TaxTMI 
TaxTMI 
2023 (8) TMI 471
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....vice tax under reverse charge mechanism on commissions paid to insurance agents, etc. 2. Intelligence was gathered by DGCEI, Chennai zonal unit that the appellant is availing cenvat credit wrongly on the basis of invoices issued by dealers of Motor Vehicles containing description of services which were never actually provided by the automobile dealers to the appellant. Accordingly, investigation was initiated and documents recovered, statements recorded. The investigations was done as under : (i) Investigation into the alleged irregular availment of cenvat credit by appellant on the basis of invoices issued by the automobile dealers (excluding the dealer, M/s. TVS Sundaram Motors) and manufacturers (excluding the manufacturer, M/s. Honda Cars India Ltd.) (ii) Investigation on the irregular availment of credit on the basis of invoices issued by the manufacturer, M/s. Honda Cars India Ltd. (iii) Investigation into the alleged irregular availment of credit on the basis of invoices issued by the dealer, M/s. TVS Sundaram Motors. 3. It is noted that the dealers of motor vehicles not being Agents / Brokers / Intermediaries of the Insurance companies are n....
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....w before the Tribunal. 5. The Ld. Counsel Shri Raghavan Ramabadran appeared and argued for the appellant. It is submitted that the appellant is engaged in providing general insurance services pertaining to motor insurance, health insurance, property insurance, engineering insurance, liability insurance and other miscellaneous insurances. 5.1 At the time of sale of the automobiles, the automobile manufacturers through their established dealer network assist the vehicle buyers to obtain the insurance. From the view point of the insurance companies, including the Appellant, the dealers of automobile manufacturers are usually the first point of contact with the buyers of motor vehicle and hence for motor insurance too. Accordingly in order to increase its customer base, the Appellant enters into agreement with various automobile manufacturers and their authorized dealers in order to get access to their customers through various dealerships. 5.2 The case of the Department is as follows : a. Firstly, that the invoices on which credit is taken do not reflect the true description of the services provided by the dealers to the appellant. b. Secondly, in respect of....
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.... at the service recipient's end. 5.5 To support this argument Ld. Counsel relied on the judgment of the Hon'ble High Court of Madras in M/s. Modular Auto Ltd. CCE Chennai - 2008-VIL-541-MAD-ST. The ratio laid in this case was followed by the Tribunal in the case of M/s. Ford India Pvt. Ltd. Vs Commr. of GST & CCE - 2019-VIL-182 CESTAT CHE-ST. 5.6 The very same issue in this appeal on identical set of facts was considered by the Tribunal in the case of Cholamandalam MS General Insurance Co. Ltd. Vs CCE - 2021 (3) TMI 24 CESTAT CHENNAI [2021 (47) GSTL 263 (Tri.-Chennai)]. The Tribunal in the said case followed the judgment of the Hon'ble jurisdictional High Court in the case of M/s.Modular Auto Ltd. (supra) to hold that when it is not disputed that the dealer has paid service tax on the services described in the invoices, the denial of credit at the recipient's end cannot be justified without reopening the assessment at the dealer's end. 5.7 In regard to the second issue of denial of cenvat credit on unsigned computer generated invoices issued by M/s. Honda Motors India Ltd. to the appellant, the Ld. Counsel submitted that there is no dispute that the service provider is reg....
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....the adjudicating authority in para 13 of the OIO has made discussions in this regard. So also, there is no mention in the SOD that the activities cover reimbursable expenditure. However, in para 14.2 the adjudicating authority has held that the amounts paid by appellant to dealer are reimbursements and therefore no service tax is payable by dealer on such amounts, and therefore appellant is not eligible for credit. The Ld. Counsel argued that by considering the notfn no. 30/2012 and the amount as reimbursements, the adjudicating authority has travelled beyond the SCN. 6. The Ld. Counsel adverted to the decision of the Tribunal in the case of Karur Vysya Bank Ltd. VS CCE Trichy - 2019 (22) GSTL 63 (Tri.Chennai). It is pointed out that in the said case, the department had issued SCN demanding service tax under "Business Support Service" (BSS) on infrastructure support services provided to insurance companies by the bank. The Tribunal upheld the confirmation of demand. It was thus argued that when service tax is not paid by an assessee (Bank) for Business Support Services, demand has been raised for providing infrastructure facilities and supports to the insurance company. That the....
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...., which limits the payment of Commission or brokerage to 10%. The circular specifically state, "No payment of any kind including "administrative or servicing charges" is permitted to be made to the agent or broker in respect of the business of which he is paid agency commission or brokerage." 8.2. The appellant maintains business connection with automobile dealers for procuring insurance policy from the vehicle buyers. The tie up with manufacturer brings out the mechanism for rendering such insurance services and they inform the dealer the rate of commission for rendering such services. The appellant is not authorized to outsource such insurance services. As per Section 40 of Insurance Act, 1938, only licensed Brokers are permitted to do insurance business and entitled to receive commission. For the purpose of receiving the commission, the dealers have raised the invoices describing the services as 'data processing and policy servicing activities'. In reality, the dealers do not provide any such service and only provide insurance services. The taxable value and the service tax is calculated as a percentage of own damage (OD) premium and intimated by appellant to the dealers thro....
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....6. It is argued that the Board vide F.No.224/44/2014-CX.6 dt. 06.07.2015 had issued instructions for option to issue invoices in electronic form and authentication of digital signature. This came into effect only on 6.7.2015. So the credit availed by appellant on unsigned invoices issued by e-mail from M/s. Honda Cars is not valid and the demand has been correctly confirmed by the impugned order. 8.5 The third issue is regarding two sets of invoices showing different description of services. The description of service in the invoice of the account maintained by the dealer (TVS Sundaram Motors) is shown as 'additional incentive'. The description of the service in the corresponding invoice of the appellant shows as 'Data processing and Policy related activities'. The appellant has not been able to explain the discrepancy. The credit has been righty denied by the adjudicating authority. 9. It is asserted by the Ld. Counsel that the credit has been denied not because of incorrect description of service in the invoice, but because the dealers and manufacturers did not provide any service to the appellant and the invoices have been raised to pay the commission on insurance services....
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....processed and issued the policy? A: Yes Do you agree that for the above service KM was paid service charges at a % of the OD premium? A: Yes Q: Do you agree that KM rendered the services mentioned in Schedule A of the agreement of the service provider agreement dated 15.11.2013? A: Yes, they provided Policy servicing and Data processing services. Q: Do you therefore agree that your answer to question no. 18, 19 20, 25 (questions by department while recording statement) are incorrect? A: Yes it is incorrect {four separate questions and answers are made into one here} Q : why were there such four incorrect replies? A: I was forced to give such answer. Q: In question no. 34, is the description in the invoices-data processing and policy servicing-absolutely false? A: No. They are providing data processing and policy related activities services. Q: Do you agree that you received from KM, Chennai Ford, Honda Cars India Ltd, SM etc, the service of promoting RS as one of the preferred insurers and wherever they are successful they processed and issued the insurance policies ....
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....amination of witnesses. 16. Section 9D of the Central Excise Act, 1944 provides as to how the statements recorded during investigation can be admitted in evidence. The said Section has been adopted in Finance Act, 1994 as provided in Section 83 of the Finance Act, 1994. The Hon'ble High Court of Punjab and Haryana in the case of G-Tech Industries Vs Union of India - 2016 (339) ELT 209 (P&H) had occasion to consider the compliance of the provisions of Section 9D of the Central excise Act, 1944. It was held that the statements recorded during an inquiry or investigation cannot be merely accepted in evidence. For admitting such statements summons has to be issued to the witness and examined. The witness can be cross examined by the assessee. The relevant para reads as under: "16. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handi....
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....use (b) of the said subsection. The Orders-in-Original, dated 4-4-2016, having been passed in blatant violation of the mandatory procedure prescribed by Section 9D of the Act, it has to be held that said Orders-in-Original stand vitiated thereby." 17. The Hon'ble Jurisdictional High Court in the case of Sri Bala Ganeshan Spinners - 2021 (377) ELT 510 (Mad.) has emphasised the requirement of cross examination. The Tribunal in the case of Swift Institutes of Engineering Technology Vs Commissioner - 2020 (34) GSTL 502 (Tri-Chand) had occasion to consider the applicability of Section 9D of Central Excise Act 1944, to the investigations conducted for short payment of service Tax. 18. During cross-examination the witnesses have categorically stated that the dealers provided services to the appellant in the nature of 'data processing and insurance related activities'. The dealers have also collected charges from the appellant for such services along with service tax. In the SCN it is alleged that the cenvat credit is not eligible to the appellant as the description of services in the invoices is incorrect. At times, in the SCN as well as OIO it is alleged that the credit is inadmiss....
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....t Dealerships to Customers. b. Facilitate availability of infrastructure of Dealers and also facilitate the relationship between Insurer and Dealerships for insurer making available insurance Services to customers in terms of this MOU: CONSIDERATION In consideration of the services provided in pursuance of this Agreement Insurer agrees to pay a) HCIL, a fee, mutually agreed for utilization of the IT support established; maintained and provided by HCIL that would be available to the Insurer for its providing the Insurance Services. b) Dealerships a fee/service charge for utilization the infrastructure provided by Dealers at Dealerships. c) The nominated Brokers such reasonable brokerage (subject to IRDA norms) for the brokerage services to be provided by them. The rates of the fee or charges may be mutually agreed upon from time to time in writing. 21. Similar agreements have been entered with M/s. Tata Motors, M/s. Ford etc. From such agreements it can be seen that the dealers have provided services to the appellant. Further, the transactions are not hidden or suppressed in any manner. The department alleges these are ille....
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....is that no services have been provided by the dealers to the appellant as per the invoices and therefore, the appellant is not eligible to avail credit of the Service Tax reflected in this invoices. In paragraph 31 of the Order-in-Original dated 30-1-2017, the crux of the allegations of the Department has been recorded by the Original Authority, as under : "31. On careful consideration of the statements of personnel of M/s. Chola and Dealers, I find that (i) The payment made by M/s. Chola to M/s. Hyundai/Dealers of Motor Vehicles is only a percentage of OD premium collected and the said payout details are calculated by the Head Office of M/s. Chola and communicated to the Dealers; (ii) M/s. Chola could not term such payout as commission (which would be in violation of IRDA guidelines) and hence the Dealers were given prescribed format to raise invoices as if they provided "computing network connectivity through extranet, internet space, furniture and fixtures, consumables, salary of staff, computers, printers, electronics and electricity"; (iii) the Dealers accordingly raised invoices on the insurance companies in the format provided to them and ....
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....me to light. Hence their contention that department cannot approbate and reprobate in the same case is not valid." 7.3 It is not disputed that the dealer has paid Service Tax on the services described in the invoices. If that be so, the denial of credit at the recipient's end cannot be justified by the Department without reopening the assessment at the dealer's end. .. .. ... 8.1 A similar issue came up for consideration in the case of M/s. Modular Auto Ltd. (supra). The substantial questions of law considered in the above case are as under : "2. The above appeals are admitted on the following substantial questions of law; (a) When the service provider was not before the Tribunal, whether the Tribunal can go into the question as to whether the said service provider had provided service to the appellant or not, more so when the said service provider has been assessed to service tax under Business Support Service for the service rendered by them to the appellant. (b) Is the Tribunal not in error in refusing credit to the appellant for service tax paid by them to service provider when payment of service tax by the appellant for the....
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....ain the signature, it cannot be said that the credit is ineligible. Further, for the period after 2015, the Board has clarified that signatures are not required in the case of computer generated format. 28. The third issue is rejection of credit on the ground that the invoices issued by M/s. TVS Sundaram Motors (service provider) contains a different description of the service. It is alleged in the SCN that invoice maintained by dealer mentions the description of service tax as 'additional incentives' whereas the invoice with the same serial number maintained by the assessee has the description as 'data processing and policy related services'. Again, it is not disputed that the tax has been paid as per the invoices. Appellant who is the service recipient cannot be found fault for the description mentioned in the invoice maintained by the service provider. Appellant has no control over the accounts maintained by the service provider (dealer). The credit at the recipient's end cannot be denied for this reason. We hold that the denial of credit on this reason is not justified. 29. Appeal No.ST/40198/2020 covers the period from April 2015 to June 2017. The facts and allegations a....
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....t of a taxpayer to pay taxes in the teeth of opposition by the department. If the findings of the impugned order are found to be correct and true, then; (i) it would be a case of fake invoicing with its attendant evils. (ii) it would involve defrauding the ultimate taxpayer on whom the incidence of tax rests, to the tune of Rs Rs. 62,31,23,972/- during the impugned period alone. (iii) it would be an ingenious and creative method of using tax laws for unjustly enriching participants to the specially devised scheme, at the cost of the ingenuous and hapless taxpayer. (iv) it may possibly be a violation of IRDA circular which is mentioned in the impugned order. Hence the issue deserves a deeper examination of facts and layered treatment of law, which I propose to explore before coming to a conclusion. Hence this separate order. 33. The brief facts of the case are that the appellant is engaged in the business of providing general insurance service pertaining to motor insurance, health insurance, property insurance, etc. They started the insurance business in the year 2001 and are registered with the Insurance Regulatory Development Authority of ....
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....of various automobile dealers (hereinafter referred to as 'dealers') for provision of certain services. In terms of these agreement, the dealers, as service providers shall provide the following services:- I Policy & Data Processing:- a. Arrange for physical collection of completed proposal forms and organize them for quality check and data entry b. Conduct preliminary quality checks for the proposal form as per the Standards and instructions of the company c. Identify and escalate any discrepancies found in the proposal forms and / or support documents and get them rectified. d. Enter the data in the application form with receipt details in an agreed application and general control sheets. e. Forwarding the data to the company. II Policy Servicing: a. Printing of policy pack as per the Standards and Instructions of the Company b. Ship the policy pack to the insured c. In case of the returned policy, keep record of the details of the customer and send the details to the company d. Prepare detailed MIS as required by the company in the format provided by the Company e. Carry o....
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....der held that dealers were raising invoices as per the instructions of the appellant for receiving the payouts / commissions from the appellant, while no taxable service was provided by the dealers as mentioned in their invoices. Hence the irregularly availed credit needs to be reversed. Therefore, the payment of charges by the appellant to the dealer, on which the disputed 'service tax' was voluntarily discharged by the appellant and credit availed, is not duty as contemplated under the Finance Act 1994. It was at best commission paid to the dealers for the business given to the insurance company. Additionally, in respect of the services provided by M/s. Honda Cars India Ltd. (manufacturer) and TV Sundaram Motors (Dealer), it was found that the documents on which the credit was availed was not proper. The CENVAT credit wrongly availed by M/s. Honda Cars India Limited and TV Sundaram Motors (Dealer) and which was reversed by them to the tune of Rs. 69,35,403/- and Rs. 1,72,63,912/- respectively was demanded and confirmed. Hence in the impugned order, it has been held that the appellant has availed ineligible CENVAT credit of Rs. 62,31,23,972/- (Rs. 59,89,24,657/- + Rs. 69,35,403/- ....
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....edit of the services in question because they qualify as input services. 81 10. Substantive benefit of CENVAT credit cannot be denied on technical issues 81 11. Dealers are providing "Business Auxiliary Services" and the appellant is entitled to the CENVAT credit of the same 82 12. Contractual supply is the essence of applicability of service tax. 82 13. Cost of input service is included in the assessable value of the final services. 82 14. M/s. Cholamandalam MS General Insurance Company Limited and other judgments in favour of appellant 83 15. Irregular availment of CENVAT credit on the basis of irregular invoice without signature by appellant 92 16. Irregular availment of CENVAT credit on the basis of duplicate invoices by appellant 100 17. Service tax department cannot act as a superregulator and hold the appellant responsible for violation, if any, under other laws and regulations 101 18. The extended period of limitation is not invocable in the present case. 105 19. Penalty under section 78 of the Finance Act, 1994 read with Rule 15 of Credit Rules is not attracted in the present ca....
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....een provided by the service provider to the service receiver. Therefore, CENVAT credit cannot be denied to the appellant under any circumstances. 37.2 This proposition of the appellant that once the service provider and recipient agree on the provision of a service being done and received, credit cannot be denied is not legally sound. Tax liability does not arise due to consent of parties. There has to be a legally valid levy. Secondly the appellants averments are based on a turn of phrase. What needs to be discussed is the provision of 'taxable service' by the service provider and not any activity, if provided at all, that is merely a 'service'. Firstly, prior to 01/07/2012, the levy is on "taxable service", hence an activity needs to be understood in the said terms. For if there is ambiguity in understanding the scope of the subject of levy, and one has to take the aid of external sources to arrive at the meaning, then there is no tax at all. The Hon'ble Supreme Court in Mathuram Agrawal Vs. State of Madhya Pradesh [(1999) 8 SCC 667] held; "The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person w....
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....value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed." 23) Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various subclauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the 'value of taxable services'. Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24) In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'. That according to us is the plain meaning which is to be attached to Sectio....
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.... Case law 196 SC] the Apex Court held; "...In the field of legal interpretation, dictionary scholarship and precedent-based connotations cannot become a universal guide or semantic tyrant, oblivious of the social context, subject of legislation and object of the law..." The point as canvassed by the appellant is thus not the correct way forward. The constitutionality of the levy is not under challenge here. The appellants contention that service has been provided by the dealer and received by them and that these facts are undisputed and no contrary evidence is produced on record is not factually correct as seen from the SCN and the impugned order. The whole dispute is based on a challenge by the department, to the events culminating in the appellant taking credit on the invoices provided by the dealers. Hence we need to examine the evidence on record before coming to a conclusion. 37.5 It is seen that the appellant has put forward their argument in furtherance of their view that the dealers are providing "Business Auxiliary Services" which is being received by them and is eligible as input credit. We shall cross that bridge when we come to it. 38. Without prejudic....
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....r Section 73A(2) of the FA, 1994. This does not mean that department has accepted the taxpayer's assessment and that the actions of the taxpayer have been ratified. There is considerable force in the averments of Revenue. Section 73A of the FA 1994, which was inserted by Finance Act, 2006 w.e.f. 18-4-2006 (much earlier than the period in dispute), is reproduced below; 73A. Service Tax Collected from any person to be deposited with Central Government (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made thereunder from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. ....
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....t it would not cause unjust enrichment." (emphasis added) 39.3 Now to the second issue raised by the appellant, when there is no requirement to pay service tax at all then whatever CENVAT credit is taken should be treated as refund of the tax. Revenue in their submissions have stated that there is no provision in the law which mandates the department to reassess the self-assessment made by the appellant and refund the tax suo moto, even if the tax is not leviable at all. If the tax paid is not payable or leviable, the appellant or anyone else claiming refund must on his own should make an application for a refund in terms of Section 11B of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994 by virtue of Section 83 of the Act. There is again considerable force in the averments of Revenue. The Finance Act, 1994, is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law. It, therefore, follows that any and every claim for a refund of service tax can be made only under and in accordance with the provisions ....
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....sed on the discussions I do not find any substance in the appellants averments on this settled point. 40. Manner of payment of consideration is merely a measure for payment of consideration. It is not relevant to decide the nature of service provided by the appellant. 40.1 It is submitted by the appellant that the agreement between the appellant and the dealers mentions that the payment would be mutually decided. (It will be seen later in the discussion that the officials of the appellants Co and car dealers agree that there was no mutuality in the decision and the payments were made by the appellant on their own reconning to the dealers) Further the fact that the consideration is calculated in sync with the quantum of business procured by the dealers is not a determinative factor that the amount paid to the dealers is merely a payout / commission. This is only a measure / manner of computation of consideration for service provided by the dealers to the appellant. It is wholly irrelevant to decide the nature of services provided by the appellant as would be clear from the judgment of the Hon'ble Supreme Court in Senairam Doongarmall V. CIT - 1961 42 ITR 392 (SC). It was s....
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....er and received by him along with other factors and come to a conclusion as to whether it is a legitimate taxable service. Then accordingly test the declared description in the invoice with the proper classification of the service received by him, to meet the requirements of Rule 9 of CCR 2004. 41. Reliance placed on the statements recorded by the department is wholly erroneous 41.1 The appellant states that the impugned order has relied on the statements recorded from officials of the appellant's company and car dealers. That in all the statements which are relied upon, the element of provision of various services have been brought out despite the misleading questions and the intimidating tactics employed during the investigation. However, their lament is that these facts have not been considered in the impugned order in its proper perspective. That the fact is all the dealers have received payments from the appellant and remitted the same to the government on or before the due date. They further add that statements would not be automatically binding and reliable until the procedure prescribed under section 9D of the Central Excise Act 1944 is satisfied. 41.2 Response of ....
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.....15 had been rendered by SM To RSAICL and also explain for what purpose these invoices were raised by SM. Ans: Having seen the above documents, I have appended my signature in it. The payout to the car dealers are made based on the payout statement calculated as a percentage on OD premium collected by the dealer (SM) from the customer, which is prepared by RSAICL and the same was communicated to us for furnishing the invoice to the car dealer. Accordingly, M/s. TVS Sundaram Motors had issued Bill No. 007-A1/14-15/Chn dt. 27.1.15 for having claimed and received the payout. However, the payout does not represent the service charges for the description mentioned in the Bill No. 007-A1/14-15/Chn dt. 27.1.15." The query put forth was to bring out two types of bills issued by M/s. TVS Sundaram Motors, Chennai one showing reimbursement of expenses viz. "policy processing expenses, policy servicing expenses, training expenses" for the month of December 2014 and another as showing "Additional Incentive (HA)" for December 2014 wherein both the bills were issued for the same amount. Shri Balaji explained that the amount mentioned in one of the bills is prepared by the appellant to....
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....y receiving hardcopies of corresponding invoices from the dealers and send them to our Corporate Office as instructed by the Finance Dept of our Corporate Office. Q.19 Please see and sign the statement of Mr. S. Chandrasekhar, General Manager (Finance), KMPL dated 26.6.15. He has stated in the answer to questions 1 that "KMPL have not provided any data processing, policy servicing etc. to the said insurance company. The invoices have been raised by KMPL only to receive the payouts / commission (for customer referral-new and renewal policies) on the insurance amount collected by KMPL from the customers.". it means that KMPL have not provided any service to you but prepared the invoice on the basis of instructions sent by you vide email dated 12.6.2015. Why dealers are asked to raise such invoices? Ans. I have seen the statement of Mr. S. Chandrasekhar, General Manager (Finance), KMPL dated 26.6.15 that you have shown to me and I have endorsed my signature on it for having seen it. I agree with the answer stated by Mr. S. Chandrasekhar, General Manager (Finance), KMPL to Question No. 1 except in respect of Invoice No. 1404/14/000401 dt. 9.6.15 mentioned therein wher....
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.... only for the insurance policies sold, in the name of services which they had never provided? Ans. I have seen the print out shown to me and signed on it on token of seeing it. As already stated by me, the payouts given to the car dealers are arrived on the OD premium received. Hence there are no actual services as claimed in the invoices of the dealers. We follow the practice of sending such mails along with the payout statements and subsequently receiving hardcopies of corresponding invoices from the dealers and send them out Corporate Office as instructed by the Finance Dept of our Corporate Office." (emphasis added) Shri Venkatachalam Sekar is the Financial Controller holding a responsible post in the appellant-company and is also aware of the legal position of the statutes with which he is having his day-to-day work. He has not recanted his statement so far. The submission regarding the statements being taken using 'intimidating tactics' was an afterthought which was rightfully dismissed by the adjudicating authority in his order dated 23.12.2016. 41.3 After going through the averments of the appellant and the response by the department, I find that the....
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....pugned case were empowered to record a statement from the company officials and dealers, which shall be deemed to be recorded during a "judicial proceeding" within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860). That statements given before Customs Officers and by implication Central Excise Officers, investigating an offence is admissible as evidence has been stated by the Apex Court in Surjeet Singh Chhabra Vs Union of India [1997 (89) E.L.T. 646 (S.C.)] and many other judgments of Constitutional Courts. Even in the case of criminal proceedings, let alone departmental proceedings, it is for the person making a claim that a statement has been obtained by officials from him using 'intimidating tactics' etc to establish the same. Section 24 of the The Indian Evidence Act, 1872, which deals with matter relating to criminal proceedings and has more stringent safeguards, can be taken as a guide, runs as follows "Section 24 : Confession caused by inducement, threat, or promise, when irrelevant in criminal proceeding : A confession made by an accused person is irrelevant in a criminal proceeding, if the making of the confession appears t....
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....on of TV Sundaram Iyengar & Sons) g) Shri S. Shanmugasundaram, General Manager Finance, M/s. Chennai Auto Agencies h) Shri Shailendra Kumar, staff, Business Development, M/s Honda Cars India Ltd. i) Shri B. Balaji, Area Manager, M/s. Sundaram Motors It is seen that all the officials held middle and senior level positions in their respective organizations. They were not bereft of legal advice that such companies generally have. To say that they did not know the procedure to retract a statement appears incredulous. Being put under a recorded cross examination by legal representatives hired by the company, in a case involving a blame worthy act attributable to the company itself while being its employee, would be stressful. 41.7 Most of the answers of officials related to explaining the purpose of the documents and the nature of activity performed by them. Hence the statements could not have been dictated by the officials as they could not know the implication of details contained in the documents etc. What is also noted is that in spite of a large list of 25 activities that were to be performed by the automobile dealers as per the "Service Provider Ag....
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....der the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court." (emphasis added) It is seen that section 9D is relevant for the purpose of proving the truth of a fact, in any prosecution launched for an offence under the Central Excise act, 1944. The impugned order does not emanate from a proceeding of prosecution. A five judge Bench of the Apex Court by a majority decision in Thomas Dana vs The State Of Punjab, [1959 AIR 375] held that there is no escape from the conclusion that the proceedings before the Sea Customs Authorities under s. 167(8) (which was a pre-cursor to the Customs Act, 1962, a sister Act to the FA 1994 and CEA, 1944), were not "prosecution" within the meaning of Art. ....
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....e concerns the confiscation of the jewellery, whether at conveyor belt or at the green channel, perhaps the witnesses were required to be called. But in view of confession made by him, it binds him and, therefore, in the facts and circumstances of this case the failure to give him the opportunity to cross-examine the witnesses is not violative of principle of natural justice. It is contended that the petitioner had retracted within six days from the confession. Therefore, he is entitled to cross-examine the panch witnesses before the authority takes a decision on proof of the offence. We find no force in this contention. The customs officials are not police officers. The confession, though retracted, is an admission and binds the petitioner. So there is no need to call panch witnesses for examination and cross-examination by the petitioner." (emphasis added) Further the Apex Court in "Bishnu Prasad Sinha v. State of Assam" [AIR 2007 SUPREME COURT 848] held as under; "31. A confessional statement, as is well known, is admissible in evidence. It is a relevant fact. The Court may rely thereupon if it is voluntarily given. It may also form the basis of the conviction, wh....
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....d credit availed, is not duty as contemplated under the Finance Act 1994 (FA 1994). In accordance with section 106 of the Indian Evidence, the fact within the knowledge of a person must be proved as the burden of proof is cast upon him. Moreso, when he is confronted with documents and manner of working which are within his special knowledge. Section 106 of the Indian Evidence Act., 1872 gives statutory recognition to this universally accepted rule of evidence. 106. Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. White collar omissions and commissions can only be proved by documents and correspondence which has to be explained and decoded by officials who are in the know about it. When the appellant was required to discharge certain obligations as per an agreement, company officials will be in the best position to disclose and demonstrate that it was done in the manner agreed. This information has necessarily to be reduced to writing to help the investigators and later the proper officer to come to a conclusion on the happening or non-happening of an event. ....
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....t the 'commission' received from the appellant is recognized as income and accounted under the head 'Insurance Income'. 41.11 Secondly, in the statement recorded from the car manufacturer M/s. Ford India (FIPL) reveal that they have the following insurance companies as 'Preferred Insurance Companies' viz. The New India Assurance Company Limited, Bajaj Allianz General Insurance Company Limited, Royal Sundaram Alliance General Insurance Company Limited (appellant) and IFFCO Tokyo General Insurance Company Limited; that since they want uniformity of insurance services to their customers across the country, they have entered into an agreement with the insurance companies to mutually deliver the services mentioned in Annexure A of the agreement like Issue / Renewal of Insurance Policies, Claim processing etc. They only facilitate Insurance companies to have business through their dealer network and apart from this, there is no other service provided by them to the insurance companies. Hence even the car manufacturers were not providing the whole gamut of service to the appellant which is contrary to their agreement. 41.12 Revenue in their written submissions have invited attention....
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....icult for the insurance company to net, canvasses the purchaser of an insurance policy, helps in making the sale of the car insurance policy, enters the details available with them about the customer using the appellants IT support infrastructure in furtherance of the sale of policy, receives the insurance premium from the customers and takes a print out of the insurance policy to complete the sale of the policy and hand it over to the customer. Apart from this activity towards the sale of insurance policy to the customer, no other service activity is provided to the appellant which was listed in the agreement. 41.13 Shri Venkatachalam Sekar, Financial controller stated that they have entered into a tripartite agreement with M/s Ford (car manufacturer), M/s TBSSL and the car dealers. The 'payout' given by the appellant to car dealers of different car manufacturers is as under: Name of the car manufacturer Payout to the dealers Honda 22% on OD Premium Maruti 15 to 30% on OD Premium Tata 10 to 30% on OD Premium Renault 20% on OD Premium Ford 10 to 25% on OD Premium Piaggio 10 to 20% on OD Premium Ashok Leyland 10 to 30% on OD Premium....
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.... that the amount paid out by the appellant to the dealers are actually fixed as a percentage on the Own Damage (OD) premium collected by the dealers. That the payout details are collected by the appellants 'Central Payout Team' (CPT) located at their corporate office and the same is communicated to the car dealers for raising invoices on them (appellant). The CPT sends emails to their sales team which in turn sends it to the branch who then conveys the details to the car dealer through the Territory Manager of the branch. Based on this payout statement, the dealers issue invoices to the appellant for claiming payouts. The total payout to the dealers is exactly the same as that of 'data processing and policy servicing and related activities' shown in the invoice given by the dealers to the appellant since it is based on the appellants own payout statement. 41.15 The belief, knowledge and intention of the parties are a part of evidence. Documents do not always speak in a language understood by the layman. These are effectively brought to life through the statements of officials who are in the know of things. Based on this evidence the learned AA has to form his own conclusion. Whe....
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....er of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, that the input services on which CENVAT credit is sought to be taken has been received and is covered by the description given in the invoice which has been received and accounted for in the books of the appellant. It is for the recipient of the service / appellant to prove and satisfy the proper office in this regard. The SCN to the appellant is about this deficiency by the appellant to satisfy the proper officer. The principle that the burden of proof regarding the admissibility of CENVAT, while taking input credit, falls on the recipient is further made clear by Rule 9(5) of CCR, 2004. There cannot be a compromise regarding the actual receipt of service according to the description in the invoice, as discussed at para 40 below. 42.3 The mode and method of availing CENVAT credit is provided for in the CCR, 2004. Relevant portions of Rule 9 of the said Rules are extracted below; RULE 9. Documents and accounts. - (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the fol....
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....be a protective move, to be reversed and credit restored if the liability is made good by the supplier. Thus, the substantive liability falls on the supplier and the protective liability upon the purchaser. A mechanism must be put in place to address this situation." (emphasis added) The Hon'ble Apex Court too examined a similar matter in Civil Appeal No. 230 OF 2023 (Arising from SLP(Civil) No. 2572/2022) The State of Karnataka Vs M/s Ecom Gill Coffee Trading Private Limited. Though the above-mentioned case pertains to VAT/ Pre-GST regime, it's principles are squarely applicable under the Service Tax regime as well. It examines the relevance of the 'burden of proof' as per Section 70 of the KVAT Act, 2003, which is similar to Rule 9(5) of the CENVAT Credit Rules 1994, extracted above. Since the matter has been examined extensively along with contra arguments a major portion of the judgment is extracted below; 9. While considering the aforesaid issue/question, Section 70 of the Karnataka Value Added Tax Act, 2003 is required to be referred to, which reads as under: "70. Burden of proof.- (1) For the purposes of payment or assessment of tax or any claim....
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....es, such dealer/purchaser shall have to prove and establish the actual physical movement of goods, genuineness of transactions by furnishing the details referred above and mere production of tax invoices would not be sufficient to claim ITC. In fact, the genuineness of the transaction has to be proved as the burden to prove the genuineness of transaction as per section 70 of the KVAT Act, 2003 would be upon the purchasing dealer. At the cost of repetition, it is observed and held that mere production of the invoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as per section 70 of the Act, 2003. 10. Even considering the intent of section 70 of the Act, 2003, it can be seen that the ITC can be claimed only on the genuine transactions of the sale and purchase and even as per section 70(2) if a dealer knowingly issues or produces a false tax invoice, credit or debit note, declaration, certificate or other document with a view to support or make any claim that a transaction of sale or purchase effected by him or any other dealer, is not liable to be taxed, or liable to take at a lower rate, or that a deduction of input tax is available....
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...., the second Appellate Authority as well as the High Court have upset the concurrent findings given by the Assessing Officer as well as the first Appellate Authority, on irrelevant considerations that producing invoices or payments through cheques are sufficient to claim ITC which, as observed hereinabove, is erroneous. As observed hereinabove, over and above the invoices and the particulars of payment, the purchasing dealer has to produce further material like the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods including actual physical movement of the goods, alleged to have been purchased from the concerned dealers. 13. Now so far as the reliance placed upon Rules 27 and 29 of the Karnataka Value Added Tax Rules, 2005 and the submission on behalf of the purchasing dealers that under the provisions of the Rules 2005, more particularly under Rules 27 & 29, the only requirement is to issue the tax invoice and to produce the same and there is no other requirement is concerned, the aforesaid has no substance. Rule 27 cast an obligation on the dealers to issue ....
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....hich was confirmed by the first Appellate Authority. Both, the second Appellate Authority as well as the High Court have materially erred in allowing the ITC despite the concerned purchasing dealers failed to prove the genuineness of the transactions and failed to discharge the burden of proof as per section 70 of the KVAT Act, 2003. The impugned judgment(s) and order(s) passed by the High Court and the second Appellate Authority allowing the ITC are unsustainable and deserve to be quashed and set aside and are hereby quashed and set aside. The orders passed by the Assessing Officer denying the ITC to the concerned purchasing dealers, confirmed by the first Appellate Authority are hereby restored. 16. The instant appeals are accordingly allowed. However, there shall be no order as to costs." (emphasis added) The principle flowing from the above judgement as applicable in the present context is very lucid and emphatic. The burden of proving to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, the correctness of CENVAT credit sought to be claimed/ availed, as per proviso to Rule 9(2) ibid, remains upon the ou....
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....take, such an order does not confer any legal right on others to get the same relief as well. If a wrong is committed in an earlier case, it cannot be perpetuated." (emphasis added) Further, in The State of Odisha v. Anup Kumar Senapati [2019 SCC Online SC 1207] the Supreme court observed as follows: "If an illegality and irregularity has been committed in favour of an individual or a group of individuals or a wrong order has been passed by a judicial forum, others cannot invoke the jurisdiction of the higher or superior court for repeating or multiplying the same irregularity or illegality or for passing a similarly wrong order. A wrong order/decision in favour of any particular party does not entitle any other party to claim benefits on the basis of the wrong decision." Hence even if there has been no action on the dealer, that benefit cannot be relied upon as a principle of parity or equality by the appellant. No inference can be drawn from the alleged and unsubstantiated claim of inaction against the car dealers, even if it is found true. Their plea in this regard fails. 44.A The appellant submits that they are eligible to avail and utilize the CENVAT....
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....taxation. 45. The issue is no longer res integra and stands settled by the adjudicating authority in the case of M/s. Cholamandalam MS General Insurance Company Limited. 45.1 The appellant submits that the very same issue was the subject matter of dispute in the Show Cause Notice No. 309/2011 (C) dated 24.10.2011 issued to M/s. Cholamandalam MS General Insurance Company Ltd. This Show Cause Notice alleged that additional amounts over and above the permitted IRDA commission were being paid on the basis of 'referral agreements'. Since the department has also not filed any appeal against these findings and as such they have attained finality. In the above circumstances, the issuance of present Show Cause Notice is not sustainable in any manner and the same merits to be dropped. During the oral submissions made they have further referred to the judgments listed below in their favour; a. Modular Auto Ltd. Vs. CCE, Chennai reported in 2018 (8) TMI 691 Madras High Court b. Commissioner of Income Tax Vs. Walchand & Co. Ltd. reported in [1967] 65 ITR 381 (SC) c. Sarvesh Refractories (P) Ltd. Vs. CCE, Chennai reported in 2007 (218) ELT 488 (SC) d. CC....
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....tioned in the hand of service receiver (appellant in this case) (emphasis added) The matter examined by the Hon'ble High Court relates to a question where the payment of service tax by the appellant for the service rendered by service provider was not in dispute. The issue here is of an activity which was not a taxable service rendered to the appellant as mentioned in the invoice, which is in dispute. Moreover, the question of law pertaining to the 'burden of proof' cast on the recipient of service before availing credit, as in Rule 9(5) of the CCR, 2004, was not an issue before the Hon'ble High Court. This principle, which is relevant to the present case, has been examined later by the Apex Court in The State of Karnataka Vs M/s Ecom Gill Coffee Trading Private Limited (supra) under Section 70 of the KVAT Act, 2003, which is similar to Rule 9(5). Similarly, an important principle was stated by a Coordinate Bench of the Hon'ble Madras High Court in its later judgment in Pinstar Automotive India Private Limited v. Addl. Commissioner CGST & CE and referred to in para 42.3 above. The Hon'ble Court while examining an issue under section 16 Of the Central Goods and Services ....
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....tax under 'Business Support Services' on infrastructure support services provided to insurance companies and the same was upheld by this Hon'ble Tribunal. That being the case, there is no merit in stating that the no services, as described in the dealer's invoices, have been provided to the Appellant in the present case. I find that each case is decided on the peculiar facts involved. The dispute in the said case was the classification of the service either as 'Insurance Auxiliary Service' as claimed by the appellants who were corporate agents of a insurance company and 'Business Support Service' as claimed by the department. In the present case the question is not with regard to the classification of a service provided by a person holding himself to be a corporate agent of an insurance company. Hence the judgment is distinguished. In 'Automax' (supra) the issue related to the issue was the discrepancy in description of the goods not being a reason to deny CENVAT credit in the facts and circumstances of the case. They are not similar to the appellants case, as can be seen from the discussions above and are hence distinguished. In 'Poornam Info Vision' (supra) and 'M/s Cable Vision'....
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....ally not been provided by the dealers to the appellant and thus, CENVAT Credit is not eligible. 7.1 Though in the Show Cause Notice the main allegation is that the description of services in the documents on which credit has been availed is not correct, at the time of adjudication, the main finding is that no services have been provided by the dealers to the appellant and that therefore credit is not eligible. At this juncture, it needs to be pointed out that the Department has no dispute with the Service Tax collected from the appellant by the dealer and remitted to the Government. The assessment of Service Tax paid at the dealer's end has not been disturbed/questioned by the Department; only the credit availed at the service recipient's end has been questioned by issuing the present Show Cause Notice. 7.2 If the Department contends that no service has been provided, the crucial question arises as to why Service Tax was collected from the dealer. The discussion by the Original Authority at paragraph 37 countering this argument is as under : "37. As regards their contention in Para N.1 to N.7 that if no service is provided by the Dealer there is no requir....
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....eligible by the department. I find that neither Section 73A(2) of the Finance Act, 1994 nor the Apex Courts decision in 'Mafatlal Industries' was brought to the notice of the Hon'ble Tribunal. Similarly, neither was Rule 9(5) of the CCR, 2004 or the Apex Courts judgment in 'M/s Ecom Gill Coffee Trading' (supra) brought up for discussion and consideration by the contesting parties before them and if done, it was not discussed. Further there is nothing in the proceedings to show that no action has been taken against the car dealers as stated by the appellant here and even so a wrong committed by another person cannot be perpetuated or equality of action/ parity sought. Hence the decision was rendered considering only the peculiar facts and limited law relating to the matter. In this context in D.P. Chadha vs Triyugi Narain Mishra, [(2001) 2 SCC 221], the Hon'ble Supreme Court, held as follows; "26. A lawyer must not hesitate in telling the court the correct position of law when it is undisputed and admits of no exception. A view of the law settled by the ruling of a superior court or a binding precedent even if it does not serve the cause of his client, must be brought to th....
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....ollowed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it." 12. This aspect has been highlighted in Collector of Central Excise, Calcutta v. M/s. Alnoori Tobacco Products and Anr. [Civil Appeal Nos. 4502-4503 of 1998 decided on 21-7-2004]." 46. Availment of CENVAT credit by the appellant on the basis of irregular invoices without signature, issued by the automobile manufacturer viz. Honda Cars India Ltd. 46.1 The appellant has submitted that the invoices are system generated and hence do not require signature. The signature of the service provider could not be affixed as the invoice was system generated and sent over electronic means. Rule 9(2) of the CENVAT Credit Rules, 2004 which deals with documents on the basis of which CENVAT credit can be claimed states that if the DC/ AC of Central Excise is satisfied that the documents have been received and accounted for in the books of accounts he may allow the CENVAT credit. Hence this contravention is if at all a procedural d....
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....ed to the jurisdictional Deputy Commissioner or Assistant Commissioner, complete details shall be submitted afresh within fifteen days of such change. (ii) Every assessee already using digital signature shall intimate to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise the above details within fifteen days of issue of this notification. 3. Every assessee who opts to maintain records in electronic form and who has more than one factory or service tax registration shall maintain separate electronic records for each factory or each service tax registration. 4. Every assessee who opts to maintain records in electronic form, shall on request by a Central Excise Officer, produce the specified records in electronic form and invoices through e-mail or on a specified storage device in an electronically readable format for verification of the authenticity of the document and the request for such records and invoices shall be specified in the letter or e-mail by the Central Excise Officer. 5. A Central Excise Officer, during an enquiry, investigation or audit, in accordance with the provisions of section 14 of the Central E....
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....nanciers. These two activities itself reveal the importance and value of an invoice. In daily life no person, including the appellant, would be prepared to freely allow the bank to encash a cheque even for a paltry amount, bearing the company's name if it is not signed by an authorized representative. There is no reason why government finances and tax payment should be handled differently and in a cavalier manner. A signature placed on an invoice physically or digitally inculcates faith in the document and gives it credibility and value in matters of taxation, business operations and day to day transactions. Dishonesty in the issue of such an instrument is an offence under relevant statutes. It is on the basis of this trust that day to day business thrives. The menace of fake invoicing and its deleterious effect on the economy is well known. Rule 4A of Service Tax Rules, 1994 (STR 1994) has to be understood in this context. The Rule itself makes it mandatory that the invoice is signed by a person providing taxable service or a person authorized by him in respect of such taxable service. In The State of UP. & Ors. v. Babu Ram Upadhya [(1961) 2 SCR 679(CB)], it was observed by the Ap....
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....ssuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of output service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit. (emphasis added) It is necessary to examine every word of a statute in its context, more so considering the instant liquidity given by the said document when taken into the books of account. A easy facility far removed from the rigors and checks involved in getting a loan from the bank. In the light of the mandatory provision for affixing of signature under Rule 4A of STR, 1994, which is the heart of the Rule, proviso to Rule 9(2) of the CCR, 1994 which creates an exception to the main rule cannot be seen to be controlling the main provision. In case a conflict among the Rules is perceived, then as per the Apex Courts judgment in Commercial Tax Officer, Rajasthan Vs M/s Binani Cement Ltd & Anr. ([2014] 3 S.C.R.1), when ....
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....the Rule. In the instant case the position becomes even more adverse as the appellant has been found indulging in blame worthy conduct. 46.5 Further it is observed that Notification No. 18/2015-Central Excise (N.T.), Dated 01/07/2015 while specifying the safeguards and procedures for issue of digital invoices lays out more stringent conditions, like use of only Class 2 or Class 3 Digital Signature Certificate duly issued by the Certifying Authority in India, preservation of appropriate back up of records in electronic form for a period of 5 years, document modification history, access to key information from the signature panel and acceptance of signer post verification of necessary particulars etc. Hence the appellants plea that the error is only procedural and hence credit may be allowed, cannot be accepted and fails. 46.6 With regard to the case laws cited by the appellant and mentioned at para 46.1 above, it is to be stated that Tribunals cannot legislate or amend the Rule. Statutory authorities also cannot pass a general order that militates against / or nullifies the specific provisions of the Rules for all times. It is seen that the orders are cryptic and do not examin....
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....of IRDA principles. From the statements of the personnel of the dealers, the department has concluded that the payment made to the dealer by the appellant constitutes "commission" and therefore, since the appellant is in violation of the IRDA regulations in this regard, there is no separate service provided by the dealer, therefore, the credit of the same is not available to the appellant. The appellant submits that the service tax department cannot act as regulator for other laws in force. In the present case, the service tax has been discharged on the invoices raised by the dealers in this case. However, the violation of the IRDAI regulation, if any, cannot be a ground for denying the credit otherwise available to the appellant. Without prejudice, the illegality of a transaction does not determine or alter its tax implications. Therefore, the credit is available to the appellant in the present scenario. The appellant has further submitted that the IRDAI itself issued a letter dated 12.8.2015 wherein the said authority stated that they have notified 'Guidelines on Outsourcing activities' in February 2011 in terms of which all other activities which support the core activities (suc....
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....e maximum commission fixed by IRDA is 10% of OD premium and the payout are far more, hence they cannot bill the amount as commission. That the car dealers are not authorized to sell the car insurance policies according to IRDA however there is no separate sale of insurance policies to car customers because it is automatically sold with the sale of the new car as price of insurance is inbuilt in the 'on road price' of the car. This statement was recorded while the official was confronted with documentary evidence and cannot be ignored. 48.4 Any person, let alone an officer of the tax department, aware of the commission of an offence or intention thereof, including an economic offence, is duty bound to give information to the authorities concerned. I find that the allegations made by Revenue were meant in that direction and to show that the huge payouts by the appellant to the car dealers were not on account of 'Data Processing and Policy Servicing and related activities'. I find that Revenue has succeeded in this limited objective. It does not make them a super regulator. To find whether the amounts paid by the appellant to car dealers were within or in violation of IRDAI guideli....
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....entitled to avail and utilize credit of service tax paid on various input services for the reasons mentioned in this reply. Hence, allegation of suppression of facts with intention to evade is erroneous. They have relied upon the judgments (i) 'Shreeraj Panmasala Pvt. Ltd.' (supra) to state that when Revenue has not collaborated its allegations with sufficient reliable evidence, the allegations have no legs to stand on, in (ii) 'Continental Foundation Jt. Venture' (supra) to state that the expression 'suppression' has to be construed strictly. There cannot be suppression that is not willful, and (iii) Padmini Products Vs. Collector of Central Excise (supra), to state that fraud, collusion, willful mis-statement postulate a positive act and mere non observance of Rules etc. will amount to a failure under the provision. 49.2 Revenue submitted that the appellant is on a wrong footing that the demand proposed in the SCN and confirmed by the AA in the impugned order is interpretational in nature, inasmuch as, it is a case of well pre-planned and pre-meditated act of multiple offence involving fraud, collusion and suppression of facts committed by the appellant. Revenue submits that e....
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....le to avail CENVAT credit, and as the issue is technical in nature, no penalties can be imposed. 50.2 This averment has been contested by Revenue. Once it is found that the issue involves any one of the ingredients like fraud, collusion, suppression of facts etc with intention to evade payment of duty, penalty has to be imposed as has been correctly done in the impugned order. 50.3 The discussions above show that the appellant has wrongly and knowingly availed of CENVAT credit for which he was not eligible. It is a general principle of law that a person ought not to be able to profit from his or her own wrong. The use of legal instruments to subvert law was examined by the Hon'ble Supreme Court in Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana & Anr., [(2012) 1 SCC 656]. The Hon'ble Court in that case felt that whatever be the intention, the consequences are disturbing and far reaching, adversely affecting the economy, civil society and law and order. It is felt that a similar situation will prevail if tax laws are subverted by using colourable legal devices like tailor made agreements meant to serve as a legal cover for blame worthy conduct. Hence penalty was correct....
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....tful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently. Section 11A, however allow the assessees in default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases where the non-payment or short payment etc. of duty is by reason of fraud collusion etc. are dealt with under sub-section (1A) of section 11A and the cases where the non-payment or short payment of duty is not intentional under sub-section (2B). 10. Sub-section (2B) of section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under section 11AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to h....
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....ice tax is collected with reference to the value of service. As a necessary corollary, it is the value of the service which is actually rendered which is to be ascertained for the purpose of calculating the service tax payable thereupon. Any other amount which is calculated not for providing such taxable service, in this case the 'service' as declared in the invoice, cannot be a part of that valuation as that amount is not calculated for providing such 'taxable service'. G) As per Section 73A(2) of the FA, 1994, even if the tax is not liable to be collected from a person, if collected, the collected amount has to be paid to the credit of government. This does not mean that department has accepted the taxpayer's assessment and that the actions of the taxpayer have been ratified. H) Any 'tax' collected, retained or not refunded by the department in accordance with the provisions of a statute must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Hence any excess money collected as tax and paid to government is seen to have been retained under the authority of law. I) The Finance Act, 1994, is a self-contained....
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....ments that they have no option but to pay the 'payouts' to the car dealers due to their agreement with the car manufacturers and that there is no separate sale of insurance policies because it is automatically sold with the sale of the new car as the price of the insurance is in-built in the 'On Road Price' of the car. O) It is relevant to note that the Service Charge paid to infra- companies for their service is in the range of 1.75 to 4% of OD premium and the dealer, who cannot recall having provided any service activity as per the agreement, to the Insurance Company gets paid a percentage between 10 to 55 % on the OD premium amount for the insurance policies booked, allegedly for providing 'services'. These cannot be held to be genuine consideration towards transactions for 'data processing and policy servicing'. When examined in totality the payments do not satisfy the test of what a reasonable person of ordinary prudence would do while hiring services. They signify something more. P) What monies were received by the car dealers' based on invoice prepared and sent to them by the appellant was not the fruit of a taxable activity as declared in the invoice. In s....
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....illegal gains are to be taxed at the hands of those who financially gained from these actions. However, in the case of Indirect Taxes where the burden of tax rests on the final consumer, while those who perpetuate the illegality are beneficiaries of the illegal monies collected as 'tax' - due to input credit schemes meant to neutralize the cascading effect of tax - needs to be tested against the legal principle that a person ought not to be able to profit from his or her own wrong. U) The entire scheme as unraveled by Revenue points to fraud, collusion, willful misstatement in the invoices at the behest of the appellant and suppression of facts by contravention of the Act and the Rules made thereunder with intention to evade payment of duty, using ineligible credit. The blame worthy act by the appellant is deliberate and with the intent to enrich themselves unjustly at the cost of the car customer who bears the ultimate incidence of the 'non-tax'. The matter could not have been unraveled by supervisory checks of the jurisdictional Division / Range staff and without an in-depth investigation by departmental officers based on documents, agreements and statements from officia....