2022 (5) TMI 1120 - AT - Service Tax

Tribunal orders remand for fresh examination of issues emphasizing natural justice principles

M/s. Neelkamal Realtors Towers Pvt. Ltd. Versus Commissioner of Customs (Import), Mumbai

The Tribunal allowed the appeal by way of remand to the adjudicating authority, directing a fresh examination of all relevant issues. The adjudicating ... CENVAT Credit - duty paying invoices - whether availment of CENVAT Credit by the appellant on the basis of a debit note availed by M/s IGSSTPL without receiving any service is admissible as per law? - HELD THAT:- As per the agreement, under sub-clause (xxii) of definition under clause (1), the obligation of the Development Manager shall include repayment of loan to Yes Bank together with all cost of services thereof; repayment of Development Manager loan together with all cost of services thereof and repayment of all third party capital together with all cost of services thereof. To appreciate the factual position of the impugned case, it is found appropriate to go through the relevant clauses of the agreement between the appellant and M/s IGSSTPL. On going through the various clauses of the agreement, it is found that the appellants have entered into an agreement with M/s IGSSTPL; as a consideration of the agreement, a sum of Rs.520 Crores, was to be paid to the Development Manager; all the development activities including planning, organizing, designing, construction, marketing of the project were to be done by the Development Manager and also Development Manager was required to repay the loan amount availed by the appellant from the Yes Bank - The learned Commissioner further goes on to find that the said financial service is not used by M/s Neelkamal Realtors Towers Pvt. Ltd for providing any output services and that M/s IGSSTPL are not in the business of providing financial service, but are in the construction service. The said financial services are consumed by the Development Manager i.e. M/s IGSSTPL and, therefore, the availment of CENVAT Credit of the same, by the appellant, is contrary to the provisions of CENVAT Credit Rules, 2004. He further finds that transaction in money is outside the ambit of service. The passing on to the burden by the Development Manager to the appellants as to be seen is only the transaction in money and not a financial service provided by M/s IGSSTPL. While deciding the inadmissibility of CENVAT Credit, one needs to be clear as to what is the service rendered; who is the service provider; who is the service recipient; what is the consideration; whether Service Tax has been paid on the same; what is the output service provided by the input credit receiver i.e. the appellants in this case and whether there exists a nexus between the input service on which credit is taken and the output service provided. It is not clear from the records of the case and rival submissions as to whether all the above criteria is fulfilled - In the instant case, the Development Manager who has undertaken the work of construction and development of free land as per the contract entered into with the appellants. As per the terms of the agreement, M/s IGSSTPL would also avail loan from M/s DHFL and transfer the same to the appellants. It is not possible to come to a categorical conclusion on the basis of the available documents/records, so as to examine the claims of rival parties herein. While holding that credit of Service Tax cannot be availed just because M/s IGSSTPL had raised a debit note on the appellants without rendering any particular service and without raising any invoice on the appellants indicating categorically the details of the service provider, service recipient, the service provided and the remuneration thereof - the ends of justice will be met only if all the relevant issues are considered afresh by the adjudicating authority taking into account all the facts involved in the case. The appeal is allowed by way of remand to the adjudicating authority by keeping all the issues open. Issues Involved:1. Admissibility of CENVAT Credit based on a debit note without receiving any service.2. Whether the transaction between the appellant and the Development Manager constitutes a service or merely a transaction in money.3. Compliance with CENVAT Credit Rules, 2004, specifically Rule 4(7) and Rule 2(l)(ii).4. Nexus between input service and output service for availing CENVAT Credit.5. Adequacy and validity of documentation for availing CENVAT Credit.Issue-Wise Detailed Analysis:1. Admissibility of CENVAT Credit Based on a Debit Note Without Receiving Any Service:The appellants, M/s Neelkamal Realtors Towers Pvt. Ltd., availed CENVAT Credit based on a debit note issued by M/s Indo Global Soft Solutions & Technologies Pvt. Ltd. (IGSSTPL). The Department contested this, arguing that IGSSTPL did not provide any service to the appellants, and thus, the credit availed was not in line with the provisions of law. The Tribunal found that the appellants entered into a Development Management Agreement with IGSSTPL, under which IGSSTPL was responsible for various project management activities. However, the Tribunal noted that neither the Commissioner nor the appellants provided clear evidence of services rendered by IGSSTPL to justify the CENVAT Credit. The Tribunal emphasized the need for proper documentation, such as invoices, to substantiate the claim.2. Whether the Transaction Constitutes a Service or Merely a Transaction in Money:The Department argued that the transaction between the appellants and IGSSTPL was merely a transaction in money and not a service. The appellants contended that the fees charged by IGSSTPL for arranging finance should be considered a service subject to Service Tax. The Tribunal highlighted that the agreement between the parties included various project management services, including arranging finance. However, the Tribunal found that the exact nature of the service provided and whether it qualifies as a taxable service was not clearly established in the records.3. Compliance with CENVAT Credit Rules, 2004:The Tribunal examined the compliance with CENVAT Credit Rules, 2004, specifically Rule 4(7) and Rule 2(l)(ii). The appellants argued that they fulfilled the conditions of Rule 4(7) as the processing fee and Service Tax were reduced from the loan amount, and they availed credit on the basis of valid documents. The Department contended that the financial service was consumed by IGSSTPL and not the appellants, making the credit inadmissible. The Tribunal found that the Commissioner did not adequately address whether the appellants met the necessary criteria for availing CENVAT Credit.4. Nexus Between Input Service and Output Service:The Tribunal emphasized the need to establish a clear nexus between the input service (financial service) and the output service provided by the appellants. The Tribunal noted that it was not clear from the records whether the appellants utilized the input service for providing an output service chargeable to Service Tax. The Tribunal directed the adjudicating authority to examine this aspect in detail, considering the relevant documentation and evidence.5. Adequacy and Validity of Documentation for Availing CENVAT Credit:The Tribunal found that the appellants relied on a debit note from IGSSTPL without providing adequate documentation, such as invoices, to substantiate the service received. The Tribunal highlighted that a debit note alone could not justify the availment of CENVAT Credit without proper evidence of the service provided. The Tribunal directed the adjudicating authority to re-examine the case, ensuring that all relevant documents and evidence are considered.Conclusion:The Tribunal allowed the appeal by way of remand to the adjudicating authority, directing a fresh examination of all relevant issues. The adjudicating authority was instructed to consider all facts, documentation, and evidence, and to pass a fresh order within 12 weeks. The Tribunal emphasized the importance of adhering to the principles of natural justice by providing the appellants an opportunity to present their case.