2024 (8) TMI 1604 - AT - Service Tax

Appellant Allowed Full CENVAT Credit Under Rule 6(5); No Service Tax on Discounts or Parking Fees

M/s Apollo Gleneagles Hospital Limited Versus Commissioner of Service Tax, Kolkata

CESTAT Kolkata held that the appellant was not required to reverse CENVAT credit under Rule 6(3)(ii) of the CCR, 2004, as all services fell under Rule ... Reversal of CENVAT Credit - applicability of Rule 6(3)(ii) of Cenvat Credit Rules, 2004 - Opening Balance of CENVAT credit declared in ST-3 return in month of Apr' 2011 - Renting of Immovable property service and business auxiliary service w.r.t. sharing of revenue with CINRC and ADCPL and parking fees - Commission on sale of medicines and consumables from AHEL - Expenses in foreign currency - invocation of extended period of limitation - penalty. Reversal of CENVAT Credit - applicability of Rule 6(3)(ii) of Cenvat Credit Rules, 2004 - HELD THAT:- As all the services fall under Rule 6 (5) of the Cenvat Credit Rules,2004, therefore, the appellant is not required to reverse the cenvat credit availed by them being provider of taxable as well as non- taxable services - The said issue has been dealt by this Tribunal in the case of M/s Williamson Magor & Co. Limited Vs. Commissioner of Service Tax, Kolkata [2024 (3) TMI 404 - CESTAT KOLKATA], wherein this Tribunal has held that 'Since the Appellant has utilised full credit only in respect of those input services specified in Rule 6(5) of CCR 2004, we hold that the Appellant has rightly availed and utilized the CENVAT Credit as provided under Rule 6(3)(c) and Rule 6(5) of the CENVAT Credit Rules, 2004. Accordingly, we hold that the demand confirmed in the impugned order on this count is not sustainable.' - thus although the appellant is providing taxable as well as non-taxable services, the appellant is entitled to avail the cenvat credit on the services received by them following under Rule 6 (5) of the Cenvat Credit Rules, 2004 to the extent of 100%, therefore, the appellant is not required to reverse the cenvat credit amounting to Rs.62,75,162/ - - issue is answered in favour of the appellant. Opening Balance of CENVAT credit declared in ST-3 return in month of Apr' 2011 - HELD THAT:- There is no opening balance of cenvat credit on 01.04.2011, therefore, in fact, no evidence has been adduced by the Revenue that the said cenvat credit showing as opening balance, has been utilized by the appellant - the demand on account of opening balance of cenvat credit declared in ST-3 Return in the month of April, 2011, of Rs.6,33,41,238/-, is not sustainable against the appellant. Accordingly, the same is dropped - the issue is answered in favour of the appellant. Renting of Immovable property service and business auxiliary service w.r.t. sharing of revenue with CINRC and ADCPL and parking fees - HELD THAT:- The appellant has an arrangement for MRI and Dental Divisions, where the Experts were paying for MRI Scanning and providing Dental treatment. The appellant is a Joint Venture for providing sharing the amount received by the appellant. In case of MRI Scanning, the appellant retained 5% of the total amount received by them and in case of Dental, the appellant retained 20% of the amount recovered from the patients. The Revenue shows that the amount as retained by the appellant is under 'Renting of Immovable Property Service'. On going through the agreement placed, it is found that the appellants were sharing the amount recovered from the patients for providing health care services. In that circumstances, the amount retained by the appellant is not towards the Renting of Immovable Property Services. Therefore, no service tax is payable by the appellant under 'Renting of Immovable Property Service' - on Parking Fees recovered by the appellant, the vacant land used for parking purposes, which is subsequently excluded from the definition of taxable service. Therefore, on the Parking Charges, the appellant is not liable to pay service tax - the issue answered in favour of the appellant. Commission on sale of medicines and consumables from AHEL - HELD THAT:- The appellant is receiving discount and various incentives on the purchase of medicines from the Pharmacy, which is not a part of any services rendered by the appellant as held by this Tribunal in the cases of Poojara Telecom Private Limited Vs. Commissioner of Central Excise & Service Tax, Rajkot [2023 (11) TMI 524 - CESTAT AHMEDABAD] and M/s AIA Engineering Vs. The Commissioner of Service Tax, Ahmedabad [2014 (12) TMI 241 - CESTAT AHMEDABAD], wherein it has been held that the discount offered to the appellant on sale of goods, is not liable to service tax under the category of 'Business Auxiliary Service'. Therefore, the discount received by the appellant on sale of medicines and consumables from the Pharmacy, does not fall under the category of 'Business Auxiliary Service' and no service tax is payable by the appellant on the said discount received by the appellant - issue answered in favour of the appellant. Expenses in foreign currency - HELD THAT:- The service tax sought to be recovered from the appellant for the expenses in foreign currency on the import of taxable services from outside India, the services received in the form of accreditation fees and training fees are taxable service, on which the appellant has paid service tax of Rs.14,18,518/- along with interest and the remaining demands are related to travelling, boarding and lodging expenses of Directors and Employees of Foreign Companies and the interest payment also for the loan taken from Deutche Bank, cannot be termed as importing taxable service. Therefore, on the said amount, the appellant is not liable to pay service tax - Further, the expenses incurred prior to 18.04.2006, the appellant is not liable to pay service tax as there is no mechanism for recovery of service tax prior to 18.04.2006 under reverse charge mechanism on payment received in Foreign Convertible Exchange under reverse charge mechanism. Therefore, the said demand is also not sustainable against the appellant - the service tax paid and interest paid, is also not considered by the adjudicating authority, if the same is considered, then no service tax is payable by the appellant as confirmed in the impugned order - the issue is answered in favour of the appellant. Invocation of extended period of limitation - penalty - HELD THAT:- In the facts and circumstances of the case, the demand by invoking extended period of limitation is not sustainable. Consequently, the demand beyond the normal period of limitation, is not also sustainable - no penalty is imposed on the appellant. The impugnd order is set aside - appeal allowed. ISSUES: Whether the appellant is liable to reverse CENVAT credit availed on common input services exceeding 20% limit under Rule 6(3)(ii) of the CENVAT Credit Rules, 2004, when such services fall under Rule 6(5) exception'Whether the opening balance of CENVAT credit declared in ST-3 return for April 2011 is sustainable as a demand against the appellant'Whether amounts retained by the appellant under arrangements for MRI, Dental services, and parking fees constitute taxable 'Renting of Immovable Property Service' or business auxiliary services attracting service tax'Whether commission or discounts received by the appellant on sale of medicines and consumables from the pharmacy fall under 'Business Auxiliary Service' and are liable to service tax'Whether expenses incurred in foreign currency, including accreditation fees, training fees, travel, lodging, and interest payments, constitute import of taxable services liable to service tax'Whether service tax paid by the appellant has been properly appropriated and considered in the demand'Whether the demand raised under extended period of limitation for the years 2007-08 to 2010-11 is sustainable? RULINGS / HOLDINGS: The appellant is entitled to avail and utilize full CENVAT credit on input services specified in Rule 6(5) of the CENVAT Credit Rules, 2004, and is not required to reverse credit under Rule 6(3)(ii); thus, the demand of Rs. 62,75,162/- is not sustainable.The alleged opening balance of Rs. 6,33,41,238/- in April 2011 is not supported by ST-3 returns filed by the appellant, which show 'nil' opening balance; hence, the demand on this count is dropped.The amounts retained by the appellant under joint venture arrangements for MRI and Dental services and parking fees do not constitute 'Renting of Immovable Property Service' or taxable service, as the relationship is that of a joint venture with no service rendered; therefore, the demand of Rs. 18,77,322/- is not sustainable.Discounts and commissions received on sale of medicines and consumables are not taxable under 'Business Auxiliary Service,' as these represent purchase discounts and incentives, not services rendered; thus, the demand of Rs. 3,39,53,020/- is dropped.Expenses in foreign currency related to travel, lodging, and interest payments do not constitute import of taxable service, and only accreditation and training fees paid have been taxed; demands on other expenses are not sustainable.The service tax paid by the appellant amounting to Rs. 20,15,724/- has not been properly appropriated by the adjudicating authority, and this amount should be considered against the demand.The demand raised by invoking extended period of limitation for 2007-08 to 2010-11 is not sustainable due to absence of suppression or misstatement; hence, the extended period invocation is invalid. RATIONALE: The Tribunal relied on Rule 6(5) of the CENVAT Credit Rules, 2004, which is an exception allowing full credit on specified input services unless exclusively used for exempted services, as held in a recent precedent by the same Tribunal.The opening balance contention was rejected due to lack of documentary evidence in ST-3 returns and reliance on internal CBEC EDW database not filed by appellant, emphasizing the primacy of statutory returns.The joint venture nature of arrangements was supported by agreement terms and Tribunal precedents holding that joint ventures do not amount to provision of taxable services between parties, referencing decisions including Aashlok Nursing Home and Mormugao Port Trust.Precedents from CESTAT Ahmedabad and upheld by the Supreme Court established that discounts on purchase of goods do not constitute taxable business auxiliary services, distinguishing sales transactions from service transactions.Valuation principles under Section 67 of the Finance Act, 1994, as interpreted by the Supreme Court, exclude reimbursable expenses from taxable service value prior to amendment in 2015, thus foreign currency expenses other than taxable service fees are excluded.The adjudicating authority's failure to consider service tax payments made by the appellant contravened proper credit adjustment principles, warranting relief.The extended period of limitation can only be invoked upon proof of suppression or fraud, which was absent here, making the demand time-barred as per statutory limitation provisions.