Custom, Excise & Service Tax Tribunal
M/S. Sundaram Clayton Ltd vs Cce. Chennai - Ii on 8 January, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/485 487/2012 & E/41529/2014 (Arising out of Order-in-Original No. 32 - 34/2012 (M-II) dated 31.08.2012 and Order in Original No. 10/2014 (M-II) dated 24.03.2014, passed by the Commissioner of Central Excise, Chennai II Commissionerate). M/s. Sundaram Clayton Ltd. : Appellants Vs. CCE. Chennai - II : Respondent
Appearance Shri G. Viswanathan, GM (Legal), For the applicant Shri K.P. Muralidharan, AC (AR) For the respondent CORAM Honble Shri D.N. PANDA, Judicial Member Honble Shri R. PERIASAMI, Technical Member Date of Hearing/Decision: 08.01.2016 FINAL ORDER No. 40066-40068, 40070/2016 Per: D.N. Panda On behalf of the appellant Shri G. Viswanathan, GM (Legal) submits that all the three appeals No. E/485 487/2012 covers three Show Cause Notices and the services stated in the table under para-11 of the adjudication order dated 31.08.2012, are as under:-
Sl. No. SCN & Date Description of Service Amt of credit disallowed 1 14/2011 dt.9.4.2011 Period 01.04.2010 to 31.01.2011 Banking and other financial services Clearing and Forwarding and Customs Clearing Services Insurance Services Legal Services Auction Services Courier Services Information Technology Services Photography Services Rent a cab Service Travel Booking Service 14,03,623.64 11,24,230.16 5,16,474.96 2,575.00 3,55,180.27 29,301.72 2,68,186.79 6,730.39 1,32,173.82 52,243.19 Total 38,90,719.94 2 07/2012 dt.8.5.2012 Period 01.02.2011 to 31.03.2011 Auction Services Banking and other financial services CHA services Design Services Information Technology Services Photography Services Rent a cab Service Rent paid for temporary structure Travel Booking Service 2,99,646.00 8,52,702.00 9,00,877.00 12,0310.00 7,25,940.00 3,216.00 1,47,305.00 87,401.00 48,327.00 Total 31,85,724.00 3 35/2012 dt.18.5.2012 Period 01.04.2011 to 31.11.2011 Banking and other financial services Construction Services CHA Services 6,42,908.00 10,694.00 2,28,591.00 Total 8,82,193.00 So far as Appeal No. E/41529/2014 is concerned, that appeal relates to the Show Cause Notice dated 25.11.2013 resulting in the adjudication order dated 24.03.2014.
2. Arguing the three appeals No. E/485 487/2012, Shri G. Viswanathan, GM of the appellant company submits that all the services stated in the table above are pertaining to the manufacturing activity and the respective services were input for the said activity for which that was utilised. Explaining each item listed in the table above, he submits that;
a) Banking and other financial services are nothing but financial services which is covered by Rule 2 (l) of Cenvat Credit Rules, 2004. Therefore, where there was a clear evidence of the provisions of financial services by Banks and other financial institutions, this aspect cannot be disputed by Revenue to allow the input credit of the service tax paid against Banking and other financial services.
b) Clearing and Forwarding and Customs Clearing Services of CHA are fully attributable to the manufacturing and clearing of finished goods to the destination and bringing raw materials to the factory. Therefore, credit cannot be denied for such services.
c) Insurance Service is availed for the purpose of insurance of the raw materials used in manufacture and other capital assets of the Company.
d) Auction Services are availed to clear the scrap of the factory, which is indispensable to get manufacturing place and place for storing finished goods.
e) Courier service is very much necessary for the business related activities, which was availed by the appellant.
f) Information Technology Service is the service relating to the technological assistance availed for running of the business
g) Photography service was utilised to provide ID cards to the employees and also to utilise the same for other related business activities.
h) Rent a Cab service was utilised for the transport of employees and also for business promotion activities.
i) Travel Booking service was availed for the purpose of business travels.
j) Designing service was related to the tools used for the purpose of maintenance of equipments used in the manufacture of finished goods.
k) Construction services availed relates to repair and maintenance of factory building.
l) Legal services availed relate to the charges paid by the company to the counsels for the services availed in legal matters relating to the appellant.
m) CHA services were used for import as well as export of goods, which is indispensible for the clearance of the finished goods.
n) Rent paid for temporary structure service was availed for the purpose of building a temporary structure to store the finished goods as well as raw materials.
3. So far as the appeal No. E/41529/2014 is concerned, it is explained that the services tabulated in the aforesaid table are almost same as above except Business Auxiliary services and warehouse services involved in this appeal. Department alleged that Business Auxiliary Service was not allowable. But service really availed was supply of labourers for manufacturing and other activities, which is directly attributable to the business activity for which the service tax paid cannot be denied to avail cenvat credit. So far as the warehouse service is concerned, it is necessary for the business concern to avail this service for storing finished goods before clearance or to bring the raw materials for clearance.
4. Revenue supports adjudication. Ld. DR relies on the Tribunals decision in the case of the appellant reported in 2012 (25) STR 172 (Tri.-Chen.) as well as in the Tribunals Final Order No. 1297/2011 dated 131.12.11, which has not yet been reported. In the unreported decision the matter was remanded for consideration in the light of the decision of the Honble Bombay High Court in the case of CCE, Nagpur Vs. Ultratech Cement Ltd. reported in 2010 (260) ELT 369 (Bom.). So far as the reported decision is concerned, we state that that was the case where the Single Member Bench had a prima facie view at the interim stage held that Auctioning services availed has no nexus with business activity. Such conclusion has no relevance to the present case. We fail to understand how the whole space of the factory shall remain dumped with the unwanted goods, for which the clearance is necessary in order to facilitate storage of goods both finished and raw materials.
5. Heard both sides and perused the records. So far as the three appeals No. E/485 487/2012 is concerned, we have examined each item that was brought to our notice from the Table at para-11 of the adjudication order dated 31.08.2012.
a) We appreciate that the financial service is a covered service under Rule 2 (l) of CVR, 2004. Added to that finance being the necessary input for the purpose of carrying out the manufacturing activity and money is invested to carryout manufacture, credit cannot be denied for such services availed.
b) Clearing and Forwarding and Customs Clearing Services are integrally connected to the business. Procurement of raw materials and finished goods are essence of business. Therefore, the appellant cannot be denied to avail credit in respect of this service.
c) Insurance Service protects the raw materials and finished goods in transit as well as the assets of the company, for which credit cannot be denied for availing this service.
d) Auction service is also integral part of the manufacturing activity since, clearance of the dumped goods having no utility is necessary to be removed in order to store raw materials or finished goods. Therefore, this service cannot be said to not integrally connected and credit cannot be denied.
e) Legal services are availed for statutory compliance which is the duty of the assessee to comply and the credit cannot be denied for such services since it has relevancy to the activity of manufacture. Once there is legal obligation and the assessee has to discharge the same irrespective of the manufacture being done but, business to be carried out, cenvat credit of service tax paid on such count is undeniable.
f) Courier service is considered necessary for the business because without such service, there may not be possibility of movement of documents as well as goods with least cost. Therefore, the appellant is entitled to cenvat credit on this count.
g) Information Technology service is an integral part of the business activity to reduce the paper work and to carryout business efficiently and effectively. Maintenance of software is also integral part of activity of business. Therefore, this service is inseparable from the business activity of the appellant for which appellant cannot be denied cenvat credit.
h) Photography service is used to issue ID cards to the employees and for other different business activity, which is used in relation to the manufacturing of final products. Therefore credit of service tax on such input service is not deniable.
i) Rent a cab service is found to be essential for the transportation of the employees in the adjudication order itself. When such a service is not found irrelevant to the business or manufacturing activity, credit of input tax cannot be denied since rent a cab service is essential for the movement of the employees to factory and to carry out business activity.
j) Travel booking service is explained in the record that it is attributable to the transportation of the employees to different customer places and for business promotion activities. Therefore credit of service tax on this service cannot be denied.
k) Designing services pertained to the tools used in the manufacture of finished products, logos, graphics, corporate identity designing etc., This has nexus to the manufacture and clearance of goods for which cenvat credit cannot be denied on these services.
l) Construction service is explained to be used in modernization, renovation and repairs of the factory and for construction of temporary sheds made to store raw materials and other assets of the company. Once there is no evidence found on record demonstrating that such expenses relate to different activity, the appellant is eligible to cenvat credit for this service also.
m) CHA service is also indispensable to carryout clearance of finished goods for which no cenvat credit on this count can be denied.
n) So far as Business Auxiliary Service (BAS) and warehouse service is concerned, that pertains to appeal E/41529/2014. BAS is explained to be relating to supply of labour service for manufacture and included in the definition of input service as per Rule 2 (l) of CCR, 2004, which is relevant to the manufacturing activity and therefore, appellant cannot be denied credit thereon. So far as the warehouse service is concerned, that related to storing of raw materials as well as finished goods either before clearance or after clearance. This itself is indication of its relevance to the manufacturing activity and therefore, credit cannot be denied thereon.
For the elaborate reasons stated above, the decision of the adjudicating authority denying Cenvat Credit on above counts is reversed and the appellants are entitled to cenvat credit on all the above services mentioned.
6. In the result all the four appeals are allowed.
(Dictated and pronounced in open court)
(R. PERIASAMI) (D.N. PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
BB
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