CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, Ahmedabad
COURT
Appeal No. : ST/360/2010-DB
Arising out of : OIO No.08/VDR-II/STAX/GNFC/COMMR/2010,
dt. 28.05.2010.
Passed by : Commissioner,
Central Excise, Customs & Service Tax, Vadodara-II.
For approval and signature :
Mr. M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No
2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No
3 Whether their Lordships wish to see the fair copy of the Order? Seen
4 Whether Order is to be circulated to the Departmental authorities? Yes
Appellant (s) : M/s. GNFC Ltd.
Represented by : Shri S.R. Dixit (Advocate)
Respondent (s) : C.C.E. & S.T. Vadodara-ii
Represented by : Shri Alok Srivastava (A.R.)
CORAM :
Mr. M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
Date of Hearing: 17.07.2014
Date of Decision: 31.07.2014
ORDER No. A/11437/2014, dt. 31.07.2014
Per: Mr. M.V. Ravindran;
This appeal is directed against OIO No.08/VDR-II/STAX/GNFC/COMMR/2010 dt. 28.05.2010.
2. The relevant facts that arise for consideration are the appellant herein is a registered service provider engaged in providing taxable services such as online information and data base access and / or retrieval services . The appellant is discharging the appropriate service tax liability on such services. The appellant are also providing services of digital signature certification on which service tax liability was not applicable as per the CBEC circular no.137/76/2008-CX(4), dt. 05.06.2008. The appellant has been availing benefit of Cenvat Credit of the service tax paid on various input services which are used by them for providing taxable service as well as non-taxable service. The appellant has not maintained separate accounts in respect of receipt, consumption and inventory of input services used in both the categories. It was noticed by the lower authorities that appellant utilized whole of the Cenvat Credit of service tax towards payment of service tax liability on the taxable output services while they were eligible to use only 20% of the amount of service tax payable from Cenvat Credit. This contravention was noticed by the lower authorities for the period of October 2005 to September 2007. Show cause notice dt. 21.12.2009 was issued to the appellant directing them to show cause as to why the demand of an amount of Rs.51,85,498/- be not raised on them alongwith interest and penalties be not imposed for improper utilization of Cenvat Credit in excess of 20% as provided under provisions of Rule 6(3)(c) of Cenvat Credit Rules, 2004. The appellant before the issuance of show cause notice paid off the entire duty liability and the interest thereof in cash and submitted detailed reply to the adjudicating authority contesting the issue on merits and on limitation. The adjudicating authority after following the due process of law upheld the demand raised alongwith interest and imposed penalties under Section 76 and 78 of the Finance Act, 1994 and also extended the benefit of payment of 25% of the amount of tax confirmed as provided under Section 78 of the Finance Act, 1994. Aggrieved by such an order the appellant is before us.
3. Ld. Counsel appearing on behalf of the appellant would submit that the provision of digital signature certification is not a service which cannot be considered as an exempted service as the said service is not taxable is the view which has been expressed by the CBEC in their circular dt. 05.06.2008. He would draw our attention to the definition of exempted services and submit that it would not encompose the services which are non-taxable as taxable services stand defined under various sub-clauses of Section 65(105). He would submit that when the services digital signature certification is not liable to levy itself would mean it is not a service which can be called as exempted services. It is his submission that by applying the maxim ejusdem generis or noscitur a socii the word service used in the definition of exempted services in the second limb has to be read with taxable service. It is his submission that various case laws though pertaining duty of central excise would support his case. He relies on:
(a) Siddeshwari Cotton Mills (P) Ltd. Vs. Union of India & Anr. 1989 (39) ELT 498 (SC),
(b) CCE, Bombay Vs. Maharashtra Fur Fabrics Ltd. 2002 (145) ELT 287 (SC),
(c) Oswal Agro Mills Ltd. Vs. CCE 1993 (66) ELT 37 (SC),
(d) Rohit Pulp and Paper Mills Ltd. Vs. CCE 1990 (47) ELT 491 (SC),
(e) Commercial Taxes Officer, Anti Evasion, Circle-II, Jaipur Vs. MRF Ltd. 2009 (235) ELT 802 (Raj.).
4. He would also submit that the entire demand is time barred as appellant has been filing the monthly returns with the authorities and various audit took place and there is no question of evasion of service tax liability in as much as, they had paid the tax through their Cenvat Credit available to them and it is not the case of the revenue that there were no balances in the Cenvat Credit account. It is also his submission that since the entire demand is hit by limitation, no penalties are liable to be imposed. It is his final submission that appellant having paid the entire amount through cash, the Cenvat Credit which he has already debited during the relevant period should be allowed as credit to the appellant.
5. Ld. Departmental Representative on the other hand would submit that the issue is now fairly settled by the Hon ble High Court of Rajasthan in the case of Vodafone Digilink Ltd. Vs. CCE, Jaipur-II 2013 (29) STR 229 (Raj.). After taking us through the facts of the case, and the facts of the case in Vodafone Digilink Ltd. Vs. CCE, Jaipur-II, he would submit that facts are similar and there is no difference. It is his submission that the adjudicating authority was correct in coming to a conclusion that the appellant should be penalized. He reiterates the findings of the adjudicating authority.
6. In rejoinder, Ld. Counsel would submit that in the case of Vodafone Digilink Ltd. Vs. CCE, Jaipur-II (supra) relied upon by the revenue, there is a specific finding of the Tribunal as well as Hon ble High Court that the appellant had devised a scheme deliberately to evade tax liability and hence the ratio of that case would definitely apply in that case.
7. We have considered the submissions made at length by both sides and perused the records.
8. At the outset, we would like to record the undisputed facts that the appellant is registered with the authorities for discharge of service tax liability on a specific output services provided by them. They are also availing the benefit of Cenvat Credit of the service tax paid on input services. It is also undisputed that the appellant had paid the entire amount of the demands which are confirmed by them through PLA as also through their RG-23A are to account.
9. On perusal of the records, we find that the appellant has used the entire Cenvat Credit for discharge of the service tax liability on the output services during the period October 2004 to September 2007; wherein during the period they were supposed to use only 20% of the amount of the Cenvat Credit. This provision is very clear from reading of Rule 6(3)(c) of the Cenvat Credit Rules, 2004. To that extent, we find that the appellant has contravened the provisions of the Cenvat Credit Rules, 2004. We also find that the appellant has discharged an amount of Rs.51,85,498/- through PLA as also the interest of Rs.20,85,851/-.
10. We find that the main defense of the Ld. Counsel is on limitation. On perusal of the records, we find that this defense of the Ld. Counsel may not carry their case any further as they have not clearly indicated by any correspondence to the revenue as to provision of the digital signature certification services.
11. In our considered view, the adjudicating authority has correctly come to the conclusion that appellant is required to pay the amount of Rs.51,85,498/- through PLA.
12. Since the amount is payable through PLA the interest charged on the said amount is also correctly appropriated by the authority.
13. At the same time, we find strong force in the contentions raised by the Ld. Counsel that the amount of Rs.51,85,498/- paid by the appellant through PLA / cash is over and above the same amount which has been debited by them during the period October 2004 to September 2007 in their Cenvat Credit account. We direct the lower authorities to allow the appellant to avail Cenvat Credit of an amount of Rs.51,85,498/- as appellant has made good the said amount by paying it in cash.
14. As regards the penalties imposed, we find that during the material period, there could be a confusion in the mind of the appellant as to whether digital signature certification services rendered by them would get classified under the category of exempted services or not. It is seen from the records that the authority i.e. office of controller of certifying authorities had specifically informed the appellant herein that the services rendered by them would not fall under the category of taxable service either under business auxiliary services or business support services. Appellant could have entertained a bonafide belief as to that a non-taxable services would not fall under the category of exempted services . In any case, we find that appellant could not be charged with intentional evasion of service tax liability by utilizing excess amount of the Cenvat Credit for discharging service tax liability, in as much that there is no dispute that appellant had sufficient balance in the Cenvat Credit account. It is settled law that any amount debited in RG-23A Part-II or Cenvat Credit account tantamounts to discharge of tax liability. In our considered view, the penalties imposed by the adjudicating authority under Section 76 and 78 of the Finance Act, 1994, are very harsh and unwarranted, in the peculiar facts and circumstances of this case. Keeping in mind that the appellant is subsidiary of a Government of Gujarat undertaking and also noting that appellant could have had a bonafide belief that the digital signature certification services would not fall under the category of exempted services, by invoking provisions of Section 80 of the Finance Act, 1994, we hold that appellant has made out a reasonable and justifiable cause for setting aside the penalties. Invoking provisions of Section 80 of the Finance Act, 1994, we set aside the impugned order which visits the appellant with penalties under Section 76 and 78 of the Finance Act, 1994.
15. The appeals are allowed to the extent as indicated hereinabove with consequential relief, if any.
(Pronounced on 31.07.2014)
(H.K. Thakur) (M.V. Ravindran)
Member (Technical) Member (Judicial)
