Custom, Excise & Service Tax Tribunal
Honda Motors Cycles And Scooters Ltds., ... vs Delhi-Iii on 1 August, 2018
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SCO 147-148, SECTOR 17-C, CHANDIGARH - 160 017
DIVISION BENCH
COURT NO. I
APPEAL NO. E/1066/2011-EX[DB]
[Arising out of Order-in-Original No. 02/SSS/CCE/2011 dated
21.01.2011 passed by the Commissioner of Central Excise, Delhi-III]
Date of hearing/decision: 01.08.2018
For approval and signature:
Hon'ble Mr. Ashok Jindal, Member (Judicial)
Hon'ble Mr. Devender Singh, Member (Technical)
Honda Motor Cycles And Scooters Ltds : Appellant(s)
(SPD)
VS
C.C.E., Delhi-III : Respondent(s)
Appearance:
Present for the Appellant(s): Sh. Amrinder Singh, Advocate Present for the Respondent(s): Sh. Harvinder Singh, A.R. CORAM:
Hon'ble Mr. Ashok Jindal, Member (Judicial) Hon'ble Mr. Devender Singh, Member (Technical) FINAL ORDER NO. 62598/2018 Per : Devender Singh The appellants are in appeal against the Order-in-Original dt.
21.01.2011 passed by Commissioner of Central Excise, Delhi-III.
2. Brief facts of the case are that the appellants are engaged in the packing and re-packing of automotive spare parts etc and are registered with the Central Excise Department. During the audit of their records, it was observed that during the period 2006-07 to 2 E/1066/2011-EX[DB] 2008-09, the appellants appeared to have availed inadmissible Cenvat credit on the following services:-
(1) Business Support Service (2) Outdoor Catering Service (3) Commercial or Industrial Construction Service (4) Courier Service (Outward) (5) Custom House Agent Service (6) Transport of Goods by Road (7) Manpower Supply Agency Service (8) Management, Maintenance or Repair Service (9) Architects Service (10) Telephone Service A show cause notice was issued to the appellants on 24.04.2009 disallowing the Cenvat credit of Rs. 1,55,88,540/- along with recovery of interest and proposing equivalent penalty under Section 11AC of the Central Excise Act, 1944. The matter was adjudicated and the entire duty along with interest was confirmed and equivalent amount of penalty under Section 11AC of the Act was imposed.
Aggrieved from the same, the appellants have filed this appeal.
3. Ld. Advocate for the appellants submits that the Business Support Services were in relation to verification of the goods and receipt of the goods and the same are specifically covered in the definition of 'input service'. In this regard, he relied on the judgment of the Hon'ble Punjab & Haryana High Court in the case of CCE, Delhi- III vs. Maruti Suzuki India Ltd - 2017 (49) STR 261 (P&H) and the judgment of this Tribunal in the case of Castrol India Limited vs. CCE, 3 E/1066/2011-EX[DB] Vapi - 2013 (30) STR 214 (Tri. Ahmd.). For the Outdoor Catering Services and Courier Services (Outward), he argues that they are connected to the activity of manufacture and the activity related to business. In this regard, he relied on the judgment of Hon'ble Bombay High Court in the case of CCE, Nagpur vs. Ultratech Cement Ltd. - 2010 (260) ELT 369 (Bom.). For Commercial or Industrial Construction Services, the contention is that it was related to the construction of the factory. In this regard, he relied on the decision of Hon'ble Punjab & Haryana High Court in the case of CCE, Delhi-III vs. Bellsonica Auto Components India P. Ltd - 2015 (40) STR 41 (P&H). For Custom House Agent Service, credit was denied on the ground that it was beyond the place of removal. He argued that the port was the place of removal in case of exports. He relied on the CBEC's Circular No. 999/6/2015-CX dt. 28.02.2015. In this regard, he also relied on the judgment of Hon'ble Gujarat High Court in the case of CCE vs. Dynamic Industries - 2014 (307) ELT 15 (Guj.) and the decision of this Tribunal in the case of CCE, Rajkot vs. Adani Pharmachem P. Ltd. - 2008 (232) ELT 804 (Tri. Ahmd.). For the service of transport of goods by road, he contended that transport of goods by road is for the period prior to 01.04.2008. In this regard, he relied on the decision of Hon'ble Supreme Court in the case of CCE, Guntur vs. The Andhara Sugars Ltd. - 2018-TIOL-45-SC-CX. For Manpower Recruitment and Supply Service, he contended that the amount paid by the appellant as service tax to the vendors for providing recruitment services or supplying manpower on temporary basis. In this regard, he relied on the judgment of this Tribunal in the case of Honda Motorcycle & Scooter (I) Pvt Ltd vs. CCE, Delhi-III -
4 E/1066/2011-EX[DB] 2016 (45) STR 397 (Tri.-Chand.). For Management, Maintenance and Repair Service, the contention is that this service was for machinery, without which the manufacturing cannot take place.
4. Ld. AR for the Revenue reiterated the reasoning and findings in the order of adjudicating authority. He relied on the judgment of Hon'ble Apex Court in the case of CCE vs. Ultratech Cement Ltd.- 2018-VIL-03-SC-ST for disallowing inadmissible input credit relating to Courier Service after 01.04.2008.
5. Heard the parties and perused the record.
6.1 We find that the Business Support Service has been used for logistic support services like verification of goods, receipt of goods etc., which is covered in the definition of 'input service' at the given time. We also find that in the case of Castrol India Limited (supra), the Division Bench of this Tribunal has held that the credit of business support service is admissible in the light of decision of Hon'ble Bombay High Court in the case of CCE, Nagpur vs. Ultratech Cement Ltd. (supra). By following the same, we hold that the input service credit in business support service is admissible to the appellant. 6.2 As for Outdoor Catering Services, the same has been held to be admissible service for the purpose of input service credit in the light of decision of Hon'ble Bombay High Court in the case of CCE, Nagpur vs. Ultratech Cement Ltd. (supra). Accordingly, we hold that the input service credit is admissible to the appellant for this service. 6.3 As for the Commercial or Industrial Construction Service used for the construction of the factory, the issue is no longer res integra 5 E/1066/2011-EX[DB] and has been decided in the favour of the assessee in the case of CCE, Delhi-III vs. Bellsonica Auto Components India P. Ltd (supra), wherein Hon'ble Punjab & Haryana High Court held as under:
"9. The respondents‟ case also falls within the second part of Rule 2(l) i.e. the "inclusive" part. The definition of the words "input service" also specifically includes the services used in relation to setting up of a factory. Mr. Amrinder Singh rightly contended that it was not the appellant‟s case that the services were not used for the setting up of the factory. The doubt in this regard is set at rest by the second part of Section 2(l)(ii) which includes within the ambit of the words „input service‟ the setting up of a factory and the premises of the provider of the output service. The inclusive definition, therefore, puts the matter, at least so far as the payment for services rendered by the civil contractor for setting up the factory is concerned, beyond doubt. As the plain language of Section 2(l)(ii) indicates, the services mentioned therein are only illustrative. The words "includes services" establish the same. It can hardly be suggested that the lease rental is not for the use of the land in relation to the manufacture of the final product.
10. This becomes clearer from the fact that by an amendment of the year 2011 to Rule 2(l), construction services were excluded from the definition of "input service." The amended section in so far as it is relevant reads as under :-
"(l) "input service" means any service, -
.... ..... ....
(ii) (A) specified in sub-clauses (p), (zn), (zzl),
(zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for -
(a) construction of a building or a civil structure or a part thereof; or" Clause (105)(zzq) of Section 65 of the Finance Act reads as under :-
6 E/1066/2011-EX[DB] "(105) "taxable service" means any service provided or to be provided, -
(zzq) to any person, by any other person, in relation to commercial or industrial construction.
Explanation.- For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorised by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force shall be deemed to be service provided by the builder to the buyer."
11. If in fact the said services were not covered by Rule 2(l), it would not have been necessary to introduce the amendment. It is clear, therefore, that prior to the amendment the setting up of a factory premises of a provider for output service relating to such a factory fell within the definition of „input service.‟ The amendment of 2011 is not retrospective and is not applicable to the respondents‟ case."
6.4 The input credit relating to Courier Service was admittedly taken for transportation of goods for sale to customers. The amount has been paid as service tax to its vendors for providing the taxable service of 'Courier Services' for the purposes of transportation of finished goods (spare parts) to its distributors/dealers. We find that the amount of input credit availed before 01.04.2008 is admissible to the appellant as the same is linked with the activity of business or manufacture in view of the ratio of the judgment of Hon'ble Bombay High Court in the case of CCE, Nagpur vs. Ultratech Cement Ltd. (supra). However, the input service in relation to outward transportation beyond the place of removal is not included in the definition of 'input service' after 01.04.2008. From para 3 of Order- in-Original, it is seen that the amount of credit availed during the 7 E/1066/2011-EX[DB] period after 01.04.2008 is Rs.29,46,646/-. For the period after 01.04.2008, the Hon'ble Supreme Court in the case of CCE vs. Ultratech Cement Ltd.- 2018-VIL-03-SC-ST has held that after 01.04.2008, when the definition of input service was amended, the credit on service tax for transport of goods from place of removal to buyers' premises was not admissible. The relevant findings from the judgment of the Hon'ble Supreme Court in that case are extracted below:
"10. In the first instance, it needs to be kept in mind that Board‟s Circular dated August 23, 2007 was issued in clarification of the definition of „input service‟ as existed on that date i.e. it related to unamended definition. Relevant portion of the said circular is as under :
"ISSUE : Up to what stage a manufacturer/consignor can take credit on the service tax paid on goods transport by road?
COMMENTS: This issue has been examined in great detail by the CESTAT in the case of M/s. Gujarat Ambuja Cements Ltd. vs. CCE, Ludhiana [2007 (6) S.T.R. 249 (Tri-D)]. In this case, CESTAT has made the following observations :-
"the post sale transport of manufactured goods is not an input for the manufacturer/consignor. The two clauses in the definition of „input services‟ take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport upto the place of removal. The two clauses, the one dealing with general provision and other dealing with a specific item, are not to be read disjunctively so as to bring about conflict to defeat the laws‟ scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions".
Similarly, in the case of M/s. Ultratech Cements Ltd v. CCE Bhavnagar - 2007-TOIL-429-CESTAT-AHM = 2007 (6) S.T.R. 364 (Tribunal), it was held that after the final products are cleared from the place of removal, there will be no scope of subsequent use of service to be treated as input. The above observations 8 E/1066/2011-EX[DB] and views explain the scope of the relevant provisions clearly, correctly and in accordance with the legal provisions. In conclusion, a manufacturer/consignor can take credit on the Service Tax paid on outward transport of goods up to the place of removal and not beyond that.
In this connection, the phrase „place of 8.2 removal‟ needs determination taking into account the facts of an individual case and the applicable provisions. The phrase „place of removal‟ has not been defined in CENVAT Credit Rules. In terms of sub-rule
(t) of Rule 2 of the said rules, if any words or expressions are used in the CENVAT Credit Rules, 2004 and are not defined therein but are defined in the Central Excise Act, 1944 or the Finance Act, 1994, they shall have the same meaning for the CENVAT Credit Rules as assigned to them in those Acts. The phrase „place of removal‟ is defined under Section 4 of the Central Excise Act, 1944. It states that, -
"place of removal" means -
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be stored without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;
from where such goods are removed."
It is, therefore, clear that for a manufacturer/consignor, the eligibility to avail credit of the Service Tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the „place of removal‟ does not pose much problem. However, there may be situations where the manufacturer /consignor may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the Service Tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under Section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place."
9 E/1066/2011-EX[DB]
11. As can be seen from the reading of the aforesaid portion of the circular, the issue was examined after keeping in mind judgments of CESTAT in Gujarat Ambuja Cement Ltd., 2007 (6) S.T.R. 249 (Tribunal) and M/s. Ultratech Cement Ltd., 2007 (6) S.T.R. 364 (Tri.- Ahd.). Those judgments, obviously, dealt with unamended Rule 2(l) of Rules, 2004. The three conditions which were mentioned explaining the „place of removal‟ as defined under Section 4 of the Act, there is no quarrel upto this stage. However, the important aspect of the matter is that Cenvat Credit is permissible in respect of „input service‟ and the Circular relates to the unamended regime. Therefore, it cannot be applied after amendment in the definition of „input service‟ which brought about a total change. Now, the definition of „place of removal‟ and the conditions which are to be satisfied have to be in the context of „upto‟ the place of removal. It is this amendment which has made the entire difference. That aspect is not dealt with in the said Board‟s circular, nor it could be.
12. Secondly, if such a circular is made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of Rules, 2004 and such a situation cannot be countenanced.
13. The upshot of the aforesaid discussion would be to hold that Cenvat Credit on goods transport agency service availed for transport of goods from place of removal to buyer‟s premises was not admissible to the respondent. Accordingly, this appeal is allowed, judgment of the High Court is set aside and the Order- in-Original dated August 22, 2011 of the Assessing Officer is restored."
By following the above judgment of Hon'ble Supreme Court, we hold that the input service credit of Rs.29,46,646/- on outward transportation on account of Courier Service is not admissible for the period 01.04.2008 to 30.09.2008.
10 E/1066/2011-EX[DB] 6.5 As for the Custom House Agent Service, we find that the same is denied on the ground that the service was availed beyond the place of removal. However, the issue is no longer res integra and has been decided in favour of the assessee in the case of CCE vs. Dynamic Industries (supra), wherein Hon'ble Gujarat High Court has held as under:
"12. Accordingly, the substantial question of law raised in respect of the following three categories of services i.e. (i) Customs House Agents Services, (ii) Shipping Agents and Container Services and (iii) Services of Overseas Commission, is answered partly in favour of the assessee so far as aforesaid category Nos. (i) and (ii) are concerned. Insofar as category No. (iii) i.e. Services of Overseas Commission, is concerned, the same is answered in favour of the Revenue and against the assessee. So far as present appeal is concerned, after extending the period of limitation under the proviso to Sections 11A and 11AB of the Act, the show cause notice is issued by the Joint Commissioner, Central Excise, upon the respondent-assessee on the ground of contravention of provisions of Rules 2(1)(ii) and 9(2) read with Rule 3(1) of the Rules. Admittedly, the respondent-assessee had shown availment of Cenvat credit in Part IV and V of ER-1 returns filed by it. The appellant-Department has sought to justify its action by submitting that during the course of audit by the Office of the Accountant General, when a detailed examination of the material was done, it was realised that the respondent- assessee had availed Cenvat credit on the services of all the three categories. The respondent-assessee has rightly pointed out that all the service providers charge the service tax on all the three services and such services since were rendered at the port of export, which was the place of removal, the services were in relation to manufacturing activities as far as the first two services are concerned. However, insofar as the third service where this Court has held in favour of the 11 E/1066/2011-EX[DB] Revenue and against the respondent-assessee, we are of the opinion that the extended period of limitation would not be available to the Revenue in absence of any material to indicate suppression on the part of the respondent-assessee. It is not in dispute that there was no suppression nor any misrepresentation in respect of Cenvat credit availed by the respondent-assessee in respect of these services."
By following the above judgment of Hon'ble Gujarat High Court, we hold that the input service credit for Custom House Agent Service is admissible to the appellant.
6.6 As for the input credit for transport of goods by road, the same pertains to the period prior to 01.04.2008 (prior to the amendment in 2008), hence, the same is admissible to the appellant in view of the judgment of Hon'ble Supreme Court in the case of CCE, Guntur vs. The Andhara Sugars Ltd. (supra), wherein the Hon'ble Apex Court has held as under:
"8. As can be seen from the reading of the aforesaid portion of the circular, the issue was examined after keeping in mind judgments of CESTAT in Gujarat Ambuja Cement Ltd. [2017 (6) S.T.R. 249 (Tribunal)] and M/s. Ultratech Cement Ltd. [2007 (6) S.T.R. 364 (Tribunal)]. Those judgments, obviously, dealt with unamended Rule 2(l) of Rules, 2004. The three conditions which were mentioned explaining the „place of removal‟ are defined in Section 4 of the Act. It is not the case of the Department that the three conditions laid down in the said Circular are not satisfied. If we accept the contention of the Department, it would nullify the effect of the word „from‟ the place of removal appearing in the aforesaid definition. Once it is accepted that place of removal is the factory premises of the assessee, outward transportation „from the said place‟ would clearly amount to input service. That place can be warehouse of the manufacturer or it can be 12 E/1066/2011-EX[DB] customer‟s place if from the place of removal the goods are directly dispatched to the place of the customer. One such outbound transportation from the place of removal gets covered by the definition of input service."
By following the above judgment of Hon'ble Supreme Court, we hold that the input service credit for transport of goods by road for the period before 01.04.2008 is admissible to the appellant. 6.7 As for the Manpower Recruitment and Supply Service, it is an admitted fact that the amount was paid by the appellant as service tax to the vendors for providing recruitment services for supply of manpower on temporary basis. It is not disputed that the said manpower was essential for the purpose of carrying the operations of the business of the appellant. The finding of the Ld. Commissioner that the service does not appear to have been used in relation to manufacture of final product is tentative. In view of the judgment of this Tribunal in the case of Honda Motorcycle & Scooter (I) Pvt Ltd (supra), wherein it was held that credit on manpower recruitment and supply service is admissible to the manufacturer, we hold that the input service credit in this category is admissible to the appellant. 6.8 As for Management, Maintenance and Repair Service, the same has been used in relation to maintenance/repair of capital goods and equipment in the factory of the appellant. Since the manufacturing activity service of the appellant cannot take place without the repair/maintenance of equipment and capital machinery, the input service credit is admissible to the appellant.
7. Since we are upholding the demand of Cenvat credit of Rs.29,46,646/- along with interest in respect of Courier Service for 13 E/1066/2011-EX[DB] the period after 01.04.2008, the question of penalty for this period is to be decided. As submitted by the Ld. Advocate, it is purely a question of interpretation of law and before the judgment of Hon'ble Supreme Court in the case of CCE vs. Ultratech Cement Ltd. (supra), which was delivered on 01.02.2018, the benefit of such input credit after 01.04.2008 was being extended by the judicial pronouncements of this Tribunal. In view of that, and considering that the issue was finally settled at the level of Hon'ble Apex Court, the penalty for this period is not justified. Accordingly, no penalty is imposable on the appellant.
8. In view of the foregoing, we hold that,
(i) the demand of Cenvat credit of Rs.29,46,646/- along with interest is upheld in relation to Courier Service for the period after 01.04.2008;
(ii) rest of the adjudication order is set aside.
9. Appeal is disposed of in above terms.
(Operative part pronounced in the court)
(Ashok Jindal) (Devender Singh)
Member (Judicial) Member (Technical)
RAS‟