The Madras High Court held that Department can’t allege input services are not common once Commissioner (Appeals) concludes input services are “common”
The petitioner, M/s.Rocky Marketing Pvt. Ltd. had entered into a Business Solutions Agreement with Amazon Seller Services Private Ltd., (Amazon). The agreement enabled the petitioner to list its catalogue of products for sale in the Amazon shopping portal. Amazon provides various services, such as the facility of storage, shipping, processing of sales returns, if any, processing of payments, and more, which are overall referred to as ‘fulfillment and associated services. The petitioner compensates Amazon for such services and Amazon pays service tax in this regard. In all, the nature of the transaction between the petitioner and Amazon is the trading of goods through Amazon for which Amazon provides various services to the petitioner.
The petitioner’s refund application was rejected and an order-in-original passed. The Assessing Authority rejected the claim primarily on the ground that there was no identity of input services as far as direct trading and incentive trading were concerned.
An appeal came to be filed before the first appellate authority which came to be partly allowed by order dated 28.11.2016. There are three material observations/conclusions in the order passed in the first appeal. The first is as regards the identity or otherwise of the input services. The Appellate Commissioner states that ‘there is convergence on the stance of the Department and the appellant on the facts that the appellant provided both taxable service and exempt service (trading, which falls under negative list), the appellant has availed cenvat credit on common input services used for providing both taxable service and exempt service and the appellant have not maintained separate accounts/records for the receipt and use of common input services.’
The main ground agitated is that in spite of the CESTAT having allowed its appeal, such order having attained finality, the show cause notice once again proposes to test the entitlement of the petitioner for refund. As far as the claim of the petitioner, both in terms of its own computation as well as the amount quantified by the Commissioner under his order dated 28.11.2016 is concerned, the authority rejects the double claim, and rightly so. Moreover, the authority also refers to direct trading of certain products that do not form part of the original proceedings, such as Everest Masalas.
The single-judge bench of Justice Anitha Sumanth held that there are two opportunities that present to the respondent. The first is the filing of an appeal in terms of Section 86(1) of the Finance Act, 1994 which provides for an appeal to be filed by a person aggrieved by an order of the first appellate authority within three months from the date of receipt of the order. The second is in terms of Section 86(4) where either the Department or an assessee who has not filed an appeal against the order of the first appellate authority may, within 45 days of receipt of notice of an appeal filed by the other party, file a memorandum of cross-objection which shall be disposed of by the Appellate Tribunal as though it were an appeal presented within the time stipulated for filing of an appeal. The respondent has missed both buses.
“The identity of input services stands settled and it is only on the quantification thereof that the petitioner can be called upon to respond. Thus the respondent will issue a fresh show-cause notice limiting the scope of examination to the quantification of input service alones, call upon the petitioner to file a response, and conclude the matter within a period of eight weeks from the date of uploading of this order,” the court said.
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