The Vice Chairman Settlement Commisson vs. M/S Zyeta Interiors PVT LTD

Facts

The respondent-assessee, M/s. Zyeta Interiors Pvt. Ltd., engaged in interior works, applied for settlement of proceedings following a show cause notice dated 28.08.2018 issued by the Directorate General of Goods & Services Tax Intelligence (DGGSTI). The Settlement Commission passed a final order dated 24.03.2020, confirming service tax of Rs.40,75,512/-, interest, and penalties of Rs.5,00,000/- and Rs.25,000/- on the Director. The respondent's request for modification was rejected. Aggrieved, the respondent filed a writ petition. The learned Single Judge, vide order dated 18.08.2021, allowed the writ petition in part, quashed a portion of the Settlement Commission's order, and remitted the matter for fresh consideration. The Revenue has filed this intra-court appeal against the Single Judge's order.

Held

The Court found no exception to the learned Single Judge's finding on the issue of double taxation. It held that if the entire tax amount has reached the exchequer, the assessee cannot be made liable for double tax merely due to a deviation from the prescribed ratio of payment between the assessee and the service provider under the reverse charge mechanism. The Court noted that the discharge of the entire tax amount was not disputed and that CBEC Circular No.341/18/2004-TRU supported this view. Regarding the issue of photocopies of invoices for CENVAT credit, the Court observed that the learned Single Judge had remanded the matter primarily because the assessee was willing to produce the original invoices. Therefore, adjudicating on the admissibility of photocopies would be academic. The Court confirmed the order of remand, leaving all rights and contentions of the parties open for reconsideration by the Settlement Commission. The Settlement Commission was directed to re-consider the matter afresh after notifying the assessee and the Revenue.

Key Issues

1. Whether the learned Single Judge erred in reversing the Settlement Commission's finding regarding the ratio of tax payment under Section 68(2) of the Finance Act, 1994, considering the amendments and notifications (30/2012-ST) that altered the 50:50 ratio to 75:25 and later to 100% qua the consumer. - Revenue's argument: The assessee failed to adhere to the prescribed tax payment ratios (75:25 and 100%), and the Single Judge should not have interfered with the Settlement Commission's findings. - Assessee's argument: The CBEC Circular No.341/18/2004-TRU supports the view that reverse charge mechanism should not lead to double taxation, and since the entire tax amount reached the exchequer, the 50:50 payment was not a shortage. 2. Whether the learned Single Judge was justified in remanding the matter to the Settlement Commission for fresh consideration on the issue of admitting photocopies of invoices for CENVAT Credit, when Rule 9 of the CENVAT Credit Rules, 2004, prescribes original documents. - Revenue's argument: Photocopies are not the required documents for CENVAT credit, making the remand untenable. - Assessee's argument: Reliance on High Court judgments (Bombay, Gujarat, Punjab & Haryana) in cases like Essel Propack Ltd., Steelco Gujarat Ltd., and Ralson India Ltd. suggests that photostat copies can be admitted if genuineness is not disputed and the assessee is willing to produce originals.