cars. The adjudicating authority confirmed the demand and imposed penalty under Section 77 & 78. In the appeal filed by the appellant before Commissioner (Appeals) the demand of Cenvat Credit was upheld along with interest under Section 75. However the penalty under Section 78 was waived and the penalty imposed under Section 77 was upheld. Aggrieved by the impugned order, the appellant filed appeal.

Appellant’s contention:-Shri M.P. Joshi, Ld. Counsel for the appellant submitted that the proportionate Cenvat credit attributed to the trading of passenger car was disallowed on the ground that the trading was exempted service. He submitted that explanation under Rule 2(e) of Cenvat Credit Rules, 2004 where under the exempted service was defined including trading activity was introduced w.e.f. 1.4.2011. Since, prior to 1.4.2011 the trading activity did not fall under the category of exempted service, there was no provision for reversal of Cenvat Credit attributed to the trading activity. In the present case, the period involved was upto 31.3.2011. In support he placed reliance in the case of Badrika Motors (P) Ltd. Vs. Commissioner of C.Ex. & S.T., Bhopal 2014 (34) STR 349 (Tri.Del.) = 2014-TIOL-24-CESTAT-DEL and Commissioner of Central Excise, Tirupati Vs. Shariff Motors 2010 (18) STR 64 (Tri. Bang.) = 2009-TIOL-1571-CESTAT-BANG which had been upheld by the Hon'ble Andhra Pradesh High Court as reported in 2015 (38) STR J53 (A.P.)= 2013-TIOL-1207-HC-AP-CX. He submitted that the facts of the above cases were identical to the facts in the present case, therefore the ratio of these decisions were applicable in the present case. He further submitted that the entire demand was for the period 2008-09 to 2010-11, however the show cause was issued on 5.4.2013 i.e. after more than two years. He submitted that Ld. Commissioner (Appeals) while dropping the penalty under Section 78 in para 12 of the impugned order had given a categorical finding that there was no intention to evade payment of service tax and no ingredient such as fraud, collusion, suppression of facts etc. with intent to evade payment of duty was involved in the present case. On the basis of this finding itself, the demand was not sustainable on limitation. Therefore the impugned order was not sustainable on merit as well as on limitation.

Respondent’s contention:-On the other hand, Shri V. Kaushal Ld. Assistant Commissioner (A.R.) appearing on behalf of the Revenue reiterated the findings of the impugned order. He submitted that the trading activity, even though specified as exempted service w.e.f. 1.4.2011, but even prior to 1.4.2011 the fact remains that the trading activity was not taxable. Therefore no input credit can be allowed in respect of the service commonly used for providing taxable service as well as trading activity. He placed reliance on the following judgments:-

(i) Mercedes Benz India Pvt. Ltd. Vs. Commissioner of Central Excise 2015 (40) STR 381 (Tri. - Mumbai) = 2014-TIOL-476-CESTAT-MUM

(ii) Synise Technologies Ltd. Vs. Commissioner of C. Excise, Pune 2015 (39) STR 903 (Tri. - Mumbai) = 2015-TIOL-1036-CESTAT-MUM

Reasoning of judgment:- After carefully considering the submissions made by both the sides it was held that the fact of the case was not under dispute that the appellant was engaged in providing taxable services such as ‘Business Auxiliary Services' and ‘Servicing of Motor Vehicles' on which the service tax was paid and at the same time the appellant was engaged in the trading activity of the cars on which no service tax was paid. The charge of the Revenue was that they were availing Cenvat Credit in respect of common services which were used for taxable services as well as for trading activity. He found that the very identical issue had been considered by this Tribunal in the case of Badrika Motors Pvt. Ltd. (supra) and Shariff Motors (supra). In the case of Badrika Motors Pvt. Ltd. (supra). The Cenvat credit was denied on the GTA service on the ground that the GTA service had no nexus with the taxable service such as ‘Authorized Service Station' and ‘Business Auxiliary Service'. This Tribunal had held that no arithmetical correlation was required between the input and output services and accordingly the credit was allowed. In the case of Shariff Motors (supra) similar facts was involved that the assessee had availed the Cenvat credit in respect of GTA service which was used for transportation of motorcycles from factory to show room which were sold as such and credit was utilized for payment of service tax under authorized service station. The Division Bench had allowed the credit on GTA service. This decision had been upheld by the Hon'ble Andhra Pradesh High Court. The operative order portion is reproduced below:

"The Andhra Pradesh High Court Bench comprising Hon'ble Mr. Chief Justice Kalyan Jyoti Sengupta and Hon'ble Mr. Justice Sanjay Kumar on 19-12-2013 dismissed the Central Excise Appeal No. 91 of 2010 filed by Commissioner of Customs, Central Excise & Service Tax, Tirupati against the CESTAT Final Order No. 565/2009, dated 12-3-2009 as reported in 2010 (18) S.T.R. 64 (Tri. - Bang.) (Commissioner v. Shariff Motors). While dismissing the appeal, the High Court passed the following order:

"This appeal is preferred against the judgment and order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore, dated 12.03.2009 and sought to be admitted on the following suggested question of law:

"Whether CESTAT is correct in holding that the GTA service utilized by the assessee as recipient, is input service for providing the output service i.e., 'authorized service station'?"
The aforesaid question amply suggests that there is no element of law involved on the factual aspect. The learned Tribunal has dealt with this aspect in the manner as follows:
"In our view, unless the vehicles are received and sold, there would not be any servicing of the same. Moreover, the definition of the input service is broad enough to cover the input service availed by the Respondents and also the output service rendered by them".

They were of the view that the learned Tribunal had given correct interpretation and this was one possible interpretation and they cannot substitute by another one. Thus, they do not find any element of law involved for admission of this appeal.

Accordingly, the appeal was dismissed. No order as to costs.

In view of the above judgments, since the identical facts were involved the appellant was not required to reverse the Cenvat Credit attributed to the trading activity of passenger cars.
As regard the judgments relied upon by the Revenue in the case of Mercedes Benz India Pvt. Ltd. (supra). He found that this matter was taken to the Hon'ble Bombay High Court when the matter was remanded back to the Tribunal therefore the ratio of the judgments of the Tribunal cannot be applied. As regards Synise Technologies Ltd. (Supra), it was found that it was a single member bench decision of this Tribunal wherein the Division Bench decision of the Shariff Motors (supra) though distinguished this Synise Technologies Ltd. judgment had followed the Mercedes Benz decision of this Tribunal. Since the Tribunal order was set aside and matter was remanded, Synize Technologies Ltd. does not remain as a good law, therefore the same was of no help to the Revenue. In the case of Mercedes Benz India Pvt. Ltd. Vs. Commissioner of Central Excise (2014 (36) STR 704 (Tri.-Mumbai), he found that this decision was given by the Division Bench of this Tribunal where as the Division Bench decision in the case of Shariff Motors (supra) had been considered by the Hon'ble High Court and upheld the same. In this position the Mercedes Benz (supra) decision of this Tribunal stands distinguished.

As regard limitation, he found that the Ld. Commissioner (Appeals) while dropping the penalty under Section 78 given the following finding:

"From the decisions of various higher appellate authorities in the mater, it is clear that there was scope for varying interpretations during the period prior to 01.04.2011 and this appears to be the reason for introduction of Explanation under Rule 2(e) of the CCR. Therefore, I find merit in the Appellant's prayer for setting aside the penalty imposed under Section 78 of the Act, considering the fact that explanation to rule 2(e) of the CCR was added w.e.f. 01.04.2011. This is enough to establish that the matter under consideration was not free from doubt and there was indeed an ambiguity in the issue and therefore I find that the charge of ‘intent' cannot be leveled against the Appellant. Thus in absence of the ingredient such as fraud, collusion, suppression of facts etc. with intent to evade duty, it is incorrect to impose penalty under Section 78 of the Act read with Rule 15(3) of the CCR. As regards the imposition of penalty under Section 77, I agree with the Ld. Adjudicating Authority."

From the above finding, the Ld. Commissioner (Appeals) had conclusively held that in the absence of ingredients such as fraud, collusion, suppression of fact etc. with intent to evade payment of duty, the penalty was not imposable under Section 78. The Revenue had not challenged this finding therefore the same attained finality. Considering this finding which equally applicable in case of invocation of extended period in terms of proviso to Section 73, the demand was not sustainable on the ground of time bar also. As per the above discussion, he was of the considered view that the impugned order was not sustainable on merit as well as on limitation. Therefore the same was modified. The appeal was allowed.

Decision:-Appeal allowed.

Comment:-The gist of this case is that as the assessee was indulged in trading activities of car as well as that of authorised service station but still it does not requires to reverse the credit used for services of trading activities as the said services were used for providing the service of authorised service station and without them he cannot provide its output service. Hence the credit was rightly availed.  

Prepared by: - Prayushi Jain

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com