Service Tax Law And Cenvat Credit Rules Do Not Specify Time Limit For Which Input Service Invoices Are To Be Maintained: CESTAT
Pranav B Prem
The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) comprising Anil G. Shakkarwar (Technical Member), has held that neither the Service Tax Law nor the Cenvat Credit Rules specify any particular time limit for which input service invoices are to be maintained. The Tribunal allowed the appellant to claim Cenvat Credit of Rs. 2.94 lakhs after observing that the invoices relating to the years 2013, 2014, and 2015, though submitted belatedly in 2021, were genuine, and their non-availability earlier appeared to be unintentional.
The appellant, Bhima Riddhi Digital Services, is a multi-system operator (MSO) engaged in cable distribution. The appellant received programming services from broadcasters and their agents and distributed the same to subscribers directly or through cable operators. The appellant was registered under the Service Tax regime and had filed an application under the Voluntary Compliance Encouragement Scheme (VCES) for the period ending December 2012. The Revenue authorities initiated an investigation against the appellant, during which certain discrepancies came to light.
It was noticed that for the financial year 2012-13, the appellant had booked a turnover of Rs.10,18,10,105. For the period 01.01.2013 to 31.03.2013, the turnover reported in the ST-3 return was Rs.6,66,50,205. However, during the financial year 2013-14, while the Profit and Loss account reflected a turnover of Rs.11,73,62,203, the ST-3 return disclosed a turnover of only Rs.9,65,80,347, leading the Revenue to conclude that a taxable value of Rs.2,07,81,856 had escaped assessment, resulting in short-payment of service tax amounting to Rs.25,68,637.
Similarly, for the year 2014-15, the turnover as per the Profit and Loss account stood at Rs.15,78,21,960, whereas the assessable value in the ST-3 return was declared as Rs.15,74,92,662, leading to a short-payment of service tax of Rs.40,701. Thus, the total short-paid service tax as per the department amounted to Rs.26,09,338 for the period 2013-14 to 2014-15.
Further, the Revenue alleged that the appellant had availed and utilized Cenvat Credit of Rs.5,77,58,121 without maintaining the prescribed documents, as they failed to produce the relevant invoices during the investigation. Consequently, a show cause notice dated 07.09.2018 was issued demanding service tax of Rs.26,09,338 by invoking the proviso to sub-section (1) of Section 73 of the Finance Act, 1994. The notice also proposed the denial of Cenvat Credit of Rs.5,77,58,121 and the appropriation of Rs.5,00,000 already paid towards interest on delayed payment of service tax.
Upon adjudication, the original authority observed a typographical error and restricted the proposed disallowance of Cenvat Credit to Rs.2,93,23,732, instead of the Rs.4,93,23,732 mentioned in the show cause notice. During the adjudication proceedings in 2020-21, the appellant produced the available input service invoices covering the period from January 2013 to March 2015. The authority allowed a major portion of the claimed credit but disallowed Cenvat Credit amounting to Rs.7,59,549 due to lack of supporting invoices, ultimately dropping the demand for Rs.5,69,98,573.
The authority, however, confirmed the demand of service tax of Rs.26,09,338, appropriated Rs.11,80,034 already paid by the appellant, and directed payment of the remaining balance along with applicable interest. Penalties were also imposed.
Aggrieved by this order, the appellant approached CESTAT. The appellant contended that the confirmed service tax liability was calculated on a cum-duty basis and requested recalculation, which would reduce the liability to Rs.23,22,302. It was further contended that two additional invoices related to the denied Cenvat Credit, amounting to Rs.2,86,052.45 and Rs.328.69, were produced before the Tribunal, verified by the Field Formation, and found valid.
CESTAT carefully considered the records and submissions and noted that the difference between the turnover as per ST-3 returns and the Profit and Loss account did not indicate deliberate suppression, as the service tax impact was marginal. The Tribunal accepted the appellant’s explanation regarding the service tax liability and directed payment of the balance service tax of Rs.11,42,268 along with applicable interest.
Regarding the denied Cenvat Credit of Rs.2.94 lakhs, the Tribunal observed that the relevant invoices pertained to the years 2013 to 2015 and were produced in 2021. It held that there was no intention to suppress these invoices and acknowledged the practical difficulty in tracing old records. It was further held that the Service Tax Law and Cenvat Credit Rules did not prescribe any specific time limit for maintaining such records. Therefore, the denial of Cenvat Credit of Rs.2.94 lakhs was set aside.
In conclusion, CESTAT allowed the appeal to the extent of permitting Cenvat Credit of Rs.2.94 lakhs and directed the appellant to pay the balance service tax of Rs.11,42,268 along with applicable interest. The Tribunal found no justification for imposing a penalty in the matter.
Appearance
Shri V.M. Doiphode, Advocate, for Appellant
Shri A.P.S. Parihar, Superintendent, Authorised Representative for the Respondent
Cause Title: Bhima Riddhi Digital Services V. Commissioner of CGST & CE, Pune-II
Case No: Service Tax Appeal No. 86765 of 2021
Coram: Hon’ble Mr. Anil G. Shakkarwar [Member (Technical)]
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