Custom, Excise & Service Tax Tribunal
Jsw Salav (Steel) Ltd vs Commissioner Of Central Excise on 18 March, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. II Appln.No.ST/Extn/92519/15 APPEAL No.ST/89115/13 (Arising out of Order-in-Appeal No.US/172/RGD/2013 dated 27/06/2013 passed by Commissioner of Central Excise (Appeals), Mumbai) For approval and signature: Honble Mr. P.R. Chandrasekharan, Member (Technical) ========================================
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?
========================================
JSW Salav (Steel) Ltd., Appellant
Vs.
Commissioner of Central Excise,
Raigad Respondent
Appearance:
Ms.Aparna Hirandagi, Advocate for appellant
Shri. S.V.Nair, Asst. Comm. (AR) for respondent
CORAM:
Honble Mr. P.R. Chandrasekharan, Member (Technical)
Date of Hearing : 18/03/2015
Date of Decision : 18/03/2015
ORDER NO
1. The appeal is directed against Order-in-Appeal No.US/172/RGD/2013 dated 27/06/2013 passed by Commissioner of Central Excise (Appeals), Mumbai. There is also an application for extension of stay granted.
2. Vide the impugned, the learned appellate authority has upheld the denial of input service credit to the appellant, M/s.Welspun Maxsteel Ltd., to the extent of Rs.25,49,607/- and sought to recover the same under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 along with interest thereon and by imposing equivalent amount of penalty. Aggrieved of the same, the appellant is before me.
3. The learned Counsel for the appellant submits that the credit has been taken on service tax paid on various insurance policies in respect of capital assets of the appellant company and the period of credit is from April 2011 to August 2012. These capital assets are required for the running of the factory and therefore, the services availed fall within the definition of input service as defined in Rule 2 (l) of the CCR, 2004. However, in respect of the credit taken on life insurance, health insurance for the employees and their families, the learned Counsel would submit that in view of the specific exclusion under Clause (C) of the said Rule, they will not be entitled for the credit, however, in respect of other insurance services received they are rightly entitled for the credit. The learned Counsel also submits that in a case where interpretation of statute is involved, the question of imposition of any penalty would not arise at all. Reliance is also sought to be placed on the decision of the Honble Bombay High Court in the case of CCE, Nagpur Vs. Ultratech Cement 2010 (20) STR 589 (Bom), Federal Mogul Goetze (India) Ltd., Vs. CCE, Chandigarh-II 2013 (31) STR 628 (T), Finolex Cables Ltd., Vs. CCE, Pune-I 2009 (14) STR 303 (Tri-Mum) CCE, Tirunelveli Vs. The India Cements Ltd., - 2011-TIOL-681-CESTAT-MAD and CCE, Raigpur Vs. Beekay Engineering & Castings Ltd. 2009 (16) STR 709 (Tri-Del).
4. The learned Assistant Commissioner (AR) appearing for the Revenue on the other hand would submit that input service credit has been taken not only in respect of the assets used within the factory but also in respect of tugs and barges which are used for transportation of raw materials from the mother vessel to the jetty. In view of the decision of this Tribunal in appellants own case in the case of Vikram Ispat Vs. CCE, Raigad 2012 (277) ELKT 197 (Tri-Mumbai), the appellant would not be eligible for the benefit of service tax paid on services in relation to the tugs and barges and therefore, the appellant is not entitled for the entire amount of Cenvat credit.
5. In her rejoinder, the learned Counsel submits that the said decision of the Tribunal in the case of Vikram Ispat, has been challenged before the Honble Bombay High Court and the appeal has been admitted vide Central Excise Appeal No.102 of 2010 and therefore, the said decision is in jeopardy. It is her submission that the Ultratech Cement decision of the Bombay High Court has held that input service has to be understood in a broad context and any service which is required in relation to the business of manufacturing activities would be an eligible input service as defined in Rule 2 (l) of CCR, 2004.
6. I have carefully considered the submissions made by both the sides.
6.1 From a perusal of the record, it is seen that various insurance policies taken by the appellant falls into the category of Marine Hull Policy, Public Liability Insurance Policy, Standard Fire and Special Perils Policy, Burglary Standard Insurance Policy, Marine Cargo Open Policy, Industrial all Risks Insurance Policy, Marine War Insurance Policy, Money Insurance Policy and Contractors Plant and Machinery Insurance Policy. While Marine Hull Policy, Marine Cargo Open Policy and Marine War Insurance Policy pertain to tugs and barges used by the appellant in transportation of materials from the mother vessels to the jetty, the other insurance policies pertain to the insurance of the capital assets used within the factory except in the case of Contractors Plant and Machinery Insurance Policy. The nexus between the assets utilised within the factory is clearly discernible, the same cannot be said in respect of goods used outside the factory.
6.2 As regards the tugs and barges in respect of which marine policies have been taken, this issue has been considered in the Vikram Ispat (cited supra) wherein it was held that there was no nexus between the impugned services with manufacture/clearance of goods; therefore, they are not input service on which the assessee could get benefit of credit of service tax. Though this judgement has been challenged and admitted by the Honble High Court, there is no stay obtained against this decision and unless it is set aside, the said decision would prevail. Therefore, the eligibility to Cenvat credit on marine insurance policies taken in respect of tugs and barges is clearly not admissible. There is one more reason for coming to this conclusion. The CCR 2004 does not provide for Cenvat Credit of excise/CVD credit in respect of tugs and barges under the category of capital goods. If excise duty paid on these goods they are not available as credit, it does not stand to reason that service tax paid on insuring these goods should be available as credit under CCR 2004. Therefore, Cenvat credit of the service tax paid on assets of the appellant used outside the factory premises is not clearly admissible as they are neither inputs nor capital goods. Similarly, in respect of service tax paid on life insurance and medi-claim insurance for the employees/families the same is specifically excluded in terms of clause (C) of Rule 2 (l) of CCR, 2004 and therefore, the appellant would not be entitled for credit on the same.
6.3 As regards the insurance done on Contractors Plant and Machinery Insurance Policy, it is the contractors who are undertaking the job work for the appellant. It is not understood how this can be an eligible to input service to the appellant. For the contractor or the job worker it may be an input service but not to the appellant who does not own these goods.
7. To conclude, I am of the considered view that the appellant will not be entitled for Cenvat credit of service tax paid on Marine Insurance Policies taken in respect of the tugs and barges or materials brought in a ship or in respect of life or health or medi-claim insurance of the employees/families. Similarly, the appellant would not be entitled for the service tax paid on the contractors equipments. In respect of other assets, which are used by the appellant within its factory for the manufacturing activity, the appellant would be eligible for the credit of service tax paid on various insurance policies in respect of such assets. Therefore, the matter is remanded back to the adjudicating authority for ascertaining the entitlement of service tax paid in respect of items as discussed above and allow the same to the appellant. Since it is case of interpretation of Cenvat Credit Rules, the question of imposing of any penalty does not arise at all and therefore, the penalty imposed on the appellant is set aside. Since the appeal is disposed of, application for extension of stay has become infructuous and is accordingly dismissed.
8. The appeal is disposed of in above terms.
(Dictated in Court) (P.R. Chandrasekharan) Member (Technical) pj 1 7