Custom, Excise & Service Tax Tribunal
Endurance Technologies Pvt. Ltd vs Cce Aurangabad on 13 July, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. E/55 and 73/10 Mum
(Arising out of Order-in-Appeal No. AGS (219) 104/09 dated 06.10.2009 passed by the Commissioner of Central Excise & Customs (Appeals), Aurangabad.)
For approval and signature:
Honble Shri S.K. Gaule, 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 :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
Endurance Technologies Pvt. Ltd.
:
Appellant
(in Appeal No. E/55/10)
Versus
CCE Aurangabad
Respondent
..
CCE Aurangabad Appellant
(in Appeal No. E/73/10)
Versus
Endurance Technologies Pvt. Ltd Respondent
Appearance
Shri T.C. Nair, Advocate for Appellant
Shri A.K. Prabhakar, JDR for Respondents
CORAM:
Shri. S.K. Gaule, Member (Technical)
Date of Hearing : 13.07.2011
Date of Decision : 13.07.2011
ORDER NO.
Per S.K. Gaule
Heard both sides.
2. The Revenue as well as the assessees are in appeal against the impugned order passed by the Commissioner (Appeals) vide order-in-appeal No. AGS (219) 104/09 dated 06.10.2009. Since the issue involved in these cases is common they are taken up for disposal together.
3. Briefly stated facts of the case are that the assessee is engaged in the manufacture of excisable goods viz. motor vehicle parts falling under Chapter 87 of Central Excise Tariff Act, 1985. The assessee availed CENVAT credit of Service Tax paid on repairs and maintenance service of their wind mills situated at Waluj Aurangabad. Proceedings were initiated against the assessee on the ground that they availed inadmissible CENVAT credit for the period from (i) 01/12/2006 to 01/01/2008, (ii) 1.04.2005 to 1.09.06, (iii) Feb 2008 to March 2009 in their factory at Waluj Aurangabad. A show-cause notice was issued for recovery of CENVAT credit along with interest and imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 stating that the above services cannot be treated as input services of the assessee as defined under Rule 2(1) of the CENVAT Credit Rules, 2004 as these services are utilized for repair and maintenance of wind mills installed at Supa and Satara which are far away from their factory at Waluj Aurangabad. The lower adjudicating authority confirmed the demand along with interest and also imposed a penalty of Rs.6,66,856/-. The Commissioner (Appeals) upheld the lower adjudicating authoritys order to the extent of confirmation of demand and interest, however he has set aside the penalty imposed under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The assessee is in appeal against the confirmation of demand and interest and the department is challenging the setting aside of the penalty.
4. The contention of the assessee is that the services in connection with maintenance of wind mills are exclusively used in relation to manufacturing activity and, therefore, are squarely covered under the definition of input service. Input service covers not only services used directly or indirectly in or in relation to the business of manufacturing of the final product and in their case the repair and maintenance service has nexus with the upkeep of their wind mills which is used for generation of electricity which in turn is used in their factory and they are fully covered under the definition of input services under CENVAT Credit Rules, 2004. As regards the allegation of suppression of facts, the learned Counsel submits that that they have been filing their Excise Returns, Service Tax Returns in time and the records have been audited by Excise Officers and are having knowledge of their all activities. Under such circumstances, the allegation of suppression of facts is not sustainable and the extended period also cannot be invoked. In support of their contention he placed reliance on the decision of the Honble Bombay High Court in the case of CCE vs. Ultratech Cement Ltd. 2010 (260) ELT 369 (Bom.).
5. On the other hand, the learned JDR submitted that the service is not used in or in relation to the manufacture of final product. He further submitted that the input service should be used in the premises of the factory, like inputs. In the case of repair and maintenance service used in the wind mill which is situated far away from the manufacturing unit is not permissible. The assessee has availed this credit by suppressing the facts therefore penalty is rightly imposable against them.
6. In the rejoinder the learned Counsel submitted that once the demand is not sustainable, penalty is not warranted.
7.1 I have carefully considered the submissions and perused the records. The CENVAT credit availed on Service Tax paid on input service used in maintenance of wind mill located at Supa and Satara, which was availed by their manufacturing unit situated at Waluj Aurangabad on the ground that no services used by the manufacturer directly or indirectly in or in relation to manufacture of their final products. Input service is defined under Rule 2(l)(ii) of Cenvat Credit Rules, 2004, which is reproduced herein as under: -
"input service" means any service,-
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal. From the above it follows that the said definition not only covers services which are used directly or indirectly in or in relation to manufacture of final products and also includes other services, which have direct nexus or which are integrally connected in business of manufacture of final products.
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 Rule 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 Vs. Ultratech Cement Ltd. 2010-TIO)-1227-CESTAT-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.
8. In view of the above, I do not find any reason to interfere with the order of the learned Commissioner (Appeals) so far as it relates to confirmation of demand and interest is concerned. I agree with the contention of the learned Counsel that once the demand is not sustainable, penalty is not warranted. In view of the above assessees appeal is allowed and the Revenues appeal is dismissed.
(Dictated in Court) (S.K. Gaule) Member (Technical) nsk 7