Custom, Excise & Service Tax Tribunal
M/S. Voltas Ltd vs Commissioner Of Central Excise, ... on 24 July, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. E/1177/2010-Mum. (Arising out of Order-in-Original No. 64/ANS/09-10 dt. 30.03.2010 passed by the Commissioner of Central Excise, Mumbai-III ) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical) ============================================================
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M/s. Voltas Ltd.
:
Appellant
VS
Commissioner of Central Excise, Mumbai-III
:
Respondent
Appearance
Shri S.S. Gupata, C.A. for Appellant
Shri S.G. Dewalwar, Addl. Commissioner (A.R) for respondent
CORAM:
Mr. Ashok Jindal, Member (Judicial)
Mr. P.S. Pruthi, Member (Technical)
Date of hearing : 24/07/2014
Date of decision : 24/07/2014
ORDER NO.
Per : P.S. Pruthi
The appellants M/s. Voltas Thane, are before us in appeal against the order of Commissioner of Central Excise, Mumbai-III confirming demand of Cenvat Credit of Rs.2,42,77,884/- and Education Cess of Rs.4,85,609/- availed during the period April 2005 to February 2007. Interest under Section 11AB and penalties under Section 11AC and Rule 15(3) of Cenvat Credit Rules 2004 have also been ordered.
2. The brief facts of the case are that M/s. Voltas have a unit at Thane engaged in the manufacture of excisable goods under Chapter 84 of the Central Excise Tariff Act, 1985 and also plants at Dadra, Silvassa, Pantnagar-Uttaranchal. Their head office at Mumbai is registered as Input Service Distributor for the services namely Repair and maintenance, Intellectual property, Management Consultant, Insurance Services, Advertisement Services, Chartered Accountant Services, Banking and Financial Services. Show cause notice was issued to the Thane unit on various grounds: That they availed Cenvat without receiving services, that the credit from their ISD office was distributed entirely to one plant namely ABCD Plant, that the use of services in relation to manufacture of final products is not proved, that they have not established that the credit of service tax paid on the input services is on eligible services such as advertisement and intellectual property and they have not incurred any expenses towards these services and these had not been received by them in the factory nor used in relation to manufacturing of final products. The matter was adjudicated by the Commissioner who held that the appellants have not discharged the burden of proof regarding admissibility of Cenvat Credit under Rules 9(5) & 9(6) of the Rules ibid. It was held that the entire credit has been passed to only one unit i.e. Thane Plant, without apportioning the credit amongst the other units manufacturing dutiable goods and that the appellant did not establish that the credit of service tax attributable to services used in a unit either exclusively manufacturing exempted goods or exclusively providing exempted services, which is a condition of Rule 7 of the Cenvat Credit Rules, which provide for credit availment by ISD has not been availed by them. According to the Commissioner, the appellants instead of giving details of the quantum of services which can be attributed to dutiable and exempted units have merely produced a Chartered Accountants Certificate which also does not indicate that services e.g. advertisement are not used in the exempted unit namely Pantnagar. In short, the C.A. Certificate does not enable establishment of correct availment of Cenvat Credit as per law. For this reason also the invocation of extended time period was upheld and the demands confirmed, interest ordered and penalties imposed.
3. Heard both sides.
4. Learned Chartered Accountant at the outset raised the issue of jurisdiction stating that the quantum of eligible credit can only be decided by the jurisdictional authority where the input service distributor is registered i.e. at Mumbai. He relied on the judgment of Tribunal in the case of Commissioner of Service Tax, Ahmedabad Vs. Godfrey Philips India Ltd. reported in 2009 (14) STR 375 (Tri.-Ahmd.). He also contended that the credit can be distributed to any unit and does not have to be distributed in proportion to the services used at the various units. According to him, they have distributed credit correctly, relying on the case law Ecof Industries (P) Ltd. Vs. Commissioner of Central Excise 2010 (17) STR 515. He also stated that for services such as advertisement received in the Head Office, their credit cannot be denied otherwise ISD mechanism would fail, relying on Commissioner of C. Ex. Mumbai Vs. GTC Industries Ltd. 2008 (12) STR 468 (Tri. LB)
5. Revenue reiterated the findings of Commissioner.
6. We have carefully considered the submissions made by both sides. As regards the issue of jurisdiction, we have noted the judgment in the case of Godfrey Philips India Ltd.(supra), which held that since the document issued by ISD does not contain the nature of service provided, the eligibility of the service tax credit has to be examined at the end of input service distribution only. However, we also note that under Rule 14 of the Central Excise Rules, credit may be demanded from the manufacturer or service provider. In this case the demand has been raised on the manufacturer under Rule 14 and therefore, the legality of the show cause notice, in so far as jurisdiction is concerned, cannot be questioned. At the same time it is obvious that the correctness of service tax credit passed by the ISD needs consultation at the end of ISD jurisdictional authorities, especially since the manufacturer is same with various units.
6.1 Coming to the main issue on merits it is apparent that the dispute is whether the Cenvat Credit has been availed correctly in terms of Rule 7 of the Cenvat Credit Rules 2004. At the material time Rule 7 stated that:
Manner of distribution of credit by input service distributor. - The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following condition, namely:-
(a) the credit distributed against a document referred to in Rule 9 does not exceed the amount of service tax paid thereon; or
(b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. Reading of the Rule shows that there is no binding that the distribution of credit by ISD has to be in proportion to the turnover of various units. The requirement of proportionate distribution of credit came into the statute only from 1.4.2012 vide notification No. 18/2012 dt. 17.3.2012. Therefore, the plea of the appellant that credit does not have to be apportioned amongst various units is correct.
6.2 However, it is seen that Revenue has been requesting the appellants at all stages to provide the exact figures of service tax attributable to various units so that there is fulfillment of the two conditions under Rule 7 namely :
(a) the credit distributed against a document referred to in Rule 9 does not exceed the amount of service tax paid thereon; or
(b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. This demand is very reasonable to enable Revenue to verify the correctness of the credit availed by the Thane unit and to determine eligibility of credit under law. Instead, appellants provided a Chartered Accountant Certificate which does not provide the details sought by Revenue. During the arguments, the Learned Chartered Accountant stated that the case is very old and it would be difficult to gather all the information from all the units. We are afraid this cannot be an excuse at all and even if it is a cumbersome process to collect all information to enable the department to verify the credit, the information needs to be provide for verification. In fact the detailed information should have been provided earlier. Therefore, we remand the case and direct the appellants to present all the required information to the Commissioner within two months from the date of receipt of this order. Thereafter the Commissioner will decide the case afresh, after consulting the jurisdictional authorities having control over ISD if required, and after affording an opportunity of hearing to the appellants.
7. The matter is remanded for de novo adjudication in above terms.
(Pronounced in court) (Ashok Jindal) Member (Judicial) (P. S. Pruthi) Member (Technical) Sm ??
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