Custom, Excise & Service Tax Tribunal
M/S Classic Auto Tubes Ltd vs Commissioner Of Central Excise, ... on 29 October, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/867/11 (Arising out of Order-in-Appeal No. P-III/VM/37/2011 dated 11.2.2011 passed by the Commissioner of Central Excise (Appeals), Pune-III). For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Classic Auto Tubes Ltd. Appellant Vs. Commissioner of Central Excise, Pune-III Respondent Appearance: Shri D.H. Nadkarni, Advocate for Appellant Shri Ashutosh Nath, AC (AR) for Respondent CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 29.10.2014 Date of Decision: .2015 ORDER NO. Per: Shri Anil Choudhary
The appellant, M/s Classic Auto Tubes Ltd., is registered under the provisions of Central Excise Act and is engaged in manufacture of Rubber Inner Tubes for automobiles falling under Chapter 40 (heading 40131010 & 40139049) of the Central Excise Tariff Act, 1985 and availing CENVAT Credit on inputs, capital goods and input services used in or in relation to manufacture of finished goods as provided in Cenvat Credit Rules, 2004.
2. The brief facts are that during the course of audit, the Revenue observed that the appellant have availed CENVAT Credit of Service Tax paid on various services being canteen, gardening, bus service, employees insurance etc. during the period from May, 2007 to March, 2009 amounting to Rs.4,96,638/-. As it appeared to the Revenue that the aforementioned services have not been used in or in relation to the manufacture and clearance of final products and, therefore, do not fall under the definition of input services, show-cause notice dated 31.12.2009 invoking the extended period was issued requiring to show cause as to why not the CENVAT Credit availed in respect of the aforementioned service will not disallowed and recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A along with interest on the said amount under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act and also why not penalty be imposed under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Act.
2.1 The appellant contested the show-cause notice, vide the Order-in-Original dated 30.9.2010, the show-cause notice was adjudicated and it was held that the aforementioned services are input services for the purpose of manufacturing business of the appellant, but at the same time, it was observed that the appellant have recovered some amount from its employees on account of transport service (bus) and outdoor catering services on which proportionate credit of Service Tax was disallowed amounting to Rs.67,786/- in respect of transport service and Rs.10,496/- in respect of outdoor catering services totaling of Rs.78, 282/- which was held to be recoverable under the provisions of Rule 14 of Cenvat Credit Rules read with Section 11A and the balance proposed demand was dropped. Further interest was demanded on the amount found inadmissible and equal amount of penalty was imposed under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Act, holding that there is a case of suppression on the part of the appellant and it failed to disclose the material facts to the Revenue. That in availing credit in respect of the amount recovered and/or cost not effectively incurred for production or manufacture. Being aggrieved, the appellant preferred appeal before the Commissioner (Appeals), who vide the impugned order upheld the disallowance of the proportionate amount of Service Tax relating to the recovered amount from the employees and also upheld the penalty. Being aggrieved, the appellant have preferred appeal before this Tribunal.
3. The learned Counsel for the appellant among others have urged that the learned Commissioner has erred in holding that cost of transportation not borne by the appellant would not form part of the cost of production. It is further urged that no such case of proportionate disallowance was made out in the show-cause notice and accordingly, in denying the proportionate credit relating to employees contribution, the adjudicating authority has accepted the allowability as inputs and the proportionate amount has been erroneously confirmed by the impugned order. The appellant also relies on the ruling of the Larger Bench of this Tribunal in the case of Commissioner of Central Excise Vs. GTC Industries Ltd. 2008 (12) STR 468 (Tri-LB), wherein this Tribunal after examining in detail of the CAS-4 standards, wherein it is provided that Direct Wages and salaries shall include fringe benefits such as Bonus, medical benefits, subsidized food etc. Accordingly, it was held that CAS-4 clearly says that the cost of food is included in the cost of production. Service Tax on outdoor catering services is paid by the manufacturer for running the canteen, irrespective of the fact that the subsidized food is provided or not, whether the cost of food is borne by the worker or by the factory, the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production. It was further held that in this view of the matter, employment of outdoor caterer for providing catering service is to be considered as an input service relating to business and CENVAT Credit in respect of the same, will be admissible. The appellant further states that during the relevant period as per the ruling of this Tribunal in the GTC case, there was no requirement for proportionate disallowance and/or reversal of CENVAT Credit. It is further stated that it was only in the ruling of the Hon'ble Bombay High Court in the case of Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd. 2010 (20) STR 577 (Bom), wherein it was held that CENVAT Credit is allowable on catering service being an essential input, but the Hon'ble High Court overruled and upheld on the aspect that once the part of Service Tax is borne by the ultimate consumer of the service, namely the worker, the manufacturer cannot take credit of that part of the Service Tax which is borne by the consumer. The appellant further states that before the Hon'ble High Court, the assessee had made a concession and without disputing the issue of proportionate disallowance, paid the Service Tax. It is further urged that even if it is ruled against the assessee/appellant, the disallowance of proportionate amount is not proper being the amount attributable towards recovery from the worker. Even then as the impugned period in dispute ends in March, 2009, there is no case of any mis-declaration or suppression on part of the appellant and accordingly, extended period is not invocable and the show-cause notice is accordingly bad for the extended period. The appellant further urges that in view of the facts and circumstances, there is no contumacious conduct or any deliberate default in view of the order of Hon'ble Bombay High Court dated 25.10.2010 and accordingly, the penalty imposed is fit to be set aside.
5. The learned AR relies on the impugned order and further relies on the SMB ruling of this Tribunal in the case of Commissioner of Central Excise Vs. Bosch Chassis Systems India Ltd. 2012 (25) STR 175 (Tri-Mum), where in the case of CENVAT Credit on input service being outdoor catering service will form part of the cost so recovered from the employees which was held that employer cannot take credit on that part of the Service Tax relying on the ruling of the Hon'ble Bombay High Court in the case of Ultratech Cement Ltd. (supra).
6. Having considered the rival contentions, I agree with the ruling of the Hon'ble Bombay High Court that a manufacturer is entitled to input tax credit on the service availed to the extent of cost borne by it and cannot take credit of the amount recovered from its workers as in such cases, the actual cost stands reduced. Thus, I hold that proportionate disallowance upheld by the impugned order in respect of recovery from the employees is correct. Further, in the facts and circumstances, I find that there is no case of any contumacious conduct and/or deliberate default on part of the appellant. Consequently, invocation of extended period as well as the penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2002, is set aside. Thus, the demand survives only for the normal period.
7. In the result, the appeal is allowed in part. The appellant shall be entitled to consequential relief, if any.
(Pronounced in Court on) (Anil Choudhary) Member (Judicial) Sinha 6