TaxTMI 
TaxTMI 
2019 (5) TMI 1045
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....rvices (education services). 2.2 Appellants while providing the services took the CENVAT Credit of Service Tax paid various input services. These input services were used for providing both taxable and non taxable/ exempted services. Since appellant were not maintaining the separate account for input services used for providing taxable and non taxable/ exempted services as mandated by Rule 6(2) of CENVAT Credit Rules, 2004, they were required to follow the procedure as prescribe rule 6(3) ibid and reverse the credit attributable to the input services used for providing non taxable/ exempted services. 2.3 Show Cause Notice dated 08.04.2011, 18.10.2011 and 14.03.2012 have been issued to the appellant, seeking to deny them the credit of common input services taken by them during the periods October 09 to March 10, April 10 to September 10 & October 10 to March 11. 2.4 These show cause notices have been adjudicated. The show cause notice dated 08.04.2011 was adjudicated by the Additional Commissioner Service Tax Mumbai- II an taken in appeal before by the Appellants before Commissioner Service Tax (Appeal), who by the impugned order before us dated 03.03.2017 dismissed the app....
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....ding the output services and as per the principles laid down by Hon'ble Bombay High Court in case of Coca Cola India Pvt Ltd [2009 (242) ELT 168 (BOM)} and various other decisions the credit should not have be disallowed. vii. A large portion (Rs. 73,29,468/- out of Rs. 92,43,375/-) of the credit disallowed is in respect of services specified in Rule 65) and is eligible to be considered as input services as long as they are not used in admittedly exempted output services. viii. On application of principles underlined in Rule 6(3A)- Option II, the CENVAT Credit taken by them meets or comes within the parameters of the said Rule and impugned proceedings need to be set aside. ix. Since the issue is a bonafide interpretational issue penalties are required to be set aside by invoking Section 80. 3.3 Arguing for the revenue learned authorized representative while reiterating the impugned order submitted that appellants are having service tax registration since quite some time, and are well aware of Service Tax Law CENVAT Credit Rules, 2004. They have as per para 5 of the show cause notice taken credit in respect of those services which were not used for prov....
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.... is admissible to them? ii. Whether the appellants can be allowed the benefit of Rule 6(3) Option II, when they have not followed the procedure as laid down by the said rule. iii. Whether penalties under Section 76 and Section 77 of The Finance Act, 1994 justified upon the appellants? 4.3 Undisputed facts are that Appellants are reputed Technical Institute, engaged in providing technical education. Apart from providing technical education they are engaged in research and also are providing technical consultancy services. While the services of education and research are "non taxable"/ exempted from payment of service tax, technical consultancy services are taxable and are covered by the definition as provided by Section 65 (105)(za) of Finance Act, 1994. Appellants are registered as provider for the said taxable services. They are paying the service tax in respect of the services provided by them under the said taxable category. They are also availing the CENVAT Credit in respect of various input services received by them. 4.4 Rule 2(l) of Cenvat Credit Rules, 2004 define the input services as follows: "Rule 2(l) "input service' means any service - ....
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.... These services are required by the Noticee for the upkeep and maintenance of various equipments including computer hardware, software, other various technical equipments, laboratory equipments & instruments as well as the infrastructure such as elevators, EPABX systems in various buildings and again a service being covered under Rule 6(5) qualified to be input service. 5. Management Consultancy Service Some of these services were obtained for patent registration of products designed by R&D division of IIT. The other part of services relate to services obtained for design and implementation of software for the institute. These services were provided by Tata Consultancy Services. The service being of infrastructural nature is covered by Rule 6(5) and is eligible to be considered input services. 6. Scientific & Technical Consultancy Services These services were obtained for execution of the project undertaken by IIT and as such, is directly forming part of the output service and therefore is an input service. 7. Technical Inspection & Certification services While providing consultancy services, various tests are required to be conducted and services of ve....
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....nstitute. 14. Cargo Handling Service The Institute Imports various equipments from abroad for its research activities and this being the core function base on which extensive consultation is provided, they are treated as input services for output services. 15. Online Information Data Services This service is obtained for getting Bandwidth/accessing internet services and it being an infrastructural need of the business activity of the Institute, it is an input service for output service. The vendors of this service are Reliance, VSNL and Verizone. 16. Rent-a-Cab Scheme Operator's Services Often cared are hired by faculties for their official assignments of consultancy and academic purposes. As such, they are directly related to output service activity and therefore are input services. 17. Telecommunication Services These services are essential part of business, academic and administrative work of the Institute and as such, a business expenditure of the Institute and therefore qualify to be input service. 4.6 Commissioner has in her order in para 24 and 24.1 held as follows, for holding that the services against which the appellants have claimed....
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....or repairs of the premises of provider of output service or an office relating to such premises, advertisement, market research, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry. As can be seen, whereas setting up, modernization etc., of the premises of a service provider is covered in the inclusive portion of the definition of input service, other activities/services like say, original construction of complex, is not covered by input service as construction of complex is not claimed as having any nexus to provisions of Scientific and Technical Consultancy Service. This would be so even if these are used for providing education and this education comes into indirect use while providing taxable service. Moreover, I find that the host of judgments referred to by the Noticee in support of their claim that the input services in which credit is claimed as eligible under Rule 2(l) of the CCR, 2004 are not directly applicable to the facts and circumstances of the present case. Thus the Noticee has not been able to establish that the inputs on which CENVAT is ....
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....o inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A). Explanation I.- If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II.-For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars....
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.... credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, M denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and N denotes total CENVAT credit taken on input services during the financial year; (d) the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as p....
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....th June of the succeeding financial year. (i) where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent. per annum from the due date till the date of payment. Explanation I.- "Value" for the purpose of sub-rules (3) and (3A) shall have the same meaning assigned to it under section 67 of the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder. Explanation II.-The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III.- If the manufacturer of goods or the provider of output service fails to pay the amount pay....
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....r can exercise this option only once during the financial year. Sub-rule 3(a) lays down the procedure and conditions to be followed in case any of the options under sub-rule 3 are exercised. These conditions interalia include intimating the Range Superintendent all the details of the provider of input service, date from which such option is to be exercised, description of exempted and taxable services, Cenvat Credit lying in balance on the date of exercising option. 22.3.2 The service provider shall also determine and pay provisionally on a monthly basis, the amount equivalent to the Cenvat Credit attributable to the inputs used in exempted services as per formula laid down in the Rule. The final credit attributable to exempted services for the whole financial year is also to be determined as per laid down formula and the differential amount if any paid on or before 30th of the succeeding financial year along with the prescribed rate of interest if paid beyond the prescribed date. Alternatively the service provider may adjust the excess amount on his own by taking credit of such amount. In either case the service provider shall intimate the details to the jurisdictional Su....
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.... opt for one of the following two options : (i) Pay an amount equal to 10% of the value of the exempted goods or 8% of the value of the exempted services. Exempted service includes non-taxable service also. OR (ii) Pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in or in relation to manufacture of exempted goods or for provision of exempted services. Rule 6(3A) prescribes the conditions and procedure to determine the amount of CENVAT credit attributable to exempted outputs." 4.9 After recording as above in para 22.5.1 she observes "Schemes under rule 6(3) are optional and each individual scheme is comprehensive and self contained. An assessee can exercise the option in relation to all his activities as an assessee and the option is not available only in relation to a part of his activity and the option once exercised cannot be withdrawn during the said financial year." 4.10 Commissioner has in para 25.1 observed that Appellants have failed to comply with the legal obligations casted stating as follows: "25.1 Therefore, in spite of being aware of the legal requirements (as they have been receiving SCN's....
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....ic and Technical Consultancy Services and accordingly are required to follow the relevant cenvat provisions as per Rule 6 bid for claiming the Cenvat credit. Further, they have not produced any documentary and substantive evidence input which can justify their claim for eligibility of Cenvat Credit. In this connection, it may be stated that the aforesaid sub-rules of Rule 6 ibid, are not the enabling provisions for availment and utilization of Cenvat Credit. These sub-rules contain supplementary conditions in tandem with the definition of "Input Service" given under Rule 2(l), the credit enabling provisions under Rule 3 and the restriction on availment of credit imposed under Rule 6(1) of the said rules. When the Noticee has not bothered to maintain any separate account or give any option or reverse any credit from time to time as specified in the Cenvat Credit Rules, they cannot unilaterally stake claim to any amount of credit as being eligible to them under Rule 6(3) and Rule 6(5) of the Cenvat Credit Rules, 2004. They were first of all required to show that the credit has been taken of service tax paid on services which qualify to be input services as per definition provided und....
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.... That being so next question that needs to be examined is vis a vis Rule 6 of CENVAT Credit Rules, 2004, as the major service provided by the appellant i.e. providing/ imparting education is exempted service. 4.13 Undisputedly appellants have not followed the procedure prescribed for availing the options provided under Rule 6(3A) of the CENVAT Credit Rules, 2004, to the extent that they have not filed any intimation to the Range Superintendent, with the prescribed particulars for availing the second option of reversal of the credit determined on proportionate basis. However appellants have claimed that during the relevant period they had reversed the CENVAT Credit attributable to exempted services. During the course of argument they had submitted following charts showing the reversal of credit by them: Particulars Credit taken on input services Credit Reversed under 6(3)(ii) Credit availed on services not specified under 6(5) Total CENVAT Credit availed Ratio of amount paid under 6(3) (ii) Specified under 6(5) Other than 6(5) A B C D E=C-D F=B+E G=D/C* 100 Apr-Sep 10 2793809 3748793 3523865 2,24,928 30,18,737 94.0....
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....Section 76 and 77 of the Finance Act, 1994 on the appellants along with the interest as provided by Section 75 of Finance Act, 1994. 4.18 Appeal No ST/86612/17, is against the order of Commissioner (Appeal) for different period as the order in original in this case was passed by the Additional Commissioner. Since the issue involved are identical in this appeal we remand this matter also to the original authority for causing similar verifications in this case too. 5.0 In view of discussions we allow both the appeals and remand the matters to Adjudicating authority for passing a fresh order after verifying the fact of reversal of credit vis a vis the book of accounts and ST-3 return. Needless to say that since the matters are quite old adjudicating authorities should dispose of the matters in remand proceedings with four months of the receipt of this order after following the principles of natural justice. (Order pronounced in the open court on 16.05.2019) ============= Document 1 CA 17/02/19 Indian Institute of Technology Period: April 10 to September 11 Statement reflecting the CENVAT credit account as reflected in the ST3 return and correct position Pe....