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TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 306
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....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 manufacturing unit of the assessee. It contained details of the inv....
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....ired 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 assessee was not entitled to avail the CENVAT credit. Then, relying on the languag....
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....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, it does appear that issuance of invoice, bill or challan to transfer such credit is the first/....
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.... 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 if the context or the intention otherwise demands. In In re Lord Thurlow Ex Parte Official Receiver [1895 1 QB 724] Lord Esher, M.R. observed at p. 729 that "the wo....
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....itioners. 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, the Supreme Court considered the purpose and object of the relevant provision and whether the provision itself was part of a procedural/machinery provision or substantive provision-to interpret ....
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....ate 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. (See Shiveshwar Prasad Sinha v. District Magistrate of Monghyr [AIR 1966 Pat 144 : ILR 45 Pat 436 (FB)] , Nomita Chowdhury v. State of W.B. [(1999) 2 Cal LJ 21] and Garbari Union Coop. Agricultural Credit Society Ltd. v. Swapan ....
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.... 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 enforce the law to its letter produces manifest injustice, for frequently equitable and humane considerations, and other considerations of a closely related nature, would seem to be of a sufficient caliber to excuse or justify a technical violation of the law." 15. In Mohan Singh v. Internati....
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....her 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". (emphasis supplied) In the above background of law laid down by the Supreme Court, we first consider the facts found by the Tribunal. It is not disputed that the assessee had available with it CENVAT credit. This credit would have arisen only against original duty/service tax payment documents such as Excise challan/s, invoice etc. Those would ....
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.... 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, wrong or double utilisation made by the assessee. Also, once the utilisation had been made by the manufacturing unit either against an invoice or against the letter it would automatically get reflected in the returns filed thereafter by the assessee and no part of it could be claimed to have escaped the attention or scrutiny of the departmental autho....
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.... 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 for CENVAT credit to arise and they do not in any manner affect the computation of that credit. The Rules only regulate the manner or method for utilisation of that credit in the situation where such credit may on account of the nature of business operations of an assessee arise at it's head office but again by virtue of it's business organisation and stru....
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....e 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 documents that was relevant to be disclosed in the interest of revenue and not the form on which such details were required to be furnished. For instance, an invoice if issued is either wanting in necessary details or the details that are filled up are wrong, the assessee would not be entitled to any benefit. On the other hand, if all details required by the Rules are disclosed b....