2018 (9) TMI 1515 – CESTAT CHENNAI – TMI – Demand of service tax – Reversal of Cenvat Credit – Scope of SCN – Non-speaking order – main grievance of the department is that the impugned order is a non-speaking order without giving detailed findings either to support or counter the arguments of the noticee but has simply confirmed demands proposed in the notice and the statement of demand – principles of natural justice – Held that:- The SCN had alleged in para 5.1 that “value of goods (sold during taxable service) is to be included in the gross value of taxable service under section 67 of the Finance Act, 1994”. The same paragraph also alleges that “assessees are liable to pay an amount of 5% of gross value of exempted service as per explanation 1(a) to rule 6(3) and 6(3A) of CENVAT Credit Rules, 2004 – These are the only two alleged infractions raised in the show cause notice. There is no other allegation or infraction that has been brought out in the show cause notice dated 11.6.2013
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the adjudicating authority has chosen to apply the facts of the case to the said circular dated 23.8.2008, particularly, when the said circular pertains to a period prior to the amendment introduced under Rule 2(e) of CENVAT Credit Rules, 2004 amplifying the definition of exempted service to include “trading”.
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It is evident that the order of the adjudicating authority has not addressed the allegations and concerns raised in the show cause notice but has instead veered off into other areas which have not been alleged in the notice or in the statement of demand – Thus, the adjudicating authority has not given any speaking order based on the allegations and charges proposed in the notice / statement of demand.
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The impugned order not having addressed the allegations in the show cause notice but having only confirmed the proposed demands on other grounds cannot be sustained – case remanded for fresh adjudication based on the allegations and charges made out in the show cause no
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credit they have opted to pay 5% of tax in the gross profit on the trading activity as per Rule 6(3) of the CENVAT Credit Rules, 2004; and They will be availing credit for all the input services, except certain input services if used for exclusively rendering any exempted services. 1.1 Vide another letter Ref. CO/ST/44 dated nil, the assessees clarified that they at arrived 5% of difference between sale price on the cost of goods sold, which may be called as gross profit; that in their goods the difference between sale price and cost of goods sold is more than 10% of cost of goods; that such computation was done as per Explanation (C) to Rule 6(3) of CENVAT Credit Rules, 2004 vide Notification No. 13/2011-CE (NT) dated 31.3.2011. In response, the jurisdictional Assistant Commissioner vide letter dated 29.12.2011, informed the assessees to pay an amount equal to 5% on taxable value determined under Section 67 of the Finance Act, 1994 i.e. 5% of the gross value of the franchisee service
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nvolving painting, tinkering and repair of accident vehicles. They further pointed out that the entire consideration including the cost of materials, consumables and labour is offered to service tax, being a works contract. They have neither claimed exemption nor cleared the goods as non-taxable sale transaction. Having paid service tax on the entire value, the question of applying explanation 1(C) to Rule 6(3) for these transactions does not arise; and They also render pure labour and service contracts which do not involve any transfer or sale of materials. Service tax has been remitted on the entire labour cost and here again Explanation 1(C) to Rule 6(3). The assessee concluded that the request to pay a sum equal to duty for the entire sales turnover, is clearly impermissible and is sought to be re-assessed. They do not have any other transaction at present to be governed by explanation 1(C) to Rule 6(3) and Thus, the request to pay a sum equal to duty for the entire sales turnover
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ng of goods, but is actually sale of goods in the course of providing taxable services (franchisee service and servicing of motor vehicles) 1.4 In view of the above, it appears that the value of such goods (sold during the course of providing taxable services) is to be included in the gross value of taxable services under Section 67 of the Finance Act, 1994 and that the assessee are liable to pay an amount of 5% on gross value of exempted services as per Explanation 1(a) to Rule 6(3) and 6(3A) of CENVAT Credit Rules, 2004 read along with Rule 2(e), in addition to payment of 5% on gross profit on trading activity as per Explanation 1(C) to Rule 6(3) and 6(3A of CENVAT Credit Rules, 2004. 1.5 On such basis, the show cause notice proposed demand of an amount of ₹ 95,94,743/- as service tax liability for the period April 2011 to March 2012 with interest thereon and also for imposition of penalties under various provisions of law. For subsequent period, April 2012 to June 2012, statem
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words, whether value of goods sold which are used or consumed in the course of providing taxable service could be excluded for the purpose of computing taxable value of service iii) Whether in the facts of this case the appellants over and above the payment of 5% of the value of the exempted service namely trading, should include the same in the value of taxable service and whether the benefit of the Notification No. 12/2003-ST can be denied? Whether Commissioner was right in demanding over and above 5% / 6% payment on value of exempted service calculated as per explanation 1(C) to CENVAT Credit Rules 6(3D) and again demanding separately 5% or 6% on the gross profit on sales? iv) Whether in the facts and circumstances of the case amount demanded with interest can be sustained. v) Whether in the facts and circumstances of the case penalty under Rule15 can be sustained. 1.6 Department has also come in appeal against the impugned order before this forum in Appeal No.ST/42339/2015 primaril
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different. It is seen that the notice had sold spares during the course of provision of taxable services namely MRS as is evident from the sample invoices available in the file wherein TVS had indicated the same vehicle registration number which was serviced in the sale invoice also thus connecting the sales to the services provided by them. In respect franchisee service also the franchise was given for servicing of motor vehicles under the brand name of TVS and the spares required for such service were also sold by TVS. Thus in respect of both types, the sales has a direct connection to the services rendered by TVS and so the value of such goods sold would form part of the gross value of service in terms of Section 67. But as there is clear evidence in the invoice to show that the goods were sold and that there was no evidence on record to show that they had availed CENVAT on such goods by TVS, the value of such goods sold during the course of provision of services were eligible for t
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r fresh adjudication. 2. On the date of hearing, on behalf of the assessee, ld. Senior Advocate Shri N. Venkataraman put forth various arguments and contentions which can be broadly summarized as under:- (a) The assessees are engaged in following activities:- (i) Buying and selling parts as pure trading activity (ii) Indivisible works contract for vehicles (iii) Pure labour and service contract when sale of materials (iv) Divisible contract of goods and rendition of servicing. There is no controversy in respect of these activities except in relation to that involving divisible contract of goods and servicing. (b) The appellant themselves only had informed the department vide their letters dated 1.12.2011 and 8.3.2012 regarding the various types of activities done by them and also in particular regarding the manner of reversal of CENVAT credit taken in respect of such contracts. (c) The adjudicating authority instead of providing arguments as to why the method adopted by TVS for payment
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dated 01.03.2003 and that the values of materials sold by them were to be added to the taxable value of services under MRS/FRA services. (d) The show cause notice itself contains contradictions. On one hand, the notice alleges that traded as sold and exempted, and at the same time, the notice also alleges that the value of service should include value of materials sold also. (e) The notice treats sale as other than trading and accordingly seeks to recover an amount equivalent to 5% of value of sale without giving any benefit of abatement. 2.1 In response to further letter from department appellant had vide their letter dated 5.1.2012 clarified inter alia that in respect of sale of products, they are paying 5% on different between sale price and the purchase price, that no input credit is taken and hence no duty is payable. 2.2 In reply to the show cause notice, the appellant had inter alia made the following submissions:- 2.3 The following are some of the submissions taken by the appe
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terials and by virtue of the notification mentioned above, in cases of works contract service, only the service portion of the contract is taxable. Therefore the demand that the appellants ought to pay tax on the entire value including the value of materials sold is not acceptable. (v) The greatest contradiction in the subject notice is that on one hand the notice seeks to include value of the parts sold in taxable value of taxable services and at the same time treats such sale as exempted service. (vi) The appellants vide their reply to the Statement of Demand submitted, in addition to the grounds in their reply to Show Cause Notice, the following:- (vii) The officer has not taken into consideration the letter written to the Deputy Commissioner dated 30.012014 before issuing the statement of demand wherein the case of Ketan Motors td (v) CESTAT, Nagpur was enclosed, in which it was held that, if a transaction involves only sale of parts, question of levying service tax would not arise
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f the impugned order in denial of the notification benefit 12/2003-ST dated 10.03.2003 wherever it is applicable, by wrongly interpreting the activity of sale of spare parts as other than sale and also wrongly presuming that credit was taken on inputs which is not factually so. Therefore the finding at Para 18 of the impugned order is also not tenable. Submission made in earlier paragraphs may be taken into consideration in this context. (x) In para 19 of the impugned order, the Commissioner contradicts the reasoning adopted for the demands in question. On the one hand, he gives a finding that the appellants are indulging in trading activity independent of any taxable service e and therefore they are required to pay an amount of 5% on the value of exempted service and at the same time he gives a finding that in addition to the payment of 5% of the gross value of exempted service the appellants should also pay 5% of the gross profit of the trading activity. On the one hand, Commissioner
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ence the reasoning adopted by the commissioner in para 21 based on alleged bifurcation of value of services and goods is also not correct. (xii) In para24 of the impugned order the Commissioner has totally misunderstood the entire concept of sale and service and inclusion of sale value of the goods in the taxable value of service because of his wrong presumption and assumptions and basis which have already been refer to by the appellants in the grounds of appeal. The appellants have also aggrieved that, inspite of various decisions cited before him, Commissioner has not considered any of the said decisions. (xiii) Even otherwise, the whole issue is one of the interpretation of law and rules and Appellants genuinely believed that they had compiled with provisions of Cenvat Credit Rules and provision relating to valuation. (xiv) Therefore for the above reasons the resort to Cenvat Credit Rule 15 for the imposition of penalty is improper, illegal and unsustainable. 3. On the other hand, l
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No. 96/7/2001 ST dated 23.08.2007, citing examples of invoices raised by the notice and discussing the provisions of section 67 of the act and concluded that the Assessee was not eligible for the exemption under Notification N12/2003 ST dated 1.03.2003 and that the value of the materials sold were to be added to the taxable value of services under MRS/FRA services. 3.2 It could be seen from the notice and the documents available on file that the facts were quite different. It is seen that the notice had sold spares during the course of provision of taxable services namely MRS as is evident from the sample invoices available in the file wherein TVS had indicated the same vehicle registration number which was serviced in the sale invoice also thus connecting the sales to the services provided by them. In respect franchisee service also the franchise was not given for servicing of motor vehicles under the brand name of TVS and the spares required for such service were also sold by TVS. T
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CR read with the above definition of exempted services provided under cause (e) of Rule 2 of CCR. The AA has not given any findings either to support this aspect or counter the arguments of the notice and has simply confirmed the demands proposed in the SCN & SOD. Therefore the Order of the AA is a non-speaking order. 3.4 Hence it is very obvious that the order passed by the Commissioner is not legal and proper and is not a speaking order and has not apprised the issues actually raised in the relates show cause notice. Hence, the impugned order may be set aside and the appeal remanded to the Commissioner for denovo adjudication. 4. Heard both sides. 5. We first take up the appeal of the department. The main grievance of the department is that the impugned order is a non-speaking order without giving detailed findings either to support or counter the arguments of the noticee but has simply confirmed demands proposed in the notice and the statement of demand. We find that the show ca
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e. There is no other allegation or infraction that has been brought out in the show cause notice dated 11.6.2013 are for that matter in the statement of demand dated 23.4.2014. 5.1 We find that the adjudicating authority in the impugned order dated 30.6.2015 has framed the issue in para 17 as under:- Now the question is whether the value of the goods sold (traded) during the course of providing taxable services is to be included in the gross value of taxable services under section 67 of the Finance Act, 1994 . 5.2 However, in the same paragraph and in paragraph 18 that follows, the adjudicating authority has gone into the aspect of whether Notification 12/2003-ST dated 1.3.2003 has been fulfilled by the assessee in this case. Discernibly, non-fulfillment of Notification No. 12/2003-ST was not an allegation or charge raised in the show cause notice. True, para 4.4 of the notice dated 11.6.2013 did reproduce a portion of the Notification 12/2003-ST, however, without making any reference
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Further, we find that based on the such discussions, the adjudicating authority in para 20 of the order concluded that value of goods sold is to be included in the gross value of services as assessee has not fulfilled the conditions laid down in Notification 12/2003-ST. 5.3 We also find that in para 17 of the impugned order, the adjudicating authority has stated that assessee has taken credit of duty paid on goods and materials sold by them. Ono the other hand, as per the letter dated 5.1.2012 of the assessees to the jurisdictional Assistant Commissioner at point No. 5 relating to sale of parts to franchisees they have averred that no input credit is taken and hence no duty is payable . 5.4 The assessee also, in their grounds of appeal and other contentions made by them, have consistently found fault with the adjudicating authority which have already been set out above. For example, the appellant has submitted that the Commissioner has contradicted in para 19 of the impugned order, the
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ee has found fault with the reasonings adopted by the adjudicating authority. This being so, the impugned order not having addressed the allegations in the show cause notice but having only confirmed the proposed demands on other grounds cannot be sustained. We therefore are inclined to accept the prayer made by the Revenue seeking remand of the case for fresh adjudication based on the allegations and charges made out in the show cause notice. So ordered. 7. Coming to the assessee‟s appeal, while there are indeed number of persuasive arguments put forth by ld. Senior Advocate, in view of our decision to remand the matter for denovo adjudication, we also allow the present appeals of the assessee by way of remand. Hence in the denovo adjudication, the points and arguments raised by both sides will be addressed by the adjudicating authority, after giving sufficient opportunity to both parties to present their case. All the appeals are allowed by way of remand. (Pronounced in court o
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