TaxTMI 
TaxTMI 
2018 (1) TMI 306
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....ce of the party, not registered with the department under the provisions as envisaged under Notification No.26/2005-Service Tax dated 07.06.2005 issued in terms of sub section (2) of Section 69 of the Finance Act, 1994 is eligible to issue any document to pass on the credit to their manufacturing unit and whether on the basis of these documents CENVAT credit be allowed? (ii) Whether a manufacturer is eligible to avail and utilize CENVAT credit on the basis of the documents which are not prescribed under the provisions of Rule 9 of the CENVAT Credit Rules, 2004? (iii) Whether CENVAT credit be allowed on the basis of documents which do not contain the statutory information as per the provisions of Rule 4A (2) of the Service Tax Rules, 1994?" Admittedly, CENVAT credit had arisen to the assessee at its head office. The dispute pertains to utilization of such credit at one manufacturing unit of the assessee located away from it's head office (hereinafter referred to as the manufacturing unit). The disputed utilisation of CENVAT credit (details of which were mentioned on a letter issued by the head office to the manufacturing unit of the assessee) occurred at the....
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....ion of credit by "Input Service Distributor" and "Documents and accounts" required for that purpose, respectively. Under Rule 7 the "Input Service Distributor" is required to observe that credit is distributed-against the documents referred; it does not exceed the amount of service tax paid thereon; only that credit of service tax be distributed to a manufacturing unit as may be attributable as input service to that unit; that distribution of service tax amongst various units be made in proportion to their manufacturing activities etc. Under Rule 9, it is provided that CENVAT credit shall be taken by the manufacturer or the provider of each different service or input service distribution on the basis of documents including amongst others invoice issued by the manufacturer etc. Sri Krishna Agrawal submits, under Rule 4A of the Service Tax Rules, CENVAT credit could be transferred by the "Input Credit Distributor" i.e. by the head office of the assessee to it's manufacturing unit only against invoice or bill or challan contemplated under the said Rule. Since a letter can never qualify as either an invoice, or bill or challan the said Rule was never complied. Therefore, the ass....
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....t the second or the later stage of utilisation of CENVAT credit. It provides that an "Input Service Distributor", at the time of distributing credit on taxable services shall issue an invoice, bill or challan of CENVAT credit distributed to it's manufacturing unit for utilisation by such manufacturing unit. Then having considered the arguments so advanced by learned counsel for the parties and having perused the material on record, we find that as a fact, the revenue does not dispute that CENVAT credit had correctly arisen in favour of the assessee at its head office/"Input Service Distributor". It further does not dispute the correctness of the amount of such CENVAT credit transferred to its manufacturing unit for utilization. It is also not the case of the revenue that the Input Credit Distributor/head office of the assessee had already been utilised or there was any effort on part of the assessee to claim double benefit of such CENVAT credit inasmuch as it is not the case of the revenue that the assessee had earlier utilized the said amount of CENVAT credit in question. Then as to the mode adopted by the assessee to transfer the CENVAT and that contemplated by the Rule....
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....ssee may be held to have correctly availed the CENVAT credit. In the case of Sainik Motors v. State of Rajasthan, AIR 1961 SC 1480 a purposive approach was adopted by the Supreme Court to interpret the word "shall" appearing in Rules 8 & 8A of the Rules framed under Rajasthan Passengers and Goods Taxation Act and in related notification issued under that Act. They were held to be directory looking at the context or intention of the Rules and notification in which word 'shall' was used. The same were harmonized with the language used in Section 4 of the parent Act that used the words "may accept". It was thus held that while levy itself remained non-mandatory, if imposed, the same was to be computed only in the manner laid down in the Rules. In this regard, the Supreme Court held: "12. It is, however, contended that though the section creates an option, the Rules and the notification make the payment compulsory, and attention is drawn to the word "shall" used both in Rules 8 and 8-A and the notification whereas the words in the two provisos to Section 4 are "may accept". The word ''shall' is ordinarily mandatory, but it is sometimes not so interpreted....
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.... out at a very low figure, the minimum being less than Rs. 1 per day and the maximum, Rs. 1.50 np. per day. The rates are no doubt very reasonable, but this hardly meets the argument of the petitioners. There are, however, good reasons for upholding the fixation of lump sums the payment of the lump sum is not obligatory, and a person can elect to pay tax calculated on actual fares and freights. The fares and freights are fixed by competent authority under the Motor Vehicles Act, and that takes into account the average earnings, and the lump sum is fixed as an average of what tax would be realised if calculated on actual fares and freights. There is no compulsion for any operator to elect to pay a lump sum if he does not choose to do so. Nor is the argument that there may be vacant periods when no passengers or goods are transported but the tax is payable, is of any force, because there may be days when the business done might result in tax in excess of the lump sum payable. The lump sum figure is based on averages, and cannot be impeached by reference to a possibility that on some days no business might be done". Then, in the case of P.T. Rajan v. T.P.M. Sahir, (2003) 8 SCC 498,....
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..... On the other hand Section 23(3) of the 1950 Act categorically mandates that direction can be issued for revision in the electoral roll by way of amendment in inclusion a nd deletion from the electoral roll till the date specified for filing nomination. The electoral roll as revised by reason of such directions can therefore be amended only thereafter. On the basis of direction issued by the competent authority in relation to an application filed for inclusion of a voter's name, a nomination can be filed. The person concerned, therefore, would not be inconvenienced or in any way be prejudiced only because the revised electoral roll in Form 16 is published a few hours later. The result of filing of such nomination would become known to the parties concerned also after 3:00 p.m. 48. Furthermore, even if the statute specifies a time for publication of the electoral roll, the same by itself could not have been held to be mandatory. Such a provision would be directory in nature. It is a well-settled principle of law that where a statutory functionary is asked to perform a statutory duty within the time prescribed therefor, the same would be directory and not mandatory. (Se....
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....#39;shall' is used, the same may not be held to be mandatory. Even a mandatory provision having regard to the text and context of the statute may not call for strict construction. 75. In U.P. SEB v. Shiv Mohan Singh [(2004) 8 SCC 402 : 2004 SCC (L&S) 1141] this Court stated the law in the following terms: (SCC p. 440, paras 96-97) ''96. Ordinarily, although the word ''shall' is considered to be imperative in nature but it has to be interpreted as directory if the context or the intention otherwise demands. (See Sainik Motors v. State of Rajasthan [(1962) 1 SCR 517 : AIR 1961 SC 1480] , AIR para 12.) 97. It is important to note that in Crawford on Statutory Construction at p. 539, it is stated: "271. Miscellaneous implied exceptions from the requirements of mandatory statutes, in general.--Even where a statute is clearly mandatory or prohibitory, yet, in many instances, the courts will regard certain conduct beyond the prohibition of the statute through the use of various devices or principles. Most, if not all of these devices find their jurisdiction in considerations of justice. It is a well-known fact that often to enfor....
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.... 16. Recently, a three-Judge Bench in Kailash v. Nanhku [(2005) 4 SCC 480] while interpreting Order 8 Rule 1 of the Code of Civil Procedure was of the opinion: (SCC p. 496, para 33) "33. As stated earlier, Order 8 Rule 1 is a provision contained in CPC and hence belongs to the domain of procedural law. Another feature noticeable in the language of Order 8 Rule 1 is that although it appoints a time within which the written statement has to be presented and also restricts the power of the court by employing language couched in a negative way that the extension of time appointed for filing the written statement was not to be later than 90 days from the date of service of summons yet it does not in itself provide for penal consequences to follow if the time schedule, as laid down, is not observed. From these two features certain consequences follow." (See also Salem Advocate Bar Assn. (II) v. Union of India [(2005) 6 SCC 344] .) 17. However, even if a statute is directory in nature the same should be substantially complied with. What would satisfy the requirements of substantial compliance, however, would depend upon the fact of each case". (emphasi....
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....cuments giving rise to eligible CENVAT credit and such reconciliation would not be completed or proven because the assessee may have issued an invoice or bill or challan under Rule 4A of the Service Tax Rules. Even an invoice or bill or challan if issued under Rule 4A of the Service Tax Rules would require verification by the revenue authorities as to the correctness of the facts stated therein. Thus, an invoice if issued may contain details as required under Rule 4A of the Service Tax Rules giving name of the service provider, service recipient as also the amount of credit. Yet, the same would be required to be verified before it could be said that the credit had correctly had been claimed to have arisen and transferred. In the case of a letter as had been issued by the assessee in the instant case no different or other procedure was required to be followed inasmuch what was primary and essential was the verification of the facts stated therein and not the form of the document. Those forms i.e. Invoice/Bill/Challan do not have a direct revenue implication, especially when there is no dispute as to the CENVAT having arisen and when there is also no allegation of it's false, ....
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....sequence of alleged non-compliance of Rule 4A of Service Tax Rules, we find that Section 77 (2) of the Finance Act, 1994 though does provide that every contravention of the Act or the Rules shall be penalized, however, that provision itself is a general and omnibus provision, which it is doubtful can be relied upon by the revenue to plead that the provisions of Rule 7 and 9 of the CENVAT Rules read with Rule 4-A of the Service Tax Rules are mandatory. If such submission were to be accepted, it would result in mandatory penalty being imposed upon all/every infringement irrespective of the fact that it may involve a technical or innocent or involuntary non-compliance of the Act or the Rules. Such interpretation may not only be very harsh and therefore unacceptable to hold the provision of Rule 4A mandatory but it may in fact open to challenge Section 77 (2) of the Finance Act, 1994, for that reason alone. Also, as noted above, clearly Rules 7 and 9 of the CENVAT Rules and Rule 4-A of the Service Tax Rules are part of the machinery provisions. These three Rules taken together only provide for the mechanism to avail CENVAT credit that may have arisen. The said Rules do not provide f....
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....ut necessitating distribution of CENVAT credit. Then, the purpose of the Rules is to allow the revenue authorities to know how much of the CENVAT credit that had admittedly arisen at the head office or to the "Input Service Distributor" had been transferred to different manufacturing units and the details of the service etc. on which such credit had arisen. Such details are apparently required both for the purpose of CENVAT credit reconciliation and also to ensure that such CENVAT credit utilisation is regulated to ensure it is not mis-utilized or claimed repeatedly. The Rules are thus purely part of machinery provisions. It is the details mentioned on the invoice or bill or challan or a letter that therefore assume primary importance. Once the details as required by the Rules are disclosed/found mentioned on the document itself-whether on the form of an invoice or on the form of bill or on the form of challan or on the form of a letter as has been done in the instant case, the assessee opened itself to the verification process that the Rules prescribe and which process is necessary to be undertaken in the interest of revenue. Thus, it is the substance and contents of the ....