Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise vs V. Thangavel & Sons (P) Ltd on 18 July, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.ST/358/2009
[Arising out of Order-in-Appeal No.36/2009 [CE] SLM dated 5.3.2009 passed by the Commissioner of Customs & Central Excise (Appeals), Salem]
For approval and signature:
Honble Shri R. PERIASAMI, Technical Member
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 authoritative report or not? :
3. Whether the Member wishes to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
Commissioner of Central Excise,
Salem
Appellant
Versus
V. Thangavel & Sons (P) Ltd. Respondent
Appearance:
Shri K.P. Muralidharan, Supdt. (AR) For the Appellant Shri M. Karthikeyan, Advocate For the Respondent CORAM:
Honble Shri R. Periasami, Technical Member Date of hearing : 13-06-2014 Date of pronouncement :FINAL ORDER No.40406/2014
1. Revenue filed this appeal against the order of Commissioner (Appeals) dt. 05.03.2009.
2. The brief facts of the case are that the respondent is a manufacturer of Synthetic Filament Yarn which attracts duty of excise and is also exempted from payment of duty under Notification No.30/2004, subject to non-availment of cenvat credit. The respondent also is registered with service tax authorities for rendering commission agents service which is taxable under the category of "Business Auxiliary Service" (BAS). They were availing the benefit of cenvat credit on inputs, capital goods, input services and discharging appropriate duty of excise on the final products manufactured by them. From 1.6.2006, they had opted to avail the benefit of exemption under the above notification and they are liable to reverse cenvat credit of duty paid on the inputs. They have reversed the credit attributable to the inputs lying in stock, contained in work in progress and finished goods as on 31.3.2006. Even after the reversal of credit, they had the balance of credit in their cenvat credit account. The respondents have utilized the Cenvat credit for payment of service tax liability on their output services rendered by them from the same premises. A show cause notice dated 02.01.2008 was issued for disallowing cenvat credit alleged to have been lapsed and wrongly availed by respondent.
3. On adjudication, the adjudicating authority confirmed the demand of Rs.20,44,436 + Rs.58,789/- along with interest and also imposed penalty. Aggrieved by this order, the respondent filed appeal before Commissioner (Appeals) and he allowed the appeal and set aside the adjudicating authoritys order. Hence Revenue filed the present appeal against the impugned order only on the limited grounds that the lower appellate authority erred in allowing credit availed on inputs received for the manufacture of excisable goods, for payment of service tax on the services rendered towards BAS for as the said inputs were not used for providing the output service.
4. Ld. A.R reiterates the grounds of appeal and submits that the manufacture of excisable goods and providing of Business Auxiliary Service are entirely different even though both activities are carried out in the same premises. The service rendered by the respondents as a commission agent under BAS has nothing to do with the manufacturing activity carried out by them. He relies on the definition of inputs defined in CCR 2004 and stated that definition of input credit availed on the manufacture of excisable goods are not for providing output service and the said inputs credit cannot be utilized for payment of service tax towards output service. He relies on Rule 2(k)and Rule 3(3) which prohibits utilization of cenvat credit availed on goods for payment of service tax for output services.
5. The learned advocate for the respondent reiterates the findings of the Commissioner (Appeals) in the impugned order and submits that the appellate authority has rightly allowed the appeal. He submits that there is no allegation by the department on the admissibility of cenvat credit and once the admissibility of credit is not under dispute, there is no bar on utilization of credit for payment of service tax on output services. He also submits that as per Rule 3(4) of CCR, cenvat credit can be utilized for payment of duty of excise on any final product or payment of service tax on output services. He relies on the following case law:-
(i) CCE Coimbatore Vs Lakshmi Technology & Engineering Indus. Ltd. 2011 (23) S.T.R. 265 (Tri.-Chennai)
(ii) S.S Engieers Vs CCE Pune 2013-TIOL-1512- CESTAT-MUM.
He submits that they are eligible to utilize the credit availed on the inputs for manufacture of excisable goods towards payment of service tax on output service as there is no one to one correlation.
6. I have carefully considered the submissions from both sides and gone through the records. The main contention of the Revenue is only on the utilization of cenvat credit by the respondents earned on the inputs received for manufacture of excisable goods towards payment of service tax for "Business Auxiliary Service", Prima facie there is no dispute on the admissibility of Cenvat credit availed on the inputs.
7. There is no dispute on the fact that the respondent is a manufacture of excisable goods Synthetic Filament Yarn and duly registered with the Central Excise Department. The respondents also registered with the service tax authorities as "commission agent", which is classifiable under Business Auxiliary Services and discharging service tax on the output service. Therefore, the respondents are not only a manufacturer of excisable goods but also the provider of output services and both the activities are carried out in the same premises.
8. Apparently there is no dispute on admissibility of the cenvat credit availed by the respondents as the Commissioner (Appeals) in the impugned order has decided in favour of respondents, which is not contested in the appeal by Revenue. Once it is held that the respondents are eligible for availment of input credit, they can utilize the cenvat credit available with them either for payment of excise duty on the final products or for payment of service tax on the output services as stipulated in the sub-rule (4) of Rule 3 of CCR 2004. The restrictions on utilization of cenvat credit stipulated in the CCR relates only for specific type of duties i.e. education cess on excisable goods or payment of educational cess on output services. There is no restriction for utilization of common input credit availed on the inputs and also on input services for payment of excise duty or service tax.
9. The identical issue has been dealt with by the Tribunal in the case of Lakshmi Technology & Engineering Indus Ltd. (supra) and in the case of SS Engineers (supra). The Tribunal's order in the case of SS Engineers Vs. CCE, Pune-I (supra), is reproduced herein below:-
5. We have considered the rival submissions. We have gone through the CENVAT Credit Rules. We find that Rule 2 defines input, input services, capital goods etc. Before availing CENVAT credit, a manufacturer or service provider has to be satisfy the definitions provided under the said Rules. Rule 3(1) of the CENVAT Credit Rules states that a manufacturer or producer of final products or provider of taxable service shall be allowed to take credit of various duties specified in various sub-clauses therein. The specified duties among various duties include duty of excise specified in the First Schedule to the Excise Tariff leviable under the Excise Act as also Service Tax leviable under different Sections of the Finance Act, 1994. Sub-rule (4) of Rule 3 provides that CENVAT credit may be utilized for payment of various liabilities and includes any duty of excise on any final product as also service tax on any output service (other situations also covered under the said sub-rule, which are not relevant in the present case). Thus, we find that Rule 3 of the CENVAT Credit Rules, 2004 does not stipulate maintaining separate account as a manufacturer and as a service provider. Third proviso to sub-rule (4) of Rule 3, provides that no credit of the additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act, shall be utilized for payment of service tax on any output service. Similar restrictions are in other proviso. We also note that there are certain restrictions on the utilization of particular type of duties which are elaborated in sub-rule (b) of Rule 7 of the CENVAT Credit Rules. These restrictions do not cover cross utilization of credit of excise and service tax, as a general proposition.
6. We have also gone through the various case law quoted by the learned counsel for the appellant and we note that in the case of CCE, Pune vs. Lakshmi Technology and Engineering Industries Ltd. (supra) in para 6 has observed as under:
6. I have carefully considered the submissions from both sides and perused the records. Rule 3(1) of the CENVAT Credit Rules permits credit to a manufacturer of final product or a service provider of taxable service. If a person manufactures only excisable goods, he is entitled to take credit of not only excise duties paid on capital goods and inputs but also additional duty of customs paid under the Customs Tariff Act in respect of imported inputs and capital goods and also service tax paid on the input services utilized in or in relation to the manufacture of the excisable goods. In other words, a manufacturer of excisable goods is entitled to use the credit from a common pool to which different categories of specified excise duties, customs duty and service tax are allowed to be taken as credit. Similarly, a provider of taxable service is also entitled to take credit of specified excise duty, additional duty of customs and service tax in respect of input services and utilize the credit from all these sources for the purpose of paying service tax. The objection by the Department is that the respondent who is both a service provider and a manufacturer should maintain two separate accounts one in respect of credit attributable to inputs, capital goods and services meant for excisable goods and credit attributable to capital goods, inputs and services attributable to the service provided by them. Common CENVAT Credit Rules have been framed in terms of powers conferred by Section 37 of the Central Excise Act, 1944 and Section 94 of the Finance Act, 1994. Rule 3(1) enables a 'manufacturer' or a 'provider of taxable service' to take credit of specified duties and utilize them to discharge duty liability under Rule 3(4) of the CENVAT Credit Rules. A credit can be utilized for payment of any duty of excise on any final product or for payment of service tax on any output service. The respondent is undisputedly registered as a service provider for providing the services of renting of immovable property. The credit taken by them as manufacturer / service provider has been used both for paying excise duty and for paying service tax. The rules permit taking of credit under a common pool and permit use of the credit from the common pool for different purposes and there is no restriction placed to the effect that credit accounts should be maintained for use for manufacture of excisable goods and for use for providing services. Therefore, the view taken by the Commissioner (Appeals) cannot be faulted. The clarification sought to be relied upon by the Department that input credit service taken only if the output is a service liable to service tax has no relevance to the present case. Undisputedly, the respondents have registered themselves as service provider of service of renting of immovable property and paying service tax as provider of output service and therefore the utilization of credit taken by them is valid.
7. In addition to above, we have also gone through the format of ER-1 return and ST-3 return. Sr. no. 8 and the Table details the CENVAT credit taken and utilized. In ER-1 return, in Table at Sr. no. 8, in column (9), details about service tax are specifically listed. On careful analysis of the said format, the intention appears to be to permit cross utilization of the credit of excise duty and service tax.
19. Considering the afore cited decisions of the Tribunal on the identical issue, I find that there is no infirmity in the order of Commissioner (Appeals) in holding that utilization of input cenvat credit availed by the respondents for payment of service tax on the output service of Business Auxiliary Services rendered by them. The impugned order is upheld. Accordingly, the appeal filed by Revenue is dismissed.
(Pronounced in open court on __________) (R. PERIASAMI) TECHNICAL MEMBER gs 2