Custom, Excise & Service Tax Tribunal
M/S. Tata Motors Ltd vs Commissioner Of Central Excise, ... on 21 September, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.E/627/2007
(Arising out of Order-in-Original No.13/S.Tax/Commissioner/2007 dated 09.10.2007 passed by the Commissioner of Central Excise, Customs & Service Tax, Jamshedpur)
FOR APPROVAL AND SIGNATURE
Honble Shri H.K.Thakur, Member (Technical)
Honble Shri P.K.Choudhary, Member (Judicial)
1. Whether Press Reporters may be allowed to see
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
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
M/s. Tata Motors Ltd.
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Jamshedpur
Respondent (s)
Appearance:
Shri Ravi Raghavan, Advocate for the Appellant (s) Shri K.Chaudhary,Suptd.(AR) for the Respondent (s) CORAM:
Honble Shri H.K.Thakur, Member (Technical) Honble Shri P.K.Choudhary, Member (Judicial) Date of Hearing/decision:-21.09.2016 ORDER NO.FO/A/76073/2016 Per Shri P.K.Choudhary
1. M/s. Tata Motors Limited, Jamshedpur, the appellants herein are engaged in the manufacture of commercial motor vehicles & chassis and parts thereof falling under Chapter 87, 84, etc. of the First Schedule to the Central Excise Tariff Act, 1985 at their factory located at Jamshedpur. The appellants are availing cenvat credit of the duty paid on the inputs as well as input services received and used by them in the manufacture of final products. Appellants do not have the facility to manufacture axles and gear boxes in their factory and accordingly they have supplied the raw materials to M/s. H.V.Axles Limited and M/s. H.V.Transmission Limited (hereinafter referred to as HVAL and HVTL) who manufacture the axles, gear boxes and components thereof. The inputs procured/purchased by the appellants are supplied directly to HVAL and HVTL and always belonged to the appellants. Copy of the job order placed by the appellants on HVAL and HVTL are available as Annexure 1&2 at pages 26-33 of the appeal paper book.
2. HVAL and HVTL never sold axles and gear boxes to the appellants, since they have undertaken the process of manufacture out of the raw materials supplied to them by the appellants. Since no sale is taking place on the transfer of axles and gear boxes from HVAL and HVTL to the appellants, no sales tax is charged from the appellants. Illustrative copy of the invoices of HVAL and HVTL are available as Annexure 3&4 at pages 34 and 35 of the Appeal paper book.
3. The appellants have also availed services of some 3rd party processors, who process the raw materials/inputs sent to HVAL and HVTL, on behalf of the appellants and send those processed inputs/raw materials to HVAL and HVTL for further use in the manufacture of axles and gear boxes which are used by the appellants in the manufacture of motor vehicles. The contract of services rendered by the 3rd party processors is between the appellants and the 3rd party. Copy of the purchase order placed by the appellants on the 3rd party is available on page 36 of the appeal paper book. The appellants have paid processing charges to the 3rd party processors along with applicable service tax under the Business Auxiliary Services in terms of Section 65(19) read with Section 65 (105)(zzb) of the Finance Act, 1994. Accordingly, the appellants have taken credit of the service tax paid since the said services were used in the manufacture of axles and gear boxes, which are used in the manufacture of final products manufactured by the appellants. Show cause notices were issued and after due process of law, a demand of Rs.1,21,64,153/- was confirmed under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944 and a penalty of Rs.10,000/- was imposed under Rule 15(3) of Cenvat Credit Rules, 2002 vide the impugned order. Hence, the present appeal before this tribunal.
4. Ld. Counsel appearing on behalf of the appellant company reiterated the grounds of appeal and submitted that the appellants are receivers of the services rendered by the job worker and the said services have been used directly or indirectly, in or in relation to the manufacture of final products i.e. motor vehicles and accordingly the appellants are entitled to credit of service tax paid on the input services. Ld. Counsel also filed a flowchart depicting the movement of raw materials to the various job workers for processing. He also submitted a paper book containing Cenvat Credit Rules, 2004, definition of input services, notifications and copy of various judgments in support of his submissions. He further submits that the Ld. Commissioner in the impugned order has totally ignored the expression services used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final product. It is a settled legal position that the expression in or in relation to the manufacture of final product itself is of wide import. Definition of input services not only uses the expression in or in relation to the manufacture of final product but has also used the expression whether directly or indirectly, in or in relation to the manufacture of final products.
5. Axles and gear boxes are undisputedly used in the manufacture of motor vehicles and the services rendered by the 3rd party processors which were first used in the manufacture of axels and gear boxes, would still be satisfying the expression services used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of motor vehicle chassis. He vehemently argued that in view of the submissions made and the decisions cited by him the services rendered by the 3rd party processors are covered by the definition of input services with reference to the final product namely motor vehicle chassis. The impugned order holding that the services of the 3rd party processors are used only in the manufacture of axles and gear boxes and not in the manufacture of motor vehicle chassis is wholly incorrect and unsustainable in law.
6. Shri K.Choudhuri, Suptd.(AR) appearing on behalf of the Revenue reiterated the discussions and findings of the impugned order.
7. Heard both sides and after perusal of the case records we find that vide Notification No.8/2005-S.T. dated 01.03.2005 exemption has been extended to taxable service of production of goods on behalf of the client referred in sub-clause(b) of Clause (19) of Section 65 of the Finance Act. Period of dispute is March, 2005 to March, 2006 and thereafter in view of the aforesaid notification the appellants are claiming exemption for the subsequent period. On this issue paragraphs 7.2 and 7.3 of the case law Endurance Technologies Pvt. Ltd.-vs.-Commr.of C.Ex., Aurangabad [2011(273)E.L.T.248(Tri.-Mumbai)] are relevant and are reproduced below:
7.2?Input services rendered for manufacture of wind mills for generation of electricity is not in dispute. The electricity so generated is used in the manufacture of final product. Therefore, the service falls under the definition of input service. As regards input service used at a different place it is pertinent that there is no mandate in law that it should be used in the factory unlike inputs, which is clear from Rules 4(1) and 4(7) of the Cenvat Credit Rules, 2004 reproduced herein :-
Rule 4(1). The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service :
Provided that in respect of final products, namely, articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker.
Rule 4(7). The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in Rule 9. 7.3?The Tribunal in the case of Indian Rayon & Ind. Ltd. (supra) has held that no such stipulation regarding receipt of input service, which is separately defined under the Rules, is provided. The Honble High Court in the case of Ultratech Cement Ltd. (supra) has held that the definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the case of Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd. - 2010-TIOL-1227- CESTAT-MUM = 2011 (21) S.T.R. 297 (Tri. - Mum.), this Tribunal has held that the denial of CENVAT credit on the ground that services were not received by the respondent in factory premises is not sustainable. 7.1. In the aforesaid decision it was held that services rendered outside the factory when have a nexus with the manufacture of final product then such services are covered under definition of input service of the Cenvat Credit Rules, 2004. This decision of the tribunal has been upheld by the Honble High Court of Bombay in Commissioner of Central Excise and Customs, Aurangabad vs. Endurance Technology Pvt. Ltd.[2015-VIL-221-BOM-ST]. Similar view has been expressed by the larger bench of the tribunal in Parry Engg. & Electronics P. Ltd. vs. C.C.E. & S.T., Ahmedabad-I,II,III [2015(40) S.T.R.243(Tri.-LB)]. Paragraphs no.7 is relevant and is reproduced below:
7.?We find that the Honble Bombay High Court in the case of Endurance Technologies Pvt. Ltd. (supra) held that Cenvat credit is eligible on maintenance or repair services of Windmills, located away from the factory. It is well settled that the decision of Honble High Court is binding on the Tribunal. It was pointed out at the time of hearing that the definition of input service credit was subsequently amended in 2011. We find that the present appeals are involving for the period 2006-2007. In any event, this issue is not before the Larger Bench. Hence, the view taken by the Tribunal in the case of Endurance Technologies Pvt. Ltd. (supra) is correct. 7.2. Respectfully following the above decisions of the Honble High Court and the coordinate bench of the tribunal, we hold that the appellants are the receiver of the services rendered by the 3rd party job worker and the said services have been used directly or in directly in or in relation to the manufacture of motor vehicles chassis. Hence, the appellants are entitled to credit of service tax paid on the input services. The definition of input services is very clear; that the receiver of service does not mean receiver of inputs. The Cenvat Credit Rules itself recognize the distinction between input and input services according to which it has been made mandatory to receive inputs in the factory of production to avail cenvat credit on inputs. There is no condition to avail cenvat credit on input services that services availed should be received by the service receiver/manufacturer in the registered premises. In the case on hand, the goods, on which services were provided, instead of coming to the appellants factory were dispatched to another job worker of the appellants i.e. HVAL/HVTL. As already emphasized definition of input services does not specify that the services should be received in the factory of the manufacturer. The condition to avail cenvat credit on input service is that it should be used in or in relation to the manufacture of final products. In this case the service was used in the manufacture of motor vehicle chassis directly or indirectly. It is also a fact that the service charge paid by the appellant to the job worker is included in the assessable value of the final products.
8. In view of the above observations the appeal is allowed with consequential benefit, if any.
(Operative Portion of the order was pronounced in the open court.) S/d. S/d.
(H.K.Thakur) (P.K.Choudhary) MEMBER (JUDICIAL) MEMBER(TECHNICAL) MEMBER(JUDICIAL) ss 1 Appeal No.E/627/2007