Whether credit of services availed through intermediary deniable on the ground that invoice does not has mentions name of service recipient ?

PJ/Case Law/2014-15/2361

Case:-ULTRA TECH CEMENT LTD Vs COMMISSIONER OF CENTRAL EXCISE, TRICHY

Citation:-2013-TIOL-1347-CESTAT-MAD

Brief facts:- Applicant is a manufacturer of cement and clinkers and they appointed an agent by name M/s. Excellent 2 Publicities for telecasting in TV channels their advertisements and Brand ‘Birla Cement' and ‘Birla Super'. M/s. Excellent 2 Publicities engaged the services of Jaya TV for getting timeslot for broadcasting advertisements. Jaya TV raised invoices on Excellent 2 Publicities showing charges for timeslots along with service tax paid. Excellent 2 Publicities raised invoices on the Applicant for the commission charged by them for the services rendered and service tax paid thereon and further asked for reimbursement of the cost for timeslots and the service tax paid by them on behalf of the applicants to Jaya TV. Applicant have taken service tax credit paid on the commission to Excellent 2 Properties as well as service tax paid by Jaya TV which was reimbursed to Jaya TV through intermediary i.e. Excellent 2 Publicities. Revenue was of the view that the applicant could not have taken credit on the service rendered by Jaya TV because there is no invoice issued by Jaya TV in the name of the applicant. Based on such reasoning, Revenue issued a Show Cause Notice for recovering credit taken during the period 26.7.05 to 3.5.06 and after adjudication, an amount of Rs.41,98,139/- is confirmed against the applicant. Aggrieved by this order, applicant has filed the appeal along with stay application before Tribunal requesting for waiver of pre-deposit of dues arising from the impugned order.

Appellant contentions :-The counsel for applicant submits that in the matter of advertisement, CBEC had clarified that the agent who canvasses timeslots would pay service tax only on the commission earned by them. In fact, initially, there was no service tax on the charges for timeslots. Subsequently, when service tax was imposed on the charges for timeslots, the Board clarified that the client in respect of timeslots was not the agency (who canvass timeslot) but the person who actually utilizes the timeslot. Consequent to this type of clarification, the practice was that the intermediary charged service tax only on the commission and the bill raised by the Jaya TV was supplied by the intermediary and reimbursed by the applicant. He submits that there is no doubt that this input service was utilized by the them which comes out clearly from the invoices raised by Jaya TV showing that the timeslots were for advertising their brand of "Birla Cement" and "Birla Super" and therefore the minor issue that invoices raised by Jaya TV is not showing the name of the applicant should not be a reason to deny credit having regard to proviso to Rule 9 (2) of Cenvat Credit Rules. He relies on the following decisions:-

a)   EUPEC-Welspun Coating India Ltd. Vs CCE Vadodara 2010 (19) STR 478 (Tri.-Ahmd.) = (2008-TIOL-2616-CESTAT-AHM)

b)   Valco Industries Ltd. Vs CCE Chandigarh 2012 (28) STR 457 (Tri.-Del.) = (2012-TIOL-1443-CESTAT-DEL)

c)    Pharmalab Process Equipments Pvt. Ltd. Vs CCE Ahmd. 2009 (16) STR 94 (Tri.-Ahmd.) = (2009-TIOL-2215-CESTAT-AHM)

As a rejoinder, ld. counsel for applicant submits that bill was paid by the applicant and there is no question of somebody else taking credit because the bill cannot be paid again by some other factory of M/s Ultratech. He also submits that after the period May 2006, the problem has been resolved because now invoices are being issued by TV channels indicate client's name and address also and therefore this issue was of a temporary nature and there is no misuse of any Cenvat credit taken in this case.

Respondent contention :- Opposing the prayer, Ld. AR for Revenue submits that invoice issued by intermediary, M/s. Excellent 2 Publicities, is not one of specified documents under Rule 9(2) and M/s. Excellent 2 Publicities is not providing the service of broadcasting. M/s Excellent 2 Publicities has no authority to issue any invoices showing service tax paid on such services and therefore there is no question of taking any Cenvat credit based on invoices issued by the intermediary. In the case of credit based on invoices issued by Jaya TV, he submits that no credit can be taken since name of applicant is not shown on the invoices. He also submits that there is possibility that this credit may be taken by some other factory of the applicant. He relies on the decision of M/s Eagle Plastics Industries Ltd. Vs CCE Pune - 2004 (171) ELT 296 (SC).

Reasoning of judgment :- Considered the arguments on both sides. Bench was not in agreement with Revenue's argumentthat defect pointed out is fatal to eligibility of credit considering the overall facts andcircumstances of the case. Therefore, bench waived pre-deposit of dues arising from the impugnedorder for admission of appeal and there shall be stay of collection of such dues during pendencyof the appeal.

Decision:-Pre-deposit waived.

Comment:-The basic principle of allowing credit is that credit cannot be denied as far as the substantial conditions of receipt of service and its use in provision of output service/manufacturing activity is not doubted and there has been payment of tax of which credit is being taken. In the present case, it was prima facie concluded that merely because the services of broadcasting of advertisements were availed through intermediary person and the invoices issued by the broadcasting service provider did not contain the name of service recipient, credit could not be denied to the service recipient for such procedural lapse.

Prepared by: Shubham Sancheti

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PJ/Case Law/2014-15/2361

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