CENVAT Credits Can’t Be Denied To Service Recipient Without Opening Assessment Of Service Extended By Service Provider: CESTAT
Mariya Paliwala
15 Nov 2023 7:40 AM GMT
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that without an opening assessment of the provision of service extended by the service provider, CENVAT credits cannot be denied to the recipient who had paid the required service tax through the service receiver in order to avail the input services.The bench of Dr. Suvendu Kumar Pati (Judicial Member)...
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that without an opening assessment of the provision of service extended by the service provider, CENVAT credits cannot be denied to the recipient who had paid the required service tax through the service receiver in order to avail the input services.
The bench of Dr. Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that the motor vehicle dealer, as an agency, was providing services to the appellant and raising invoices with descriptions of services as per the format provided to it by the appellant through email. The agreement does not contain provision for payment against such services and the modalities of payment, which Respondent-Department has linked to the number of insurance policies sold, but if it is treated as service received from the car dealers against which Service Tax liability was discharged by the car dealers and it remained undisputed, there is no point in denying credits to the Appellant who had availed those services to sell its car insurance policies, and this being a separate transaction, it is immaterial as to who received commission against the generation of a car insurance policy by availing the services.
The assessee or appellant is in the business of providing general insurance services. It has been receiving infrastructure facilities and support services from various motor car dealers as well as availing input credits against the payment of tax paid towards the availing of such services along with other services like workstations, advertisements, etc.
On the basis of intelligence gathered by the DGCI that the dealers of cars were collecting insurance premiums from the car customers and remitting the insurance amount to the insurance companies against receipt of a certain percentage towards own damage premium'' and ‘payout’ without a valid insurance agency or brokerage license, investigations were conducted that revealed that actually services like “work stations, support services, and display service” were not provided by the dealers to the Appellant, and the amount paid to the dealers was a certain percentage of the amount paid only towards the insurance premium collected by them and remitted to the Appellant insurance company.
The show-cause cum-demand notice under Rule 15(3) of the CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994, was issued denying CENVAT Credit availed that got confirmed along with interest and an equal penalty under Section 78 of the Finance Act, 1994.
The appellant/assessee contended that it had entered into several agreements with motor car dealers for providing facilities, including the sharing of desktops, telephones, faxes, photocopying machines, storage rooms for the storage of advertisement materials, safe custody of policies, etc., which were specifically incorporated into the agreement. The motor vehicle dealers raised invoices with service charges and service tax for the services provided by them, against which the appellant had rightly availed the credits. The output service in completing insurance business was becoming fruitful through those inputs, but instead of raising invoices with descriptions as business support services defined under Section 65(104)C of the Finance Act, 1994, they had put incorrect descriptions of services in the invoices, but that would not make the nature of the transaction invalid.
The department contended that the amount transferred to the vehicle dealers was dependent on the number of vehicles sold and insured and not based on the provision for the supply of infrastructure or business support services, for which interference in the order passed by the Commissioner is uncalled for.
The tribunal allowed the appeal and quashed the order passed by the Commissioner of Service Tax, by which the CENVAT credit was denied at the receiver’s end on the grounds of an incorrect description of services in the invoices raised by the service provider.
Counsel For Appellant: Vinay Jain
Counsel For Respondent: Anand Kumar
Case Title: M/s. Tata AIG General Insurance Co. Ltd. Versus Commissioner of Service Tax-VI, Mumbai
Case No.: Service Tax Appeal No. 85359 of 2017
