The Division Bench of the South Zonal Bench, Chennai, of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) was faced with a unusual scenario wherein the Judicial Member and Technical Member held contradicting opinions in two appeals pertaining to the capacity of the Appellant to avail CENVAT credit.
The present Appeals were lodged by Royal Sundaram General Insurance Company Ltd., a prominent provider of general insurance to individuals, families and businesses and have their footprint across various domains within the Insurance industry. The Appellant being a public limited company, is registered for payment of service tax under reverse charge mechanism on commissions paid to insurance agents among others.
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It was alleged by theDirectorate General of Central Excise Intelligence, Chennai Zonal Unit (DGCEI) that the Appellant had been illegitimately claiming CENVAT credit on invoices that were issued by certain Automobile dealers in favour of the Appellant company. The same was supposedly done by citing descriptions of services that were not actually provided by the Automobile dealers to the Appellant Insurance Company.
It was uncovered by the DGCEI that the automobile dealers, though not part of the Insurance industry are not explicitly permitted to solicit their customers to avail Insurance schemes provided by the Appellant company, but had been doing the same while classifying the services under overheads of ‘Data Processing and Policy Servicing related activities’.
The Credit availed by the Appellant was disallowed by the Respondent Commissioner of GST & Central Excise who proceeded to impose interest and penalties on the Appellant, which has been contested through the present Appeals.
The Division Bench of the South Zonal Bench, Chennai, of CESTAT comprising Sulekha Beevi C.S., Judicial Member and M. Ajit Kumar, Technical Member in a rare occurrence within Tribunals gave contradicting obiter dicta while formulating the decree.
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The Judicial Member permitted the availment of Credit by the Appellant affirming that an electronic signature on an invoice containing details of duty or service tax payable, description of goods or taxable service, service tax registration number, person issuing the invoice etc., provides sufficient authentication to verify the validity of the invoice.
The invoice in question was registered under different overheads by both the Automobile Dealer company and the Appellant, but payments were made wholly based on the invoices issued. In light of the findings, the Judicial Member allowed the Appeal while holding that the denial of credit is not justified.
The Technical Member on the other hand, gave preference to the rationale that an unsigned, electronic invoice issued by the Automobile dealer does not constitute a valid invoice while stating that the Appellant is not eligible to avail CENVAT credit on the basis of other legal grounds.
In light of the polarizing decisions purported by the Technical Member and Judicial Member, the matter was referred to the Third Member of the CESTAT – said reference was challenged by the Appellant before the High Court of Madras via two separate Writ Petitions.
The High Court of Madras proceeded to set aside the difference of opinion between both members and referred the case back to the Division bench of CESTAT.
Taking into account the guidelines provided by the Hon’ble High Court of Madras, the Division Bench of CESTAT proceeded to set aside the Impugned Orders passed by the Respondent Commissioner while confirming that the order passed by the Judicial Member supersedes that of the Technical Member.
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