AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 590
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....mer Premises Equipment) which were installed in the State of Jammu and Kashmir and as the provision of the Finance Act, 1994 are not applicable to the State of Jammu and Kashmir, it has been alleged that the appellant have wrongly availed Cenvat credit and accordingly reversal of the Cenvat credit has been demanded as per the provision of Rule 14 of the Cenvat Credit Rules, 2004 readwith the proviso to the Section 73 (1) of the Finance Act, 1994; (ii) the second issue on which the demand has been raised in the above-mentioned show cause notice pertains to the matter that the appellant need to reverse back the Cenvat credit on the CPEs (Consumer Premises Equipment) installed on complementary basis at the premises of certain customers/subscribers. A demand of Rs. 8,71,650/- has been raised on this issue as per the provision of Section 73 (1) of the Finance Act, 1994, (iii) a demand of Rs. 62,66,437/- has also been demanded for wrong availment of the Cenvat credit on the CPEs lost in transit or lost at the distributors premises before same being put for the final utilization; (iv) and a demand of Rs. 9,84,62,871/- has also been made under Rule 14 of the Cenvat Credit Rules, 2004 readw....
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....iven here below :- Period Total Service Tax payment (Rs.) Cenvat credit utilized for payment of service tax (Rs.) Service Tax paid in cash (Rs.) Date of filing of relevant ST-3 return 2009-2010 1,216,050,209/- 1,141,968,929/- 74,081,280/- April - September 2009 - 23/10/2009 October - March 2010 - 23/07/2010 2010-2011 1,589,642,450/- 1,548,505,832/- 41,136,618/- April - September 2010 - 26/10/2010 October - March 2011 - 25/04/2011 2011-2012 1,94,57,90,608/- 1,87,55,28,002/- 7,02,62,606/- April - September 2011 - 25/12/2011 October - March 2012 - 25/04/2012 01/4/2012 to 31/01/2013 2,26,47,56,192/- 1,58,43,18,011/- 68,04,38,181/- April - June 2012 - 22/11/2012 July - September 2012 - 22/04/2013 October - March 2013 - 31/08/2013 Total 701,62,39,459/- 615,03,20,774/- 86,59,18,685/- 4. It can be seen from above chart that the appellant made payment of service tax by utilization of Cenvat credits as well as by making cash payments. It has further been submitted by the learned Advocate that they have discharged service tax on the output services of broadcasting on the consider....
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....in paragraph 7 of the decision held as follows : "The Tribunal is justified in holding that if the activity of the respondent - assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture." This decision was upheld by the Supreme Court by dismissing the SLP filed by the revenue. The order of dismissal is reported at 2009 (243) E.L.T. A 121. (ii) Commissioner of Central Excise, Pune - III vs. Ajinkya Enterprises - 2013 (294) E.L.T. 203 (Bom.) On similar facts, the High Court in this case dismissed the appeal of the Revenue on the ground that if duty is paid where it is not required under law to be discharged, Cenvat credit availed need not be reversed. (iii) The Mumbai Tribunal in the case of PSL Holdings Ltd. vs. Commissioner of Central Excise - 2003 (156) E.L.T. 602 (Tri. - Mum.) held : "By utilization of credit for payment of duty which was not required to be paid, credit was effectively reversed and Revenue cannot once again ask for reversal of credit". (iv) Similar view was taken by the Delhi Tribunal in the ca....
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....invoices indicating payment of excise duty. As per the standard accounting principle the credits are taken as soon as payment for purchases are made and invoices have been received. The fact that certain CPEs have not been received on or have been lost comes to light on later date. It has been also contended that the Commissioner has been provided with the details of set-top boxes which have been lost during 2010-2011 to 2011-2012 and for 2013-2014, on which Cenvat credit have already been reversed. It has further been mentioned that only for a short period of 2012-2013 by oversight the Cenvat credits have not been reversed. It has further been argued that even without any prejudice the maximum penalty could have been 50% of the credit Cenvat credit wrongly availed by them as per the provisions of 1st proviso to Section 78 of the Finance Act, 1994 and further since entire amount of wrongly availed Cenvat credit alongwith the interest and penalty have already been deposited in the form of voluntarily payment of Rs. 5 crores with the Department, the benefit of reduced penalty of 25% should have been given to them. 6. With regard to issue No. IV, which pertains to the Cenvat credit....
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....e Cenvat Credit Rules, as according to the Department the set-top boxes value had been written off fully in the books of accounts before being put to use. Such a demand was dropped by the Commissioner, CGST, Noida by order dated 12/01/2018 holding that the capital goods had been put to use as also the capital goods have not been fully written off. The Commissioner in that order has also noted the fact that the local Range office had objected to the denial of credit by letter dated 31/01/2013. A copy of the order passed by the Commissioner CGST, Noida dated 12/01/2018 has been filed along with the compilation of judgments to this Bench. It is further been submitted that no appeal has been preferred by the Department before CESTAT against the above-mentioned order-in-original. Thus, the Department was fully aware, prior to issuance of the present show cause notice of the appellant's practice, and when the appellants are following the same practice all throughout, without prejudice to the merits of the case, invoking the extended period of limitation and imposition of penalty contending there was mala fide intent, cannot be sustained. 8. We have also heard learned Departmental Repr....
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.... service tax in cash during a period from 2009-2010 to 31 January 2013 :- Period Total Service Tax payment (Rs.) Cenvat credit utilized for payment of service tax (Rs.) Service Tax paid in cash (Rs.) Date of filing of relevant ST-3 return 2009-2010 1,216,050,209/- 1,141,968,929/- 74,081,280/- April - September 2009 - 23/10/2009 October - March 2010 - 23/07/2010 2010-2011 1,589,642,450/- 1,548,505,832/- 41,136,618/- April - September 2010 - 26/10/2010 October - March 2011 - 25/04/2011 2011-2012 1,94,57,90,608/- 1,87,55,28,002/- 7,02,62,606/- April - September 2011 - 25/12/2011 October - March 2012 - 25/04/2012 01/4/2012 to 31/01/2013 2,26,47,56,192/- 1,58,43,18,011/- 68,04,38,181/- April - June 2012 - 22/11/2012 July - September 2012 - 22/04/2013 October - March 2013 - 31/08/2013 Total 701,62,39,459/- 615,03,20,774/- 86,59,18,685/- 11. Thus, it has been claimed by the appellant that though they have availed the Cenvat credit in respect of CPEs installed in the state of Jammu and Kashmir and the credit so availed had been utilized for payment of service tax in respect of service tax pa....
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.... have held that by utilization of the Cenvat credit for payment of duty, which was not required to be paid, the credit effectively stands reversed and revenue cannot once again ask for reversal of the credits. The relevant extract of certain relevant decisions are reproduced here below :- "(a) Commissioner of Central Excise & Customs, Surat - III vs. Creative Enterprises - 2009 (235) E.L.T. 785 (Guj.) In the present case, the assessee was under the impression that the activity undertaken by it amounted to manufacture and accordingly paid excise duty and also availed Cenvat credit of the inputs utilized. The department contended that as the activity of the assessee did not amount to manufacture, the assessee is liable to reverse the CENVAT credit availed. The Gujarat High Court held that Cenvat credit cannot be denied when the assessee has paid the tax, as payment of tax amounts to reversal of credit. The court in paragraph 7 of the decision held as follows : "The Tribunal is justified in holding that if the activity of the respondent - assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by ....
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....t of Rs. 5 crores have been paid by the assessee vide challan No. 173, 391 and 176 dated 30 July 2014, 1 August 2014 and 11 August 2014 respectively against the demand of Cenvat credit which was being investigated by the department at that time. 15. We also note that the appellant have kept record of all the services which have been provided by them as well as the Cenvat credit which have been availed and utilized by them during the period covering from April 2009 to March 2014. We feel that ingredients of invoking the extended time proviso under Section 73 (3) of the Finance Act, 1994, such as, fraud, mis-representation, mis-statement and willful suppression of facts with an intent to evade payment of duty are not present in this case and therefore we hold that the provisions of Section 78 of the Finance Act, 1994 cannot be invoked in given circumstances. We also find that as per the provisions of Section 73 (3) which are reproduced here below :- "Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay ....
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....finds application only when specific and explicit averments challenging the fides of the conduct of the assessee are made in the show cause notice, a requirement that the show cause notice in the present case fails to meet. In Aban Loyd Chiles Offshore Limited and Ors. (supra), this Court made the following observations : "21. This Court while interpreting Section 11-A of the Central Excise Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed that in order to attract the proviso to Section 11-A(1) it must be shown that the excise duty escaped by reason of fraud, collusion or willful misstatement of suppression of fact with intent to evade the payment of duty. It has been observed : '...Therefore, in order to attract the proviso to Section 11-A(1) it must be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show ca....
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.... by the learned Adjudicating Authority on the Consumer Premises Equipment (CPE) which were lost in transit or lost at the distributor's premises before same being put for use in providing the output service. The appellant have admitted the fact that during the financial year 2012-2013 they have failed to reverse back an amount of Rs. 62,66,437/- on 32,078/- CPEs which were lost either in transit or at the distributor's premises before being used or put for use for providing the output service. However, it has been contended by the appellant that they have regularly been reversing back the Cenvat credit on the lost CPEs which were not put for use for providing output service. In this regard, the following details have been provided by the learned Advocate appearing for the appellant :- Financial year No. of CPEs lost Cenvat credit availed (in Rs.) Cenvat credit already reversed (in Rs.) 2009-2010 0 0 0 2010-2011 2,261 3,07,406/- 3,07,406/- 2011-2012 1,24,276 2,27,52,634/- 2,27,52,634/- 2012-2013 32,078 62,66,437/- 0 2013-2014 74,164 1,86,89,328/- 1,86,89,328/- 19. A glance at the above table thus points out t....
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....er premises and which have also been written off fully in the financial accounts from 01/07/2012 to 31 March 2014 by the appellant. The Department has been of the view that the capital goods which have been removed by the appellant after being used, the Cenvat credit availed initially at the time of the purchase of such capital goods required to be reversed in the manner as prescribed under Rule 3 (5) of the Cenvat Credit Rules, 2004. The basic premise on which the Cenvat credit has been asked for the reversal is that the CPEs installed at the consumer premises and where either connection has been disconnected or deactivated and as such no output service is being provided by such CPE; Secondly, as per the facts of the case, the CPEs remained in the custody of the consumer and they are not taken back by the appellant after the consumer has either stopped the subscription or the appellant himself has deactivated services to the such customers. In these circumstances, it is presumed that the CPEs has been removed from the premises of the appellant and accordingly the provisions of Rule 3 (5A) of Cenvat Credit Rules, 2004 will be applicable. During the course of hearing, the learned Ad....
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....year @ 8% For each quarter in the third year @ 5% For each quarter in the fourth and fifth year @ 1% (ii) For capital goods, other than computers and computer peripherals @ 2.5% for each quarter : Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value. (b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. (5B) If the value of any, (i) Input, or (ii) Capital goods before being put to use, [on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then] the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods : Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of [output] services, the manufacturer or output ser....
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....bers end and, therefore, even after 4 to 5 years the value of such CPEs is written off in the books of accounts the provisions of sub-Rule (5B) are not applicable. We feel that the Cenvat credit reversal under Rule 3 (5A) as invoked in the show cause notice and confirmed by the impugned order-in-original is legally not sustainable as the facts involved in this case are appropriately covered by the provisions of Rule 3 (5) "proviso" which say that the capital goods can be removed to the subscribers premises for further provision of the output service. It is also relevant to mention here that during the course of arguments, the learned Advocate has taken us through the record of the appeal wherein it has been pointed out that certain deactivated CPEs gets activated after lapse of certain months or years and, therefore, it is also wrong to assume that the CPEs (capital goods) on which the Cenvat credit has been taken by the appellant are not being put for providing the output service. In these circumstances, we feel that the appellant have rightly availed the Cenvat credit on the CPEs which have been placed for utilization at the subscribers premises and there is no provision under Ce....
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.... (I) that out of total Cenvat credit of Rs. 4,18,94,327/- confirmed by the impugned order-in-original, we hold that Cenvat credit amounting to Rs. 87,35,678/- pertaining to period 1st February 2013 to 31 March 2014 availed on the capital goods for providing the service in the State of Jammu and Kashmir on which no service tax has been paid by the appellant, the appellant need to reverse back the Cenvat credit amounting to Rs. 87,35,678/- as per the provisions of Section 73 (1) of the Finance Act, 1994 readwith Rule 14 of Cenvat Credit Rules, 2004 ; (II) we also uphold the reversal of Cenvat credit amounting to Rs. 62,66,437/- on set top boxes which were lost in transit or lost at the distributors premises before being put to use as per the provision of Section 73 (1) of the Finance Act, 1994 readwith Rule 14 of the Cenvat Credit Rules, 2004 ; (III) we set aside the confirmation of the reversal of Cenvat credit amounting to Rs. 9,84,62,671/- as discussed in the preceding paras on the set top boxes which were deactivated at the subscribers premises. 27. We also confirm appropriate amount of interest as per the provisions of Section 75 of the Finance Act, 1994 r....