Custom, Excise & Service Tax Tribunal
Pepsico India Holdings Pvt Ltd vs Ce & Cgst Allahabad on 13 November, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.55537 of 2014
(Arising out of Order-in-Original No.MP (Dem-23/2013)11 of 2014 dated
07/07/2014 passed by Commissioner of Customs, Central Excise & Service
Tax, Allahabad)
M/s Pepsico India Holdings Pvt. Ltd., .....Appellant
(A-36, UPSIDC, Sathariya
Industrial Area, Jaunpur-222202)
VERSUS
Commissioner of Customs, Central Excise &
Service Tax, Allahabad ....Respondent
(38, M.G. Marg, Civil Lines, Allahabad-211001)
APPEARANCE:
Shri Dhruv Tiwari, Advocate for the Appellant
Shri Santosh Kumar, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70714/2024
DATE OF HEARING : 23 July, 2024
DATE OF PRONOUNCEMENT : 13 November, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order in Original No. MP
(Dem-23/2013) 11 of 2014 dated 07.07.2014 of the
Commissioner Central Excise Customs & Service Tax Lucknow.
By the impugned order following has been held:
"ORDER
1 I disallow the cenvat credit in total amounting to Rs.
85,98,001.00 ( Rupees Eighty five lakhs ninety eight
thousands and one only) taken by the party on various
ineligible input and input services and order for
recovery of the same under the provisions of Rule 14 of
Excise Appeal No.55537 of 2014
2
the Cenvat Credit Rules, 2004 read with Section 11 (A)
(1) of Central Excise, Act, 1944.
2 I appropriate the amount of Rs 81,44,372.00 (Rupees
Eighty one lakhs forty four thousands three hundred
seventy two only) already reversed by the party
towards demand being confirmed at (1) above.
3 I impose a penalty of Rs 10,00,000.00 (Rupees Ten
lakhs only) on M/s Pepsico India Holdings Private
Limited, A-36, UPSIDC, Sathariya Industrial Area,
Jaunpur-222202 under Rule 15 (1) of Cenvat Credit
Rules, 2004."
2.1 Appellant is engaged in manufacturing of branded Aerated
Water falling under Chapter heading 22021010 of Central Excise
Tariff Act,1985, They are availing Cenvat credit on input/ capital
goods and input services used in or in relation to manufacture of
their final products.
2.2 The Officers of Anti- Evasion branch of Central Excise
Commissionerate, Allahabad visited the premises of the party
on 21.09.2012 and checked the Cenvat Credit records /
documents related to Cenvat credit availed by the party on
Inputs, Capital goods and Input services. The Finance Manager
of the firm, Shri Rakesh Agrawal provided the hard copies of
electronic records and informed that the unit had commenced
production only in the month of March' 12. The statement of Shri
Rakesh Agrawal, Finance Manager of M/s Pepsico India Holdings
(P) Ltd. (RUD No. 1) was also recorded on the same day under
Section 14 of the Central Excise Act`1944
2.3 On scrutiny of Cenvat credit records of the party in respect
of inputs, it was found that
input credit of Rs.7,67,657/- has been taken on chemicals
used on flooring during construction. Such chemicals are
neither capital goods nor input. As regards its use, the
party stated that these chemicals have been used on floors
of the plant area during construction. On pointing out non-
admissibility. on such chemicals, Shri Rakesh Agrawal,
Excise Appeal No.55537 of 2014
3
Finance Manager of M/s Pepsico India Holdings (P)
Ltd. stated that would be reversed, after discussion
with the seniors. These chemicals were admittedly used
in coating of floor area which squarely fell under category
of construction service. Hence credit taken on such
chemicals appeared to be not admissible and the same
appeared liable to be recovered from the party. However,
subsequently the party agreed and reversed the same
vide entry No. 17 dated 29.9.20 12.
From definition of input service it is evident that setting up
of factory has been excluded w.e.f 01.04.2011 from the
list of specified services U/R 2(l) of CCR, 2004 . The
Project Management Team(PMT) has undertaken various
work mainly related to setting up of the factory including
Civil Works inside the factory. Before the initiation of the
work on the project site, the Project Management Team
(PMT) undertakes survey, inspection and establishes
marking on the proposed area. The PMT also monitor daily
preparation activities and verify compliance with the
„clients‟ specification. The scope of work involved in site
preparation includes excavation work trenching and
backfilling. dewatering, clearing of drainage Setting up
security fencing, demolition of buildings, Structures and
equipment, concrete related work and asphalting. The
PMT then undertakes construction of a building or the
structure to house the operations of theplant, workforce,
and supplies. The building work involves concrete flooring,
building of masonry wall, drywall construction, building of
roof, building of ceiling, pre-cast building doors and
windows installation and waterproofing.
the party have availed and utilized Cenvat Credit against
input services received for setting up of the factory.
However the project was completed in March'12. On going
through the details of Agreement, letter of intent (LOI) and
particulars mentioned on invoices issued by the service
providers, it appears that these services fall under
Excise Appeal No.55537 of 2014
4
excluded category i.e. related to setting up of factory or
construction of building or structure and most of Cenvat
credit on input service pertains to setting up factory prior
to March,2012.
By a written submission dated 05.10.12 it was informed
that credits of Rs 16,23,863/- and Rs.7,67,657/- wrongly
taken on input service and inputs respectively has been
reversed.
From the records of the appellant it appeared that they
have taken inadmissible credit amounting to Rs.
78,30,344.81 on various input services such as Civil
Engineering, transportation, security Agency, Man Power
Supply etc. provided by various service providers viz. M/s
M.R. Warerkar & Associates, M's Pest control pyt Ltd., M/s
A.G.Developers Pvt. Ltd.,M/s Johnsons Controls (I) Pvt
Ltd., M/s Shiv Shakti Fiber Udyog, M/s Khuntia Brothers,
M/s Esskey Industrial and M/s Ranjeet Engineering etc.
The credit against these services either relate to setting
up of factory or construction of building, which is not
admissible as per Rule 2(L) of the Cenvat Credit Rules,
2004. These activities relate to excluded category i.e.
setting up and credit availed on these services is liable to
be recovered from the party. Each service is elucidated in
the following paras to indicate nature of services for
setting up a new plant as well as construction services,
specifically fall under excluded category , and not
admissible to the party as per provisions of existing Rule
2(l) of Cenvat Credit Rules (as effective from 1-4-2011).
Appellant to input service credit of Rs.17,19,787.76/-
against services for Erection of Pre Engineered Building by
M/s Phenix Infra (Division of M&B Engg. Pyt. Ltd.) under
LOI vide REF/Sathariya/CSD/2010/14/Rev-00 dated 9'
March, 2011. This service has been provided by Ms Phenix
Infra (Division of M&B Engg. Pvt. Ltd.) as Installation of
building complete (including caged ladder/polycarbonate
sheets/ RWP/ Jack beam system) as per technical
Excise Appeal No.55537 of 2014
5
specifications, as per agreement with the service provider.
Though the description of work in invoices is mentioned as
erection of pre-engineered building but the activity
undertaken falls under the category of construction of
building, which is not admissible as per Rule 2() of the
Cenvat credit Rules*2004.The same is liable to be
reversed /recovered from the party. However, on being
pointed out, Shri Rakesh Agrawal, Finance Manager, in his
statement dated 21.09.12 admitted and reversed the
same
Appellant took input service credit of Rs.21,57,497/- for
Consultancy Services for the plant of the party. As per the
LOI of M/s M.R.Warekar & Associates Pvt. Ltd. Vide
REF/Sathariya/CSD/2010/001/Rev-00 dated 8"h
June,2010, they (the service provider) have undertaken
works such as Architectural, Civil, Structural, PEB,
Statutory approvals , MEP Services Similarly, Ms Rao
Engineering Enterprises, as per REF/Satharia/CSD/20
10/005/Rev-00 dated 7th July 2010 have undertaken the
flooring work. The particulars of work mentioned in LOL is
as under :-
Scope of Work
Mobilisation of men and equipments to site, shifting of
equipment from one site to another and back to Delhi
store.
Sinking 3 boreholes to 10 m depth
Carrying out Dynamic Cone penetration test (DCPT)
Parameters to be adopted for design of foundations.
Geo-Technical Consultancy Services, as per invoice
No.172/22.10.11
Entry Invoice Particular of work
No. No./date
171 172/ Sub-soil investigation by hand boring of 150 mm dia
22.10.11 size, collection of disturbed and undisturbed samples
etc. including report recommendation of foundation,
depth and allowable bearing capacity.
Excise Appeal No.55537 of 2014
6
These activity appeared to fall under the category of
industrial construction used for building, which is not
admissible as per Rule 2 (l) of the Cenvat Credit Rules,
2004
Appellant took input service credit of Rs.1,99,279.17
against invoices of M/s A.G. Developers PVT Ltd. for
construction of flooring in Plant of the party. This activity
appeared to fall under the category of construction of
building, which is not admissible as per Rule 2() of the
Cenvat credit rules'2004 and therefore the inadmissible
credit availed on the service appeared liable to be
recovered from the party.
Appellant took input service credit of Rs.83,368.98 on
erection work of polycarbonate False Ceiling for the plant.
This service has been provided by M/s Shiv Shakti Fibre
Udyog, Faridabad under letter of intent (LOI) vide
REF/Sathariya/CSD/2010/62/Rev-00 dated 18"h October.
2011. As per LOI "The rates are inclusive of entire erection
work for false ceiling and connected work including
painting with low VOC paint necessary scaffolding work
etc. complete, as per agreement with the service provider.
The service provided by M/s Shiv Shakti Fibre Udyog,
Faridabad falls under the category of construction of
building, which is not admissible as per Rule 2(l) of the
Cenvat Credit Rules, 2004 and the credit on service availed
appeared liable to be recovered from the party.
Appellant took input service credit of Rs. 4,08,831.85/-
against invoices issued by M/s Khuntia Brothers under LOI
vide REF/Sathariya/CSD/201 1/18/Rev-00 dated 7th
April,2011 for sanitary work for extension to the factory
building. One of sample invoice No.16 dated 06.07.2011
of M/s Khuntia Brothers bears the description of work as
under: -such type of material supplied for the work of
sanitary and drainage Work, Demolishing of bituminous
concrete, WBM, soling stone and plain cement concrete,
stacking of serviceable material and disposal of
Excise Appeal No.55537 of 2014
7
unserviceable material outside the factory premises, AS
per agreement with the service provider and invoices
showing particular of works, it appeared that the activity
fell under the category of construction of building, which is
not admissible as per Rule 2(l) of the Cenvat Credit
Rules,2004
Appellant took input service credit of Rs. 10,44,261.69/-
on Project Management Consultancy (PMC) against
invoices issued by M/s Johnson Control (I) Pvt. Ltd.
Bangalore. As per LOI vide
REF/Sathariya/CSD/2010/002/Rev-00 dated 15th June
2010, the service has been provided by M/s Johnson
Control () Pvt. Ltd. Bangalore, LOI for project Management
Consultancy for expansion of factory building
works. From the perusal of agreement with the service
provider, it appeared that the activity fell under the
category of architect service used for construction of
building as well as related to setting up of the factory. The
credit on such input service is not admissible as per Rule
2(l) of the Cenvat Credit Rules, 2004.
Appellant took input service credit of Rs.71,509.39 for
Service charges of termi-seal service, pre- construction
anti termite treatment at plant and warehouse . The
description of work mentioned in invoices issued by M/s
Pest Control of India Pyt. Ltd. indicates that these
activities have been carried out as are pre-requisite for
construction of plant and as such appeared to fall under
the category of construction of building, and therefore the
credit of service tax paid on these services appeared to be
not admissible as per Rule 2(l) of the Cenvat Credit Rules,
2004.
Appellant took input service credit of Rs.1,32,915.45/-
against invoices showing work as equipment hiring and
construction of Chimney at the plant of the party. Invoices
issued by Ms Krishna Traders show services as DG rent,
operating charges whereas invoices of M/s Sonu Builders
Excise Appeal No.55537 of 2014
8
show construction of chimney. These activities relate to
setting up of factory and construction work. As such the
party appeared not entitled for credit on such nput service
as per Rule 2(l) of the Cenvat Credit Rules, 2004.
Appellant took input service credit of Rs.11,97,166.83
against invoices showing work construction and line
fabrication by Ms Ranjeet Engineering Works and Ms
Esskay industrial. In case of M/s Ranjeet Engineering
Works, the invoices/bill depicts description of work as
crane charges, man power, unloading or shifting of
various machineries at Allahabad warehouse etc. These
activities pertain to setting up of factory and construction
work which have been provided prior to operation of the
factory and as such appeared to be not eligible for credit,
as per Rule 2(l) of the Cenvat credit rules'2004.
Appellant took input service credit of Rs.1,64,366.00/-
against invoice No.1980058480 dated 24.04.12 of M/s
Tetra Pak India Pvt Ltd showing work installation and
commissioning of Sathariya plant. On perusal of LOI dated
19.7.2010 with M/s Tetra Pak India Pvt Ltd., it is observed
that the activity involves supervision of installation,
unloading positioning of equipment and carryout the
commissioning of the unit. These activity pertain to
setting up of factory and have been provided prior to
operation of the factory and as such appeared to be not
eligible for credit, as per Rule 2(l) of the Cenvat credit
rules'2004. Appellant reversed the same in the month of
Feb'13
Appellant took input service credit of Rs.2,96,573.82/-
against invoices on services of man power supply, availed
during the period when the factory had not started
manufacturing operation. M/s Aqeel Enterprises and Ms
ADECCO INDIA have provided man-power to M/s Pepsico
India Holdings (P) Ltd. during project work i.e. setting up
of the factory and other services like loading charges at
Allahabad guest house/ warehouse at Kaushambi, cleaning
Excise Appeal No.55537 of 2014
9
charges, transport charges, other work expenses, Trailer
freight charges etc.
Appellant took input service credit of Rs, 2,94, 243.66
against invoices on services of security, availed during the
period when the factory had not started manufacturing
operation.. M/s Security and Intelligence Services Ltd. and
M/s Ravi Securities have provided security services during
setting up i.e. from Jan'11 to Feb' 12.
Appellant took input service credit to the tune of Rs.
60,543.21 n Goods Transport Agency service on the
strength of Goods Receipt (GRs).The GRs issued of the
transporters indicate fright only and not_ service tax
payable. In case of credit against GTA services, Challans
evidencing payment of service tax are specified document
under Rule 9(1) (e) of the Cenvat Credit Rules, 2004. On
query the party stated that freight has been paid by their
Lucknow office. However they could not produce the
Challans /GAR-7s evidencing payment of service Tax on
freight or ISD invoices issued by their head office. As such
the credit taken on non specified document Rule 9(1)(e) of
the Cenvat Credit Rules, 2004 appeared not admissible to
them.
2.4 During investigation, the party agreed to reverse
inadmissible credit taken against the input service invoices
issued by M/s Phenix Infra, M/s M.R. Wareker, M/s Khuntia
Brothers and M/s A.G. Developers. They reversed the
inadmissible credit as detailed below:
(i) Sept‟12 Rs 23, 91193.24 (Rs.767329.99
+1623863.25)
(ii) Dec' 12 Rs.1818931.42
(iii) Jan‟ 13 Rs. 705878.21
(iv) Feb' 13 Rs. 243489.81
Total Rs.51,59,492.68
2.5 Thus revenue authorities were of the view that appellant
has taken credit against input/ input service, wrongly in
Excise Appeal No.55537 of 2014
10
contravention of provisions of Rule 2,3,4 & 9 of the Cenvat
Credit Rules, 2004. For said contravention appellant was liable
for penalty under Rule 15(1) of the Cenvat Credit Rules, 2004
2.6 A show cause notice dated 22.03.2013 was issued to the
appellant asking them to show cause as to why :-
(i) Cenvat credit taken on input and input services wrongly
to the tune of Rs 85,98,001.81 (Rupees Eighty Five Lac
Ninety Eight thousand one and paisa Eighty One only)
in violation of the provisions of rule 2, 3, 4 & 9 of the
Cenvat Credit Rules, 2004 should not be recovered
along with interest under Section 11 A & 11 AA of the
Central Excise Act`1944 read with Rule 14 of the
Cenvat Credit Rules'2004 and why the amount of Rs.
51,59,492.68 reversed by them should not be
appropriated against their liability
(ii) Penalty should not be imposed upon them under Rule
15(1) of the Cenvat Credit Rules'2004.
2.7 The show cause notice has been adjudicated as per the
impugned order. Aggrieved appellant has filed this appeal.
3.1 We have heard Shri Dhruv Tiwari, Advocate for the
appellant and Shri Santosh Kumar, Authorized Representative
for the revenue.
3.2 Arguing for the appellant learned counsel submits that,-
Cenvat Credit on inputs and input services availed prior to
commencement of commercial production is admissible,-
o Pepsico India Holdings (Pvt.) Ltd.[2022 (56) G.S.T.L.
22 (Tri.-Hyd.)]
o Saint Gobain Glass India Limited [2023 (11) TMI 522
- CESTAT Chennai]
o Mangalam Cement Limited [2023 (4) TMI 601-
CESTAT New Delhi]
o Jindal Steel & Power Limited [2023 (7) TMI 712-
CESTAT Kolkata]
Excise Appeal No.55537 of 2014
11
o Texmaco UGL Rail (P) Ltd. 2019 (7) TMI 1651 -
CESTAT Kolkata]
o Hindustan Zinc Ltd. [Final Order No. 51762-
51764/2021 in Central Excise Appeal No. 50326 of
2019]
o Solvay Specialities India Pvt. Ltd. [2023 (10) TMI
592 - CESTAT Ahmedabad]
Cenvat credit in respect of erection, commissioning and
installation services (i.e. erection of pre engineered
building, architectural services, services in relation to
flooring, renovation of flooring, erection of false ceiling,
sanitary work, installation and commissioning of plant,
equipment hiring) is admissible.
o Orient Cement Ltd. [2017 (51) S.T.R. 459 (Tri.-
Hyd.)]
o Texmaco UGL Rail, [2019 (7) TMI 1651 - CESTAT
Kolkata]
o Hindalco Industries Ltd. [2019 (5) TMI 1620 -
CESTAT New Delhi]
o Unique Chemicals [2019 (8) TMI 200- CESTAT
Ahmedabad]
o Carrier Air Conditioning & Refrigeration Ltd. [2016
(41) S.T.R. 824 (Tri. - Chan.)]
o Reliance Industries Ltd. [2022 (4) TMI 729 -
CESTAT Ahmedabad]
o Jai Balaji Industries Ltd. [2022 (8) TMI 468- CESTAT
Kolkata] Affirmed by the Hon'ble Calcutta High
Court as reported at [2023 (5) TMI 92- Calcutta High
Court]
o Godavari Power & Ispat Ltd. [2023 (11) TMI 719-
CESTAT New Delhi]
o General Motors India P Ltd. [2023 (9) TMI 713-
CESTAT Ahmedabad]
Excise Appeal No.55537 of 2014
12
o Simbhaoli Sugars Ltd. [2024 (5) TMI 618- CESTAT
Allahabad]
o Jaypee Rewa Plant [2018 (9) TMI 633- CESTAT New
Delhi]
o Mangalam Cement Limited [2023 (4) TMI 601-
CESTAT New Delhi]
Cenvat Credit on Manpower Supply services and project
management services is admissible;
o Mangalam Cement Limited [2023 (4) TMI 601
CESTAT DELHI]
o Unique Chemicals [2019 (8) TMI 200 CESTAT
Ahmedabad]
o Hindalco Industries ltd. [2023 (4) 601 CESTAT New
Delhi]
Credit on Anti termite Treatment services is admissible;
o Hindustan Petroleum Corpn Ltd. [2017 (47) STR 136
(T-Hyd)]
o Hindustan Petroleum Corpn Ltd. [2019 (5) TMI 1088
CESTAT Hyd]
Cenvat Credit on Security Services is admissible;
o Triveni Engineering & Industries Ltd. [2017 (3) GSTL
140 (T-ALL)]
o Mangalam Cement Limited [2023 (4) TMI 601
CESTAT DELHI]
Extended period is not invokable.
o Reliance Industries Ltd.[2023 (385) E.L.T. 481
(S.C.)] Mahanagar Telephone Nigam Ltd. [2023 (73)
G.S.T.L. 310 (Del.)]
o Hero MotoCorp Limited, [Final Order No. 55631-
55632/ 2024 in Excise Appeal No. 51930 of 2019
and Excise Appeal No. 50688 of 2020]
o GD Goenka Private Limited [Final Order No. 51088/
2023 in Service Tax Appeal No. 51787 of 2022]
Excise Appeal No.55537 of 2014
13
o Delhi Airport Metro Express Pvt.Ltd.[Final order No.
50031/ 2024 in Service Tax Appeal No. 50919 of
2015]
o Birla Corporation Limited [(2023) 11 Centax 132
(Tri.-Del.)], Affirmed by Hon'ble Supreme Court as
reported at [(2023) 11 Centax 133 (S.C.)]
o Uniworth Textiles Ltd. [2013 (288) E.L.T. 161
(S.C.)]
o Petropole India Ltd. [2016 (9) TMI 125- CESTAT
New Delhi]
Appellant counsel filed additional written submissions on
23.07.2024 along with the copies of ER-1 returns for the
month of the September 2011, October 2011, November
2011, December 2011, February 2012 and March 2012.
They further submitted:
o Once a service is covered by means clause of
definition, non mention of the same in the inclusive
part would not exclude the same from the purview of
input service:
High Land Coffee Works 1991 (3) SCC 617
TTK Health Care Ltd. [2007 (11) SCC 796
Bharat Coop bamk Mumbai Ltd. [2007 (4) SCC
685]
Semco Electrical Pvt Ltd [2010 (18) STR 177
(T-Bom)]
Bell Ceramics Ltd [2011 (21) STR 417 (T-
Bang)] affirmed by Hon‟b;e Karnataka High
Courtat [2012 (25) STR 428 (Kar)]
o Appellant cannot be estopped now from claiming the
credit which is legally available
Dunlop India Ltd [1983 (13) ELT 1566 (SC)]
Jayaswal Neco Ltd [2015 (322) ELT 587 (SC)]
Excise Appeal No.55537 of 2014
14
Hingora Industries Ltd. [2009 (237) ELT 318
(T-Del)]
Laxmi Color Lab [1992 (62) ELT 613 (t)
affirmed by Hon‟ble Supreme Court as reported
at [1997 (90) ELT A 183]
Polytex Industries [2012 (281) ELT 48 (Mad)]
Along with letter dated 31.07.2024 appellant counsel filed
written submission, along with the certain documents such
as invoices against which the credit was taken. They stated
"The issue in the present case relates to denial of
Cenvat Credit amounting to Rs 85,98,001 availed on
input and input services for carrying out revival and
renovation activities in the manufacturing plant on
the ground of being used for setting up of factory
prior to commencement of commercial production
and falls under the excluded category of
construction of building."
3.3 Authorized Representative re-iterates the findings recorded
in the impugned order.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 Impugned order records the findings as following:
DISCUSSION AND FINDING:
36. I have gone through the Show Cause Notice dated
22.03.13, the party's defence reply dt. 36. 16.04.14 and
the record of personal hearing held on 17.04.14. Having
complied with the requirements of natural justice, I now
proceed to adjudicate the case.
37. The Show cause notice intends to deny cenvat credit
taken by the party on inputs and input services, in total
amounting to Rs. 85,98,001.00. On persuasion during
investigation, the party have reversed credit amounting to
Rs.23,91,193.24 in Sept'12, Rs.18,26,242.61 in Dec'12,
Rs.7,05,878.21 in Jan`13 and Rs.2,43,489.81 in Feb'13, in
Excise Appeal No.55537 of 2014
15
total amounting to Rs.51,66,803.87 though under protest
Subsequently, they have further reversed credit amounting
to Rs.29,77,568.18 in March'13. The party have claimed
that this amount of Rs. 29,77,568.18 has been paid by
them before issue of SCN whereas, factually the reversal of
Rs. 29,77,568.18 was made on 27.03.13 i.e. after issuance
of SCN on 22.03.13. Thus, out of total alleged irregular
credit of Rs.85,98,001.00, the party have reversed credit
amounting to Rs.81,44,372.12 by March, 2013. Despite
making substantial reversals the party have contested the
allegations on some issues and have claimed re-credit of
some of the amounts reversed. In these circumstances, it
is appropriate on my part to discuss the individual issues to
arrive at the correct findings.
38. Credit of Rs.7,67,657/- taken by the party on
inputs:-
As per facts of the case, input credit of Rs. 7,67,657/- has
been taken by the party on chemicals like Master Flex,
Ucrect, Master Top etc. for use on flooring of the plant
during construction. It has been alleged in the SCN that
these chemicals are neither capital goods nor inputs and
thus not eligible for credit. On being pointed out about its
non-admissibility, the party, agreeing with the Deptt.,
reversed the credit vide entry no. 17 dated 29.09.12,
In their defence reply the party has offered no
comments / arguments to defend the aforesaid credit
and thus seem to have finally agreed to its non-
admissibility.
I have gone through the provisions of Rule 2 (k) of CCR,
2004 which defines input' as under:-
Rule 2 (k) Input means--
(i) all goods used in the factory by the manufacturer of
the final product; or
Excise Appeal No.55537 of 2014
16
(ii) any goods including accessories, cleared along with
the final product, the value of which is included in the value
of the final product and good used for providing free
warranty for final products; or
(iii) all goods used for generation of electricity or steam
for captive use; or
(iv) all goods used for providing any output service;
but excludes-
(A) ...
(B) Any goods used for-
(a) construction of a building or a civil structure or a part
thereof; or
(b) laying of foundation or making of structures for
support of capital goods, except for the provision of any
taxable service specified in sub-clauses (p), (zn), (zzl),
(zzq), (zzzh) and (zzzza) of clause (105) of section 65 of
the Finance Act.
In light of the above provisions of law, I hold that all the
chemicals on which input credit has been taken by the
party, were admittedly used by the them in the flooring of
the plant, which without doubt is liable to be treated as
having been used in construction of building, which fals
under the excluded category. Thus, I deny the credit of
Rs.7,67,657/- taken by the party on the aforesaid
chemicals.
39. On proceeding further, I find that the aforesaid credit of
Rs.7,67,657/- taken by the party is the only credit taken by
them on inputs. The other credits taken by the party which
are covered in the instant SCN, are of service tax paid on
input services
Since it is relevant, the provisions of "Input service" under
Rule 2(l) of CCR, 2004 as they existed during the material
time i.e. March, 2012 to Dec, 2012, are reproduced below:-
Excise Appeal No.55537 of 2014
17
01.04.11 to 30.06.12:-
"Input Service means any service-
a. used by the provider of taxable service for providing
ouput service; or
b. used by a manufacturer whether directly or
_indirectly in relation to manufacture of final product and
clearance of final product upto the place of removal.
And includes services in relation to Modernization or
renovation or repairs of the premises of provider of output
service or an office relating to such premises Advertisement
or sales promotion Market research Storage up to the place
of removal Procurement of inputs Accounting, auditing,
financing, recruitment and quality control, coaching and
training, computer networking, credit rating, share registry
and security, business exhibition, legal service) Inward
transportation of inputs or capital goods and Outward
transportation up to the place of removal."
but excludes services,--
A) Specified in sub-clauses (p), (zn), (zzm), (zzq),
(zzzh) and (zzza) of clause (105) of Section 65 of the
Finance Act (hereunder 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
b. Laying of foundation or making of structures for
support of capital goods, except for the provisions of one or
more of the specified services; or
B) Specified in sub-clauses (d), ((o), (zo) and (zzzj) of
clause (105) of section 65 of the Finance Act, in so far as
they relate to a motor vehicle except when used for the
provision of taxable services for which the credit on motor
vehicle is available as capital goods; or
C) Such as those provided in relation to outdoor
catering, beauty treatment, health services, cosmetic and
plastic surgery, membership of a club, health and fitness
Excise Appeal No.55537 of 2014
18
centre, life insurance, health insurance and travel benefits
extended to employees on vacation such as Leave or Home
Travel Concession, when such services are used primarily
for personal use or consumption of any employee.
01.07.12 onwards:-
"Input Service' means any service-
a. used by the provider of taxable service for providing
output service; or
b. used by a manufacturer whether directly or indirectly
in relation to manufacture of final product and clearance of
final product upto the place of removal.
And includes services in relation to Modernization or
renovation or repairs of the premises of provider of output
service or an office relating to such premises,
Advertisement or sales promotion Market research Storage
up to the place of removal Procurement of inputs
Accounting, auditing, financing, recruitment and quality
control, coaching and training, computer networking credit
rating, share registry, security, business exhibition, legal
service) Inward transportation of inputs or capital goods
and Outward transportation up to the place of removal."
But excludes-
(A) service portion in the execution of a works contract
and construction services including service listed under
clause (b) of section 66E of the Finance Act (hereinafter
referred to as specified services) in SO far as they are used
for-
a. construction or execution or execution of works
contract of a building or a civil structure or a part thereof;
or
b. laying of foundation or making off structure for
support of capital goods, except for the provision of one or
more of the specified services.
Excise Appeal No.55537 of 2014
19
Now, in the succeeding paragraphs, I take up the specific
service tax credits taken by the party and which the instant
SCN intends to deny
40. Erection of pre-Engineered Building--
As per facts of the case on record, input service credit of
Rs.17,19,787.76 has been taken by the party against the
services provided by one M/s Phoenix Infra. The description
of work in invoices is mentioned as erection of Pre-
Engineered Building". As per agreement with the service
provider, the service actually provided is installation of
complete building (including caged ladder / polycarbonate
sheets / Jack beam system) as per technical
specifications,
find that very clearly, the services provided by the service
provider to the party are covered under Commercial or
Industrial Construction Service [ (Section 65 (105) (zzq) ]
which have been used for *construction of building". As per
provisions of law, Commercial or Industrial Construction
services used for construction of building are clearly barred
for the purposes of taking Cenvat Credit. Thus, I hold that
the aforesaid credit taken by the party amounting to Rs.
17,19,787.76 is irregular, being in contravention of the
provisions of law and is thus liable to be recovered from the
party.
In their defence reply, the party has not contested
this specific allegation and thus admitted the non-
admissibility of the credit.
Thus, I, in the light of the provisions of Rule 2 () of CCR,
2004 hold that the services provided are not covered under
the "input service and thus deny the credit of
Rs.17,19,787.76.
41. Construction service for Architectural & Civil
Structure Services and flooring work-
Excise Appeal No.55537 of 2014
20
As per facts of the case, the party has taken input service
credit of Rs.21,57,497/- w.r.t. consulting services provided
by M/s M.R. Wareker & Associated Pvt. Ltd. and for flooring
work undertaken by Ms Rao Engineering Enterprises. As per
agreement, M/s M.R. Wareker & Associated Pvt. Ltd had
undertaken the work such as Architectural, civil, PEB,
statutory apparel, MEP Services. Similarly, Ms Rao
Engineering Enterprises had undertaken the flooring work
which includes mobilization of men equipments to site,
shifting of equipments from one site to another, carrying
out dynamic core penetration test and geo-technical
consultancy services.
Clearly, the services provided by the service provider are
covered under Architect Services [Section 65 (105) (p) ]/
Commercial or Industrial Construction Service [(Section 65
(105) (zzq) ] and have been used for "construction of
building". However, as already discussed in para-40 earlier,
such services when used for construction of building are
barred for the purposes of credit, as these services are not
covered under the definition of "input service".
In the defence reply, the party has not contested the
allegation thereby admitting the non-admissibility of
the credit taken on this count.
Thus, in the light of definition of input service under Rule 2
(l) as quoted above and the discussions above, I hold that
the credit of Rs. 21,57,497/- availed by the party is
irregular and is liable to be reversed / recovered from the
party.
42. Construction of flooring in the plant:-
As per facts of the case, the party has taken input service
credit of Rs. 1,99,279.17 against invoices issued by Ms
A.G.Developers Pvt. Ltd. Description of work as mentioned
on the invoices is as under:-
Excise Appeal No.55537 of 2014
21
"Application of high performance industrial flooring 'UCRETE'
on smooth sound and dry RCC floor after removing all dust
and dirt with the help of hard brushers / grinders / shot
blasting complete as per manufacturer's
recommendations"
Clearly, the services provided by the service provider fall
under the Commercial or Industrial Construction Service [
(Section 65 (105) (zzq) ] and have been used for
"construction of building". However, as already discussed in
para-40 earlier, such services when used for construction of
building are barred for the purposes of credit as these
services are not covered under the definition of input
service".
In the defence reply the party has not contested the
allegation thereby admitting the non-admissibility of
the credit taken on this count.
Thus, in the light of definition of input service under Rule 2
(l) as quoted above and the discussions above, I hold that
the credit of Rs. 1,99,279.17 availed by the party is
irregular and is liable to be reversed / recovered from the
party.
43. Erection work of polycarbonate false ceiling of
plant:-
As per facts of the case, the party has taken input service
credit of Rs.83,368.98 on erection work of polycarbonate
false ceiling of the plant undertaken by M/s Shiv Shakti
Fibre Udyog, Faridabad. As per agreement, the activity
undertaken is „entire erection work for false ceiling and
connected work including painting with low VOC paint‟.
Clearly, the services provided by the aforesaid service
provider fall under Commercial or Industrial Construction
Service [(Section 65 (105) (zzq) ] and have been used for
""construction of building". However, as already discussed in
para-40 earlier, such services when used for construction of
Excise Appeal No.55537 of 2014
22
building are barred for the purposes of credit as these
services are not covered under the definition of "input
service".
In the defence reply the party has not contested the
allegation thereby admitting the non-admissibility of
the credit taken on this count.
Thus, in the light of definition of input service under Rule 2
(l) as quoted earlier and the discussions above, I hold that
the credit of Rs. 83,368.98 availed by the party is irregular
and is liable to be reversed/ recovered from the party.
44. Sanitary work for extension of the factory
building:-
As per facts of the case, input service credit of
Rs.4,08,831.85 has been taken by the party against
invoices issued by M/s Khuntia Brothers. Description of
work as mentioned in the invoice is as under:-
"such type of material supplied for the work of sanitary and
drainage work, -- Demolishing of bituminous concrete,
WBM, soling stone and plain cement concrete, stacking of
serviceable material and disposal of unserviceable material
outside the factory premises,
Clearly, the services provided by the aforesaid service
provider are classifiable under Commercial or Industrial
Construction Service and have been used for "construction
of building". However, as already discussed in para-40
above, Commercial or Industrial Construction services used
for construction of building are barred for the purposes of
credit as these services are not covered under the
definition of input service'
In the defence reply the party has not contested the
allegation hereby admitting the non-admissibility of
the credit taken on this count.
Thus, in the light of definition of input service under Rule 2
(l) as quoted above and the discussions above, I hold that
Excise Appeal No.55537 of 2014
23
the credit of Rs. 4,08,831.85 availed by the party is
irregular and is liable to be reversed / recovered from the
party.
45. Project Management Consultancy Service
As per facts of the case, the party have taken input service
tax credit of Rs. 10,44,261.69 on Project Management
Consultancy provided by M/s Johnson Control Pvt. Ltd. As
per agreement, the scope of work consists of (i) Design
Development (ii) Tendering procurement process and (iii)
Project execution.
It has been alleged in the SCN that the service provided by
Ms Johnson Control Pvt. Ltd. falls under the category of
Architect Service used for construction of building and thus
not eligible for input service credit.
In the defence reply, the party contested the allegation and
submitted that the nature of work carried out by the vendor
relates to managing the execution of the project of
renovating/ revamping of the plant and thus covered under
„Modernization or renovation or repairs of the premises' and
thus they are eligible for credit on the said service and as
such requested for re-credit of the amount reversed by
them. In support of their contention, the party has placed
reliance on judgment of the Hon'ble Tribunal in the case of
M/s Shree Bhawani Paper Mills Ltd. Vs Commissioner of
Central Excise, Lucknow, reported at 2012(28) S.T.R.409
(Tri.-Delhi).
I have examined the contention of the party. I find that as
per admitted version of the party, their plant was non-
operational for almost four years from December 2007 to
February, 2012. It could recommence manufacture only
from March, 2012. In order to revive and recommence
operations, they undertook various activities and availed
input services and took credit thereon total amounting to
Rs. 85,98,001/-. The party in their defence reply has
already accepted that the credits so taken were inadvertent
Excise Appeal No.55537 of 2014
24
and as such reversed to the extent of Rs, 81,44,372/-.
Naturally, the reversed credit includes the credit taken on
the aforesaid Project Management Consultancy Service',
Thus, the non-admissibility of the credit has already been
admitted by the party.
Further, on going through the scope of work as mentioned
in the agreement which the party entered into with the
service provider, I am clear that the service provided is
covered under Architect Services for construction of
building and thus clearly not eligible for credit being under
the excluded category of input service defined under Rule
2(l) of CCR, 2004.
The ratio of the case law cited by the party is not applicable
to the present case in as much as the services of
engineering consultancy availed by the appellants in the
cited case were in relation to the development of the power
plant, where the electricity generated, in turn, was used
captively for manufacture of paper. However, in this case
before me, the service has been utilized for construction of
building which is not related directly or indirectly with the
manufacture of final products of the party and thus is not
covered under the definition of „input service‟ under Rule
2(l) of CCR, 2004
Thus, I deny the credit of Rs, 10,44,261.69 taken on this
count, having been taken in contravention of provisions of
law. I also hold that the credit is liable to be recovered /
reversed by the party.
46. Anti-termite/ Pesticide Treatment Service
As per facts of the case the party have taken input service
credit of Rs. 71,509.39 on termi-seal service and anti-
termite treatment at the plant and warehouse. The
description of work mentioned in invoices issued by service
provider, M/s Pest Control of India Pvt. Ltd. is as under:
Excise Appeal No.55537 of 2014
25
Invoice No/Date Particulars of work done
429/9.2.2011 Service charges for snake pro-service
359/02.01.2012 Service charges for termiseal service Pre-
construction Anti Termite treatment
265/4.11.2011 Service charges for termiseal service Pre-
construction Anti Termite treatment.
102/30.8.11 Service charges for termiseal service Pre-
construction Anti Termite treatment
348/29.12.2011 Service charges for Bee safe service at plant
88/24.06.11 Service Charges for warehouse pest
& 197/24.09.11 management service at W/H Puramufti
Allahabad
It has been alleged in the SCN that he description of work
mentioned in invoices issued by M/s Pest Control of India
Pvt. Ltd. indicates that these activities had been carried out
as pre- requisite for construction of plant and as such fall
under the category of construction of building, and
therefore the credit of service tax paid on these services is
not admissible as per Rule 2(l) of the Cenvat Credit Rules,
2004.
The party has contested the allegation on the ground that
the Pest Control Services are considered a prerequisite to
health and safety standards at the plant and thus cannot be
considered to be related to construction of building
I have examined the contention of the party. On going
through the description of work mentioned on invoices, I
find that the treatment undertaken by the party has been
clearly termed as pre-construction anti-termite treatment,
which clearly brings the service under the ambit of
Commercial or Industrial Construction Service [(Section 65
(105) (zzg)] which when used in construction of building is
not covered under the definition of input service under Rule
2(l) of CCR, 2004. This irregular availed credit is liable to
be recovered / reversed by the party.
47. Construction and Line Fabrication
As per facts of the case, the party have taken input service
credit of Rs.11,97,166.83 against invoices showing
Excise Appeal No.55537 of 2014
26
description of work as construction and line fabrication,
issued by Ms Ranjeet Engineering Works and Ms Esskay
Industrial. It has been alleged in the SCN that these
activities pertain to setting up of factory and construction
work which have been provided prior to operation of the
factory and as such not eligible for credit, as per Rule 2(l)
of the Cenvat credit rules'2004.
In the defence reply the party has not contested the
allegation.
I have examined the allegations made in the Show Cause
notice and on going through the description of work found
on invoices of the service provider, I am of the clear view
that the services provided by the service providers are
covered under Commercial or Industrial Construction
Service [ (Section 65 (105) (zzq)] and used in construction
of building and thus, I hold the same not covered under the
definition of input service defined under Rule 2(1) of the
CCR, 2004. Accordingly, I deny the credit and hold that the
credit amounting to Rs. 11,97,166.83 is liable to be
recovered from the party.
48. Installation and Commissioning
Service as per facts of the case, the party have taken input
service credit of Rs.1,64,366.00 against invoice
No.1980058480 dated 24.04.12 of M/s Tetra Pak India Pvt.
Ltd. showing description of work as installation and
commissioning of Sathariya plant. On perusal of LOI dated
19.7.2010, with M/s Tetra Pak India Pvt Ltd., it is observed
that the activity involves supervision of installation,
unloading/ positioning of equipment and carryout the
commissioning of the unit. It has been alleged that these
activities are in relation to setting up of factory and have
been provided prior to operation of the factory and as such
pot eligible for credit, as per Rule 2() of the Cenvat credit
rules2004.
Excise Appeal No.55537 of 2014
27
In the defence reply, the party has not contested that
allegation.
I have examined the allegation made in the Show Cause
Notice. In the light of definition of input service under Rule
2(l) of CCR, 2004, I hold that the services provided by M/s
Tetra Pak India Pvt Ltd are ineligible for input service
credit. Further, entire service has been provided prior to the
operation of the factory. Thus, these credits are irregular
and liable to be recovered from the party.
49. Manpower Supply Service
As per facts of the case, the party have taken input service
credit of Rs.2,96,573.82 on services of man power supply
provided by M/s Aqeel Enterprises and M/s ADECCO INDIA.
These services were availed during the period when the
factory had not started manufacturing operation M/s Aqeel
Enterprises and M/s ADECCO INDIA have provided man-
power to M/s Pepsico India Holdings (P) Ltd. during project
work i.e, setting up of the factory and other services like
loading charges at Allahabad guest house/ warehouse at
Kaushambi, leaning charges, transport charges, other work
expenses, Trailer freight charges etc.
It has been alleged in the SCN that credit o input services
are available only when such input services are used by the
manufacturer in or in relation to the manufacture of final
products. As the alleged credit on manpower supply service
was taken during the period when manufacturing of final
products had not commenced, the credit is inadmissible
In their defence reply the party had contested the allegation
submitting therein that while they agree that the manpower
services were availed for revival and renovation of the plant
prior to commencement of commercial production of
finished goods, but the definition of Input service provided
under Rule 2() of the CCR Rules, nowhere lays down a
specific restriction that no Cenvat credit can be availed on
services availed prior to manufacture of final products. They
Excise Appeal No.55537 of 2014
28
further contended that the first part of the definition clearly
states that 'any services used directly or indirectly in
relation to manufacture of final products' are permissible for
Cenvat credit. It is submitted that they had availed services
of manpower for the purpose of carrying out renovation,
revival of our plant in order to make the plant premises
suitable for carrying out commercial production. Since the
manpower services availed was a critical part of the
renovation of the plant these services are indirectly related
to manufacture of final products and hence eligible for
Cenvat credit.
I have examined the contention of the party in the light of
the definition of the input service under Rule 2(l) of the
CCR, 2004. I focus on the relevant portion of the definition
of „Input service‟ as given under Rule 2(l)(ii) of the CCR,
2004 which reads as under:-
Rule 2(l) (ii)- Input Service' means any service used by a
manufacturer whether directly or indirectly in relation to
manufacture of final product and clearance of final product
upto the place of removal
The language of the definition clearly provides that for
availment of credit, the starting point s the manufacture of
products and and ranges upto their place of removal. Thus,
the input service utilised prior to commencement of
manufacturing operation in the plant, is clearly not eligible
for credit, being not covered under the definition of input
service
As the service availed by the party is admittedly during the
period prior to commencement of manufacture I hold the
same not eligible for input service credit and hence deny the
credit. The eredit amounting to Rs,2,96,573.82 is liable to
be recovered from the party
50. Security Service
Excise Appeal No.55537 of 2014
29
As per facts of the case, the party have taken input service
credit of Rs. 2,94,243.66 against invoices. on services of
security, availed during the period when the factory had not
started manufacturing operation. M/s Security and
Intelligence Services Ltd. and M/s Ravi Securities have
provided security services from Jan'11 to Feb' 12, during
the period of setting up/ renovation of the plant.
It has been alleged in the SCN that credit on input services
are available only when such input services are used by the
manufacturer in or in relation to the manufacture of final
products. As the alleged credit on security service was
taken during the period when manufacturing of final
products had not commenced, the credit is inadmissible.
In their defence reply the party has contested the allegation
submitting herein that the security service has been
specifically enlisted as eligible input service under the
definition of input services under Rule 2(l) of CCR, 2004.
They further contended that the definition of Input service
provided under Rule 2(l) of the CCR Rules, nowhere lays
down a specific restriction that no Cenvat credit can be
availed on services availed prior to manufacture of final
products.
I have examined the contention of the party in the light of
the definition of the input service under Rule 2(l) of the
CCR, 2004. I focus on the relevant portion of the definition
of Input service as given under Rule 2(l)(ii) of the CCR,
2004 which reads as under:-
Rule 2(l) (ii)- "Input Service' means any service used by a
manufacturer whether directly or indirectly in relation to
manufacture of final product and clearance of final product
upto the place of removal.
The language of the definition clearly provides that for
availment of credit, the starting point is the manufacture of
products and ranges upto their place of removal. Thus, the
input service availed prior to commencement of
Excise Appeal No.55537 of 2014
30
manufacturing operation, is clearly not eligible for credit,
being not covered under the definition of input service?
As the service availed by the party is admittedly during the
period prior to commencement of manufacture, I hold the
same not eligible for input service credit and hence deny the
credit. The credit amounting to Rs. 2,94,243.66 is liable to
be recovered from the party.
51. Goods Transport Agency Service
As per facts of the case, the party have taken input service
credit to the tune of Rs. 60,543.21 on Goods Transport
Agency service on the strength of Goods Receipt (GRs).The
GRs issued by the transporters indicate freight only and not
service tax payable. In case of credit against GTA services,
Challans evidencing payment of service tax are the specified
document under Rule 9(1) (e) of the Cenvat Credit Rules,
2004. On query the party stated that freight has been paid
by their Lucknow office. However they could not produce
the Challans /GAR-7s evidencing payment of service Tax on
freight or ISD invoices issued by their head office.
It has been alleged in the SCN that as the credit was taken
on non specified document, it is not admissible to them and
the same is liable to be recovered from them.
In their defence reply, the party has not contested the
allegation.
I have examined the allegation made in the Show Cause
Notice. I agree that for taking credit against GTA Service, it
is Challans evidencing payment of Service Tax, which is a
specified document under Rule 91) (e) of the Cenvat Credit
Rules, 2004 and not GRs (Goods Receipts) on which the
party has taken credit. Since the relevant condition is not
fulfilled in this case, the credit of Rs.60,543.21 availed is
irregular, being in contravention of the provisions of law and
is liable to be recovered from the party.
52. Equipment Hiring and Construction of Chimney
Excise Appeal No.55537 of 2014
31
As per facts of the case, the party have availed input service
credit of Rs.1,32,915.45 on the equipment hiring service
provided by M/s Krishna Traders and construction of
chimney undertaken by M's Sonu Builders. Invoices issued
by M/s Krishna Traders show services as DG rent, operating
charges whereas invoices of M/s Sonu Builders show the
description of the work as construction of chimney.
It has been alleged in he SCN that these activities relate to
setting up of factory and construction work and as such are
not entitled for credit as input service defined under Rule
2(1) of the Cenvat Credit Rules, 2004
The party has contested the allegations on the ground that
the services availed by them in relation to hiring of
generators for providing electricity was meant for carrying
out necessary execution of revival project of plant in order
to make he plant fit for carrying out the commencement of
commercial production. Since hiring of generators for
providing electricity was an integral part of the project, it
would be incorrect to say that the same are ineligible as
input services under Rule 2(l) of the CCR Rules, 2004.
I have examined the contention of the party. I find the
contention misconceived in as much as the submission of
the party itself clearly suggests that services were used for
execution of revival of plant which event occurred before
commencement of commercial production. It has nothing to
do with the manufacture of final products. I further find that
the work undertaken by M/s Sonu Builders is construction of
chimney, which is nothing but part of construction of
building. Hence, I hold that the aforesaid services are not
covered under the definition of input service as defined
under Rule 2(l) of CCR, 2004 and thus deny the credit. This
irregularly availed credit is liable to be recovered from the
party.
53. On the basis of the discussions in the preceding
paragraphs, I conclude that the following cenvat credits
Excise Appeal No.55537 of 2014
32
taken by the party are irregular, being in contravention of
the provisions of law for the reasons already discussed;-
S Description Amount of credit
No taken
1 Chemicals used on flooring Rs.7,67,657.00
2 Erection of pre-engineered building by Rs.17,19,787.76
M/s Phenix
3 Architectural & Civil Structure service by Rs.21,57,497.00
M/s M.R Warekar
4 Construction of flooring by M/s Rs.1,99,279.17
A.G.Developers
5 Erection of false ceiling Rs.83,368.98
6 Sanitary work by M/s Khuntia Brothers Rs.4,08,831.85
7 Project Management Consultancy by Ms Rs.10,44,261.69
Johnson Central
8 Anti-termite treatment by M/s Pest 71,509.39
Control of India
9 Work construction and Line fabrication Rs.11,97,166.83
by M/s Ranjeet Engineering work
10 Installation and commissioning of Plant Rs.1,64,366.00
by M/s Tetra Pak
11 Manpower supply services Rs.2,96,573.82
12 Security Service R.2,94,243.66
13 GTA Rs.60,543.21
14 Equipment hiring and construction of Rs.1,32,915.45
Chimney
Total Rs.85,98,00181
I hold that the aforesaid credits taken by the party are liable
to be recovered from them under the provisions of Rule 14
of the CCR, 2004 read with Section 11 A (1) of the Central
Excise Act. Further, hold that the credit of
Rs.81,44,372.12, already reversed by the party is liable to
be appropriated against the demands being confirmed.
54. Demand of Interest:-
In the Show Cause Notice, interest has also been demanded
under the provisions of section 11 AA of Central Excise Act,
1944. The party has, however, contested that as the credits
availed by them total amounting to Rs. 85,98,001.00 have
never been utilized and that since they have already
reversed substantial amount of cenvat credits taken on
Excise Appeal No.55537 of 2014
33
various inputs / input services, no interest is payable under
Section 11 AA.
I have examined the issue. I find that Rule 14 of CCR, 2004
providing for recovery of irregular cenvat credit and interest
thereon, has been amended w.e.f, 1,4.2012 vide Notfn. No.
18/2012-CE (.T.) dt. 17.03.12 where it has been clearly
stated that "where the cenvat credit has been taken and
utilized wrongly or has been erroneously refunded the same
alongwith interest shall be recovered."`
Thus for charging interest, the irregular credit should not
only have been taken / availed but utilized too. Merely
taking of credit is not, at all, sufficient for claiming of
interest. The demand in the present case pertains to the
period from March'12 to Dec'12. The fact regarding
utilization of credit by the party has been got verified from
the concerned R.O., Sathariya Range, Central Excise
Division-I, Allahabad, who has, vide his report submitted
under C.No.20-CE/Misc/Sath/06/2012 dated 03.07.14
furnished the closing balance of cenvat credit of the party
from the months of March 2012 to Dec,2012 alongwith
relevant pages of ER-l‟s showing closing balance of Cenvat
Credit for the respective months. On going through report of
the R.O., I find that the closing balance of CENVAT Credit
for each month from March, 2012 to December, 2012 was in
excess of total demand under reference i.e. Rs.
85,98,001/-. This clearly establishes that the credits availed
by the party during the period covered under the present
S.C.N, remained unutilized Thus, I hold that no interest is
payable by the party under section 11 AA of the Central
Excise Act, 1944 in this case,
55. I find that the party have, during the course of
taking the subject irregular credits, contravened the
following provisions of CCR, 2004:-
Excise Appeal No.55537 of 2014
34
(i) Rule 2 (k) - in as much as that they have taken credit
on chemicals which is not an eligible input for their
intended use for flooring of the plant
(ii) Rule 2 (l)- in as much as that they have availed cenvat
credit on various input services which were not eligible
input services ii) Rule 4 -
(iii) in as much as they have taken cenvat credit on input
and input services without fulfilling the conditions for
allowing cenvat credit
(iv) Rule 9 in as much as they have taken cenvat credit on
GTA service without specified documents i.e. challans
evidencing payment of service tax on GTA.
For the aforesaid contraventions, I hold that the party are
liable for imposition of appropriate penalty under the
provisions of Rule 15(1) of Cenvat Credit Rules, 2004
The party have submitted that no penalty should be
imposed upon them, as the credit taken by them was out of
a bonafide mistake, as they generally believed that the
aforesaid credits were admissible to them. They have
further stated that they took the aforesaid credit without
any willful intention to defraud the revenue or to contravene
the provisions of law. They have also cited some Tribunal /
Court judgments wherein it has been held that no penalty
should be imposed for technical or venial breach of legal
provisions or when the breach flows from bonafide belief
I find that there are basic and fundamental contradictions in
the stand being taken by the party. On one hand they are
saying that they had taken the aforesaid credit on bonafide
belief that they were eligible for the same and as soon as
they came to know of these mistakes they reversed bulk of
the credit. On the other hand, they are still insisting that the
recovered credits be allowed to be re-credited by them.
Obviously there is a dichotomy in the stand of the assessee.
If the credits were taken by them mistakenly out of
Excise Appeal No.55537 of 2014
35
bonafide belief, then they should not be insisting for
allowing re-credit of the same and if they insist on re-credit
being allowed then clearly the credits have been taken by
them intentionally on purpose and not by 'mistake', as they
are insisting
I find the very fact that the party have reversed the credit,
only under protest', demonstrates that they generally
believe that the aforesaid credit are available to them. Thus,
I hold, that the aforesaid credits have been taken by the
party intentionally, filly well knowing that they were not
eligible for the same. This contention that „credit' has been
taken by them under bonafide 'belief‟ is all a sham, put
forward on afterthought.
In conclusion, I hold that the aforesaid credits have been
taken by the party on purpose, fully well knowing that they
were not eligible for the same. The referred provisions of
law have been contravened by the party intentionally and
for the same, they are liable to imposition of appropriate
penalty under the provisions of Section 15 (1) of Cenvat
Credit Rules, 2004.
4.3 From the perusal of the above order it is quite evident that
appellant had not contested the demand made for denial of
credit in respect of most of the amounts sought to be denied,
and the credit has not been denied in most of the case by
consideration of the definition of the inputs (Rule 2(k)) and input
services (Rule 2 (l)) as they existed at the relevant time. From
the reply dated 25.03.2013, submitted by the appellant in
response to the show cause notice, before the adjudicating
authority available on page 52 to 78 of it is evident that
appellant had in the reply contested denial of credit only in
respect of following inputs services:
a. Manpower Supply Services : Rs.2,60,670.97/-
b. Anti-termite/ Pesticide treatment
(Pest Control) : Rs.71,509/-
Excise Appeal No.55537 of 2014
36
c. Security Services : Rs.2,90,741.66/-
d. Project management consultancy : Rs.9,26,570/-
e. Equipment hiring : Rs.1,32,915/-
Apart from these five services the reply do not utter a single
word for the admissibility of credit sought to be denied in respect
of other inputs and input services.
4.4 We also find that the appellant has stated that the issue
involved is in respect of the denial of CENVAT Credit in respect of
input and input services, prior to the commencement of
commercial production of the unit. To ascertain the factual
status we had directed the appellant to file ER-1 returns filed by
them for the period commencing from 2007 to 2012 when as
claimed by them the unit was under renovation. All the returns
were filed online during the period of dispute on ACES, and if the
appellant claim is worth consideration then the their would have
been no difficulty for producing the copies of returns filed during
this period when the production in the unit as claimed by
appellant was stopped due to labour unrest. However appellant
has produced only copies of ER-1‟s return for the months of
September 2011, October 2011, November 2011, December
2011, February 2012 and March 2012. No explanation for non
production of the returns for the period 2007-2011 is coming
forth. Further in the table below we have tabulated the details as
claimed by the appellant for taking the credit
S Nature of Input/ Cenvat Documents Issued by Credit Availed during
No Input Services Credit the period
availed „Rs
1 Chemical used on 7,67,657.00 BSF India Ltd October 11 to March 12
flooring plant
2 Erection of pre 17,19,787.7 Pheonix Infra July 11 to September
engineered buildings 6 12
3 Consultancy services 21,57,497.0 Rao Engineering September 10 to August
of Architecture, Civil 0 works 12
Strutural and
Statutory Approvals M R Warekar
4 Construction of 1,99,279.17 A G Developer November 11 to March
Flooring Services 12
Excise Appeal No.55537 of 2014
37
5 Erection of false 83,368.98 Shiv Shakti February 12
Ceiling
6 Sanitary work 4,08,831.85 Khuntia Brothers July 11 to April 12
services
7 Project Management 10,44,261.6 Johnson Central March 11 to Nov 12
Consultancy Services 9
8 Anti Termite 71,509.39 Pest Control India February 11 to January
treatment services 12
9 Work Construction 11,97,166.8 Esskey Industries February 11 to March
and Line Fabrication 3 12
Services Ranjeet Engineering
Works
10 Installation and 1,64,366.00 Tetra Pack April 12
Commissioning of
Plant
11 Manpower Supply 2,96,573.82 Aqeel Enterprises February 11 to
Services December 12
ADECCO
12 Security Service 2,94,243.66 Ravi Security April to November 12
Security &
Intelligence Services
13 Goods Transport 60,543.21 February 11 to March
Agency Services 12
14 Equipment Hiring and 1,32,915.45 Krishna Trader May 11 to March 12
construction of
chimney services
Sonu Builder
Planet India
Total 85,98,00181
4.5 From the perusal of the ER-1 returns made available by
the appellant for September 2011, October 2011, November
2011, December 2011, February 2012 and March 2012, from
information provided at S No 5 (Details of CENVAT Credit taken
and Utilized) following table is drawn:
Details of CENVAT ADC_LVD Edu_ Sec_Edu Service Edu_ Sec_Edu
Credit _ CT_75 Cess _ Cess Tax Cess _ Cess
September 2011
Opening 1621561 0 0 0 0 0 0
Balance
Credit 0 0 0 0 0 0 0
Taken
Excise Appeal No.55537 of 2014
38
(Inputs)
Credit 0 0 0 0 0 0 0
Taken
(Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken
(Importe
d Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken on
Input
services
Credit 0 0 0 0 0 0 0
Utilized
Closing 1621561 0 0 0 0 0 0
Balance
October 2011
Opening 1621561 0 0 0 0 0 0
Balance
Credit 0 0 0 0 0 0 0
Taken
(Inputs)
Credit 0 0 0 0 0 0 0
Taken
(Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken
(Importe
d Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken on
Input
services
Credit 0 0 0 0 0 0 0
Utilized
Closing 1621561 0 0 0 0 0 0
Balance
November 2011
Opening 1621561 0 0 0 0 0 0
Balance
Credit 0 0 0 0 0 0 0
Taken
(Inputs)
Credit 0 0 0 0 0 0 0
Taken
(Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken
(Importe
d Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken on
Input
services
Excise Appeal No.55537 of 2014
39
Credit 0 0 0 0 0 0 0
Utilized
Closing 1621561 0 0 0 0 0 0
Balance
December 2011
Opening 1621561 0 0 0 0 0 0
Balance
Credit 0 0 0 0 0 0 0
Taken
(Inputs)
Credit 0 0 0 0 0 0 0
Taken
(Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken
(Importe
d Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken on
Input
services
Credit 0 0 0 0 0 0 0
Utilized
Closing 1621561 0 0 0 0 0 0
Balance
February 2012
Opening 1621561 0 0 0 0 0 0
Balance
Credit 0 0 0 0 0 0 0
Taken
(Inputs)
Credit 3644212 0 72886 364425 0 0 0
Taken 0 0
(Capital
Goods)
Credit 0 22586544 0 0 0 0 0
Taken
(Importe
d Capital
Goods)
Credit 0 0 0 0 0 0 0
Taken on
Input
services
Credit 0 0 0 0 0 0 0
Utilized
Closing 3806368 22586544 72886 364425 0 0 0
Balance 1 0
March 12
Opening 3806368 22586544 72886 364425 0 0 0
Balance 1 0
Credit 1057893 116432 21155 105788 0 0 0
Taken 8 9
(Inputs)
Credit 579377 0 11586 5795 0 0
Taken
(Capital
Excise Appeal No.55537 of 2014
40
Goods)
Credit 0 437855 0 0 0 0 0
Taken
(Importe
d Capital
Goods)
Credit 0 0 0 0 656848 13137 65685
Taken on 9 0
Input
services
Credit 0 1197968 - -11980 0 0 0
Utilized 23959
Closing 4922199 21942863 92804 464028 656848 13137 65685
Balance 6 6 9 0
4.6 Appellant has claimed relying on a series of the decisions
that the demand is time barred and extended period of limitation
is not invokable. From the tables drawn in para 4.4 and 4.5 on
the basis of the ER-1 returns and other details furnished by the
appellant it is evident that appellant is only misstating the facts
before this tribunal. The credit in respect of the inputs and
services have been for the first time taken in the month of March
2012 and reflected in the return filed for that month. The return
for the month of March 2012 would have been filed in the Month
of April 2012, and the normal period for making the demand
would be one year from the date of filing the return. The Show
Cause Notice has been issued to the appellant on 22.03.2013
well within the normal period of limitation. The Show Cause
Notice has been issued without invoking the extended period of
limitation. Had appellant claimed any credit in any month prior
to this month the same would have been reflected in the ER-1
return for that month. The submission made by the appellant on
limitation only shows the ill intention of the appellant to mislead
the bench. Thus the decision relied upon by the appellant on the
ground of limitation do not support the case of appellant as we
find that the show cause notice has been issued to them within
normal period of limitation and extended period has not been
invoked for making this demand.
4.7 It is also observed from the impugned order that credit has
not been sought to be denied for the reason that the credit is in
respect of inputs and input services received by the appellant
prior to the commencement of production. We have reproduced
Excise Appeal No.55537 of 2014
41
the contents of Show Cause Notice and impugned order. We do
not find any such allegation in the show cause notice or any such
thing in the impugned order. The credit has been sought to be
denied for the reason that the inputs and input services received
by the appellant do not qualify as input or input services as per
the Rule 2 (k) and 2 (l) of the CENVAT Credit Rules, 2004.
Appellant has placed reliance on series of decisions on this
account only to mislead the bench. These decisions are not on
the subject in dispute. Hence the decisions relied on this aspect
do not merit any consideration.
4.8 In the impugned order after considering the inputs and
input services against which the appellant have claimed the
credit in light of the definitions of inputs and input services as
per Rule 2 (k) and 2(l) respectively Commissioner have recorded
the finding to effect that these inputs and input services fall
within the exclusion clause of the said definition, and hence have
denied the said credit.
4.9 In certain decisions relied upon by the appellant it has
been held that though these goods and services are covered by
the exclusion clause, but the credit should be allowed as it gets
covered by the definition clause. In case of Solar Industries
[Final Order No. A/86810/2018 dated 23.05.2018] Mumbai
Bench while explaining the scope of exclusion clause observed as
follows:
6.2 With reference to other part of arguments that these are
part of business expansion of the appellant. Hence exclusion
clause is provided in the statute is with reference to the
specific definition clause only. Something which may be
covered has got to be excluded by way of exclusion.
In view of the exclusion clause the arguments with
regard to the coverage, the services under the
definition clause first part would not be correct.
6.3 Also tribunal has in cases relied upon by the Authorised
Representative that CENVAT Credit in respect of rent a cab
service is not admissible.
Excise Appeal No.55537 of 2014
42
7. Learned Counsel placed reliance on the decision of this
Tribunal in the case of Reliance Industries Ltd. (supra).
Specifically he relied upon the paragraph 6.3 which is
reproduced below:-
"6.3 Now the question that arises is regarding services
which were excluded by the amendment after 2-4-2011
to the definition of Rule 2(l) of the Cenvat Credit Rules,
2004. The said services are - outdoor catering, beauty
treatment, health services, cosmetic and plastic surgery,
membership of a club, health and fitness centre, life
insurance, health insurance and travel benefits extended
to employees such as Leave or Home Travel Concession.
The amendment indicates when such services are used
purely for personal use for consumption of any employee,
the Cenvat credit cannot be allowed. On perusal of the
records, we find that the appellants have been taking a
consistent stand that in their case Outdoor Catering
services, Club or Association service, Health and Fitness
Services are three services on which Cenvat credit from
1-4-2011 is sought to be denied relying upon the said
amendment to Rule 2(l) of the Cenvat Credit Rules, 2004,
which is incorrect as these services are utilized for the
business meetings held at various places including AGM."
8. The close analysis of Para 6.3 shows that the bench has
been moved by the fact that on the amendments indicates
„when such services are used primarily for consumption of
its employees, CENVAT credit cannot be allowed.‟ The above
reference could be held good only with reference to the
services mentioned in clause (C) and not those mentioned
Clause (A) & (B). While deciding the matter the bench did
not make any distinction between the services covered
under clauses (B) and (C). Such interpretation which has
been done ignoring the specific provisions in law cannot be
but per incurium and hence cannot be binding precedence.
Accordingly, the submissions made vis-à-vis relying on
Excise Appeal No.55537 of 2014
43
thisjudgments cannot be a reason for allowing the credit in
respect of rent-a-cab service in the present case.
4.10 This decision of Mumbai bench was affirmed by Hon‟ble
Bombay High Court as reported at Solar Industries India Ltd
[2022 (60) G.S.T.L. 216 (Bom.)] observing as follows:
"5. We have heard the Learned Counsel for the parties
at length and we have perused the order passed by the
Tribunal disallowing the claim for Cenvat credit. It was
found by the Tribunal that by virtue of the
amendment dated 1-4-2011 rent-a-cab service had
been excluded from the definition of the term "input
service". The same was in three limbs and the
material basis for denying such Cenvat credit was in
view of Clause (B) to Rule 2(l) of the said Rules. We
find that the Tribunal was justified in disallowing
Cenvat credit for the reasons mentioned in the
impugned order. This is also clear from a reading of
Section 65(105) of the Finance Act which excludes rent-a-
cab scheme. The transportation of employees from distance
of about 40 kms. for reaching factory is not an activity
which could be said to be a part of manufacturing activity. It
is merely for personal convenience of the employees to
enable them to reach the premises of the factory so as to
thereafter participate in the manufacturing activity."
Affirming this decision Hon‟ble Supreme Court as reported at
[2022 (64) G.S.T.L. 257 (S.C.)]observed:
"3. In that view of the matter, it cannot be said that the
High Court has committed any error in denying the Input
Tax Credit and holding that such a service is excluded from
the input service.
4. We are in complete agreement with the view taken
by the High Court."
Similarly Hon‟ble Karnataka High Court has in case of Toyota
Kirloskar Motors [2021 (50) G.S.T.L. 286 (Kar.)] held as follows:
Excise Appeal No.55537 of 2014
44
15. The undisputed facts make it very clear that the period
involved in the present appeal is admittedly of post-2011
period and after the amendment to the provisions of Rule
2(l) defining the „input service‟ and the amendment to the
provision of Rule 2(l) defining the „input service‟ came into
effect w.e.f., 1-4-2011. The definition of „input service‟ post-
amendment contains exclusion clause and exclusion clause
was effected w.e.f. 1-4-2011. Clause (c) of the said
exclusion clause specifically excludes the services provided
in relation to „outdoor catering‟ services. It is certainly not in
dispute that said services prior to 1-4-2011 have been held
to be covered by the definition of „input service‟, however,
after the amendment came into force in the light of specific
exclusion clause, „outdoor catering‟ service is not at all
covered under the definition of „input service‟.
16. Heavy reliance has been placed upon a judgment
delivered by the Madras High Court in the case of Ganeshan
Builders Ltd., (supra). In the aforesaid case, there was an
insurance in existence and it was not an insurance in
individual worker‟s name. The Madras High Court has held
that the insurance policy was assessee‟s specific and not
employee‟s specific and as there was a mandatory duty
casted upon the assessee to establish a canteen under the
Building and Other Workers (Regulation of Employment and
Conditions of Service) Act, 1996, has allowed the writ
petition, whereas, in the present case no such contingency
is involved. In the present case though the expenses
incurred in respect of the canteen services for providing
food and beverages in canteen maintained and run by the
employer is included towards the total cost of the product
and it is certainly required to establish under the Factories
Act, 1948 (Section 46), but the fact remains, the canteen
has been established primarily for personal use or
consumption of the employees. There is no ambiguity in the
statute and therefore, as it is a taxing statute, this Court
Excise Appeal No.55537 of 2014
45
cannot add or substitute words in the statutory provisions
while interpreting the statutory provision. The statute does
not leave any room for any other interpretation and
therefore, in the considered opinion of this Court, the
judgment does not help the appellant in any manner.
17. Reliance has also been placed upon a judgment in the
case of Commissioner of Central Excise v. Stanzen
Toyotetsu India (P) Ltd., (supra). However, the aforesaid
judgment is distinguishable on facts as it was delivered in
respect of a period prior to amendment.
18. Similarly, the other judgment relied upon in a case of
Resil Chemicals Pvt. Ltd., (supra). Again it is a judgment
involving pre-amendment era.
19. Reliance has also been placed upon a judgment
delivered in the case of Commissioner of Central Excise v.
Solris Chemtech Ltd., (supra). This Court has carefully gone
through the aforesaid judgment and again the aforesaid
judgment does not help the appellant in the light of specific
amendment on the subject.
20. Another judgment over which reliance has been placed
is in the case of Commissioner of Central Excise,
Ahemedabad-1 v. Ferromatik Milacron India Ltd., [2011
(21) S.T.R. 8 (Guj.)]. The judgment is again distinguishable
as it relates to period w.e.f., March, 2006 to September,
2006 i.e., period prior to amendment under the Cenvat
Credit Rules, 2004. In the considered opinion of this Court,
the statutory definition of „input service‟ under Rule 2(l)
post-amendment w.e.f., 1-4-2011 provides that „outdoor
catering‟ services falls under the exceptionary services in
Rule 2(l)(c) of the Cenvat Credit Rules, 2004. Hence, the
Tribunal was justified in dismissing the appeal preferred by
the assessee.
Excise Appeal No.55537 of 2014
46
21. A Taxing Statute has to be strictly construed and in
Taxing Statute one has to look merely at what is clearly
said. Justice G.P. Singh in his land mark work on Principles
of Statutory Interpretation, 14th Edition under the heading
Strict Construction of Taxing Statute, has observed as under
:
"General Principles of strict construction
A taxing statute is to be strictly construed. The well-
established rule in the familiar words of LORD
WENSLEYDALE, reaffirmed by LORD HALS-BURY and LORD
SIMOND, means : "The subject is not to be taxed without
clear words for that purpose; and also that every Act of
Parliament must be read according to the natural
construction of its words" (Re, Micklethwait, (1885) 11 Ex
452, p.456. In a classic passage LORD CAIRNS stated the
principle thus : "If the person sought to be taxed comes
within the letter of the law he must be taxed, however great
the hardship may appear to the judicial mind to be. On the
other hand, if the Crown seeking to recover the tax, cannot
bring the subject within the letter of the law, the subject is
free, however apparently within the spirit of law the case
might otherwise appear to be. In other words, if there be
admissible in any statute, what is called an equitable,
construction, certainly, such a construction is not admissible
in a taxing statute where you can simply adhere to the
words of the statute". [Partington v. A.G., (1869) LR 4 HL
100, p.122 : 21 LT 370]. VISCOUNT SIMON quoted with
approval a passage from TOWLATT, J. expressing the
principle in the following words : "In a taxing Act one has to
look merely at what is clearly said. There is no room for any
intendment. There is no equity about a tax. There is no
presumption as to tax. Nothing is to be read in, nothing is to
be implied. One can only look fairly at the language used".
[Cape Brandy Syndicate v. IRC, (1921) 1 KB 64, p.71
(ROWLATT, J.)]. Relying upon this passage LORD UPJOHN
Excise Appeal No.55537 of 2014
47
said : "Fiscal measures are not built upon any theory of
taxation." (Commr. of Customs v. Top Ten Promotions,
(1969) 3 ALL ER 39, p.90 (HL)."
22. The Hon‟ble Supreme Court has also taken a similar
view in large number of cases in respect of Taxing Statutes.
[See A.V. Fernandez v. State of Kerala, AIR 1957 SC 657,
p.661 : 1957 SCR 837; referred to in CIT, Bombay v.
Provident Investment Co., AIR 1957 SC 664, p.666 : 1957
SCR 1141; Gursahai v. CIT, AIR 1963 SC 1062, p.1064 :
(1963) 3 SCR 893; See further Banarsi Debi v. ITO, AIR
1964 SC 1742, p.1744 : (1964) 7 SCR 539; CIT, Gujarat v.
Vadilal Lallubhai, AIR 1973 SC 1016, p.1019 : (1973) 3 SCC
17; Diwan Brothers v. Central Bank, Bombay, AIR 1976 SC
1503, p.1508 : (1976) 3 SCC 800; McDowell & Co. Ltd. v.
Commercial Tax Officer, AIR 1977 SC 1459, p.1465 :
(1977) 1 SCC 441; Mohammad Ali Khan v. Commissioner of
Wealth Tax, AIR 1997 SC 1165, p.1167 : 1997 (3) SCC
511; Hansraj & Sons v. State of Jammu & Kashmir, AIR
2002 SC 2692, pp.2698, 2699 : (2002) 6 SCC 227; Geo
Miller & Co. (P) Ltd. v. State of M.P., (2004) 5 SCC 209,
p.216 (para 30) : AIR 2004 SC 3552.]
23. Resultantly, this Court has to look squarely at the
words of the statute and interpret them. A Taxing Statute
has to be interpreted in the light of what is clearly
expressed, it cannot imply anything which is not expressed,
it cannot merge provisions in the statute so as to supply any
assumed deficiencies.
Affirming this decision Hon‟ble Supreme Court as reported at
[2021 (55) G.S.T.L. 129 (S.C.)] held as follows:
"2. The statutory provision - Rule 2(l) defining "Input
Service" post 1-4-2011 is very clear and the out-door
catering services when such services are used primarily for
personal use or consumption of any employee is held to be
excluded from the definition of "Input Service".
Excise Appeal No.55537 of 2014
48
3. In that view of the matter, it cannot be said that
the High Court has committed any error in denying the
input tax credit and holding that such a service is excluded
from input service."
Thus in view of the above decisions the goods or services which
have been excluded by way of exclusion clause in the definition,
could not have been said to be covered by the definition, by
referring to the main clause of the definition. As observed in
case of Solar Industries all such decisions which have held so are
per incuriam and have no precedent value.
4.11 Admittedly in their appeal, at B.8 appellant while putting
up the case for allowing the credit in respect of chemicals as
input has stated
"B.8 The Appellants submit that these chemicals were
used for the proper construction of floor area which is
essential for the purpose of proper installation of
plant & machinery and keeping the factory in proper
working condition, without which manufacturing process
cannot be carried out by the manufacturer. .."
From the submission made by the appellant in appeal also it is
evident that these chemicals were used proper construction of
floor and hence would fall under the excluded category. As per
Clause (B) of the exclusion clause to Rule 2 (k), "Any goods used
for- construction of a building or a civil structure or a part
thereof; or laying of foundation or making of structures for
support of capital goods" have been excluded. Hence we do not
find any anomaly in the impugned order denying this credit.
4.12 With effect from 01.04.2011, Architect Services (Section
65 (105)(p), Commercial or Industrial Construction Services and
Work Contract Services have been excluded as per exclusion
clause (A) of the Rule 2 (l) of the Cenvat Credit Rules, 2004.
Specific finding has been recorded by the adjudicating authority,
Erection of pre-engineered building by M/s Phenix, Architectural
& Civil Structure service by M/s M.R Warekar, Construction of
flooring by M/s A.G.Developers, Erection of false ceiling, Sanitary
Excise Appeal No.55537 of 2014
49
work by M/s Khuntia Brothers, Project Management Consultancy
by Ms Johnson Central, Anti-termite treatment by M/s Pest
Control of India, Work construction and Line fabrication by M/s
Ranjeet Engineering work, Installation and commissioning of
Plant by M/s Tetra Pak, that these services are related to
construction activities of the plant of the appellant, and fall
under the excluded category. Appellant has in their defence
submission in reply to show cause notice not even contested the
fact that these services were used for construction of plant of the
appellant. Appellant have submitted that these services were
availed by them for modernization, renovation and repair of a
factory. However we do not find any merits in the submissions
made as the modernization, renovation and repair of a factory
could be undertaken of the existing and ongoing plant. Certain
decisions and Circular No 943/4/2011-CX dated 29.04.2011 has
been referred to by the appellant and to claim that the service
received in relation to modernization, renovation and repair are
covered by the inclusion clause. We reproduce the said portion of
the inclusion clause, below:
"Modernization or renovation or repairs of a factory, premises
of provider of output service or an office relating to such
factory or premises. ..."
Thus the activities of Modernization or renovation or repairs of a
factory will be covered by the inclusion clause of the definition
and those in relation to the setting up of the factory will be
covered by the exclusion clause. It is settled law that the while
interpreting a Fiscal Statute the statute should be interpreted
strictly on the basis of the words used in the statute. Hon‟ble
Supreme Court has in case of Dilip Kumar & Company [2018
(361) E.L.T. 577 (S.C.)] observed as follows:
"19. The well-settled principle is that when the words in a
statute are clear, plain and unambiguous and only one
meaning can be inferred, the Courts are bound to give
effect to the said meaning irrespective of consequences. If
the words in the statute are plain and unambiguous, it
Excise Appeal No.55537 of 2014
50
becomes necessary to expound those words in their natural
and ordinary sense. The words used declare the intention of
the Legislature. In Kanai Lal Sur v. Paramnidhi Sadhukhan,
AIR 1957 SC 907, it was held that if the words used are
capable of one construction only then it would not be open
to the Courts to adopt any other hypothetical construction
on the ground that such construction is more consistent
with the alleged object and policy of the Act.
20. In applying rule of plain meaning any hardship and
inconvenience cannot be the basis to alter the meaning to
the language employed by the legislation. This is especially
so in fiscal statutes and penal statutes. Nevertheless, if the
plain language results in absurdity, the Court is entitled to
determine the meaning of the word in the context in which
it is used keeping in view the legislative purpose [Assistant
Commissioner, Gadag Sub-Division, Gadag v. Mathapathi
Basavannewwa, 1995 (6) SCC 355]. Not only that, if the
plain construction leads to anomaly and absurdity, the Court
having regard to the hardship and consequences that flow
from such a provision can even explain the true intention of
the legislation. Having observed general principles
applicable to statutory interpretation, it is now time to
consider rules of interpretation with respect to taxation.
21. In construing penal statutes and taxation statutes, the
Court has to apply strict rule of interpretation. The penal
statute which tends to deprive a person of right to life and
liberty has to be given strict interpretation or else many
innocent might become victims of discretionary decision-
making. Insofar as taxation statutes are concerned, Article
265 of the Constitution [265. Taxes not to be imposed save
by authority of law - No tax shall be levied or collected
except by authority of law.] prohibits the State from
extracting tax from the citizens without authority of law. It
is axiomatic that taxation statute has to be interpreted
strictly because State cannot at their whims and fancies
Excise Appeal No.55537 of 2014
51
burden the citizens without authority of law. In other words,
when competent Legislature mandates taxing certain
persons/certain objects in certain circumstances, it cannot
be expanded/interpreted to include those, which were not
intended by the Legislature.
22. At the outset, we must clarify the position of „plain
meaning rule or clear and unambiguous rule‟ with respect of
tax law. „The plain meaning rule‟ suggests that when the
language in the statute is plain and unambiguous, the Court
has to read and understand the plain language as such, and
there is no scope for any interpretation. This salutary
maxim flows from the phrase "cum inverbis nulla ambiguitas
est, non debet admitti voluntatis quaestio". Following such
maxim, the Courts sometimes have made strict
interpretation subordinate to the plain meaning rule
[Mangalore Chemicals case (Infra para 37).], though strict
interpretation is used in the precise sense. To say that strict
interpretation involves plain reading of the statute and to
say that one has to utilize strict interpretation in the event
of ambiguity is self-contradictory."
4.13 Board has issued the Circular dated 29.04.2011, clarifying
the matter, stating as follows:
S Issue Clarification
No
4 Is the credit of Credit of input services used for
input services renovation or repair of factory or office
used for repair or is allowed. Services used in relation to
renovation of renovation or repairs of a factory,
factory or office premises of provider of output service
available or an office relating to such factory or
premises, are specifically provided for in
the inclusive part of the definition of
input service.
4.14 We have seen the decisions relied upon by the appellant
in the submissions made before us. We find the real test which
Excise Appeal No.55537 of 2014
52
is laid down in all the decisions is to determination whether the
activities were in relation to setting up of a factory or in relation
to renovation, modernization or repair of an ongoing factory.
4.15 Despite being given ample opportunities by us the
appellant failed to provide evidence to the effect that the
appellant was undertaking repair, modernization or repair of
existing factory. We asked them to provide the evidence in
respect of the closure of the factory in 2007 on account of
labour unrest, or the returns filed by them during the prior
period to show that they factory was existing and producing
goods and clearing the same. As we have observed they have
produced returns for the period from September 2011 onwards
where in the production and clearance was indicated as "Nil" till
February 2012. First time any production and clearance has
been show is in Month of March 2012. Thus we are not in
position to accept the contention raised by the appellant to the
effect that the works undertaken by them were in relation to
repair, modernization or renovation of the existing factory. In
fact appellant never claimed that these works were in relation
to repair, modernization or renovation during the investigations
and before the adjudicating authority. They never produce any
evidence to this effect in the proceedings at any time. On the
contrary the appellant rather than producing the evidence to
effect that the activities undertaken were towards renovation of
existing plant agreed and debited the major amount the credit
sought to be denied. The only issue that needs to be examined
in present case and on the basis of various decisions sited by
the appellant is whether these activities were in relation to
setting up of the factory or in relation to renovation, repair or
modernization of existing unit.
4.16 In absence of any evidence we are not in position to
agree with the claim made by the appellant to effect that these
activities were in relation to renovation, modernization or repair
of ongoing factory. In case of Dilip Kumar & Company referred
above Hon‟ble Supreme Court has specifically held that any
Excise Appeal No.55537 of 2014
53
person claiming any exemption has to establish that he falls
within the four corners of exemption notification. The relevant
para from the said decision are reproduced below:
"28. With the above understanding the stage is now set to
consider the core issue. In the event of ambiguity in an
exemption notification, should the benefit of such ambiguity
go to the subject/assessee or should such ambiguity should
be construed in favour of the revenue, denying the benefit
of exemption to the subject/assessee? There are catena of
case laws in this area of interpretation of an exemption
notification, which we need to consider herein. The case of
Commissioner of Inland Revenue v. James Forrest, [(1890)
15 AC 334 (HL)] - is a case which does not discuss the
interpretative test to be applied to exemption clauses in a
taxation statute - however, it was observed that „it would be
unreasonable to suppose that an exemption was wide as
practicable to make the tax inoperative, that it cannot be
assumed to have been in the mind of the Legislature‟ and
that exemption „from taxation to some extent increased the
burden on other members of the community‟. Though this is
a dissenting view of Lord Halsbury, LC, in subsequent
decisions this has been quoted vividly to support the
conclusion that any vagueness in the exemption clauses
must go to the benefit of the revenue. Be that as it is, in our
country, at least from 1955, there appears to be a
consistent view that if the words in a taxing statute (not
exemption clause) are ambiguous and open to two
interpretations, the benefit of interpretation is given to the
subject and it does not matter if the taxpayer escapes the
tax net on account of Legislatures‟ failure to express itself
clearly (See the passage extracted hereinabove from
Kesoram Industries case (supra)).
29. The first case with which we need to concern ourselves
is the case in Union of India v. The Commercial Tax Officer,
West Bengal and Ors. - AIR 1956 SC 202. It may be noted
Excise Appeal No.55537 of 2014
54
that this case was dealt with by five Learned Judges of this
Court resulting in two different opinions; one by the then
Chief Justice of India, S.R. Das for the majority, and Justice
B.P. Sinha (as His Lordship then was) rendering minority
view. The question before this Court was whether the sale
of goods made by one private mill to the Government of
India, Ministry of Industries and Supplies were to be
deducted as taxable turnover of the mill for the exemption
given under Section 5 of the Bengal Finance (Sales Tax)
Act, 1941 (Bengal Act VI of 1941). The exemption under
Section 5(2)(a)(iii) of the Bengal Finance (Sales Tax) Act,
1941 provided for exemption „to sales to the Indian Stores
Department, the Supply Department of the Government of
India, and any railway or water transport administration‟.
The Court was to interpret the aforesaid provision in order
to ascertain whether the sale to the Government of India,
Ministry of Industries and Supplies would be covered under
the Section.
30. The majority was of the view that the Government of
India, Ministry of Industries and Supplies was not similar to
those mentioned in the exemption notification. The majority
extensively relied on the history and origin of Ministry of
Industries and Supplies and concluded that the functions of
the aforesaid Ministry were different from the erstwhile
departments mentioned under the exemption provision. The
majority reasoned that the exemption being the creation of
the statute itself, it should have to be construed strictly and
the interpretation cannot be extended to sales to other
departments. We might find some clue as to the content of
a strict construction also. It was canvassed before the Court
that the object of Section 5(2)(a)(iii) of the relevant statute,
was to give exemption not to the particular departments but
to the sale of such goods to those departments and,
therefore, sale of those goods made to any Departments of
the Government of India, which came to be charged with
Excise Appeal No.55537 of 2014
55
the duty of purchasing those goods should also come within
the purview of the exemption. The Court while repelling the
aforesaid interpretation, reasoned as under :
"We are unable to accept this line of reasoning. This
interpretation will unduly narrow the scope and ambit of the
exemption by limiting it to sales of only those goods as, at
the date of the Act, used to be sold to those two
departments and sales of other goods even to those two
departments, however necessary for the prosecution of the
war, would not get benefit of the exemption. Such could not
possibly be the intention of the Legislature as expressed by
the language used by it in framing the Section."
31. The aforesaid placitum is suggestive of the fact that
the Courts utilized the rule of strict interpretation in order to
decipher the intention of the Legislature and thereafter
provide appropriate interpretation for the exemption
provided under the provisions of the Act which was neither
too narrow nor too broad. It may be noted that the majority
did not take a narrow view as to what strict interpretation
would literally mean; rather they combined legislative intent
to ascertain the meaning of the statute in accordance with
the objective intent of the Legislature.
38. We will now consider another Constitution Bench
decision in Commissioner of Central Excise, New Delhi v.
Hari Chand Shri Gopal, (2011) 1 SCC 236 = 2010 (260)
E.L.T. 3 (S.C.) [hereinafter referred as „Hari Chand case‟ for
brevity]. We need not refer to the facts of the case which
gave rise to the questions for consideration before the
Constitutional Bench. K.S. Radhakrishnan, J., who wrote the
unanimous opinion for the Constitution Bench, framed the
question, viz., whether manufacturer of a specified final
product falling under Schedule to the Central Excise Tariff
Act, 1985 is eligible to get the benefit of exemption of
remission of Excise duty on specified intermediate goods as
Excise Appeal No.55537 of 2014
56
per the Central Government Notification dated 11-8-1994, if
captively consumed for the manufacture of final product on
the ground that the records kept by it at the recipient end
would indicate its "intended use" and "substantial
compliance" with procedure set out in Chapter 10 of the
Central Excise Rules, 1944, for consideration? The
Constitution Bench answering the said question concluded
that a manufacturer qualified to seek exemption was
required to comply with the preconditions for claiming
exemption and therefore is not exempt or absolved from
following the statutory requirements as contained in the
Rules. The Constitution Bench then considered and
reiterated the settled principles qua the test of construction
of exemption clause, the mandatory requirements to be
complied with and the distinction between the eligibility
criteria with reference to the conditions which need to be
strictly complied with and the conditions which need to be
substantially complied with. The Constitution Bench followed
the ratio in Hansraj Gordhandas case (supra), to reiterate
the law on the aspect of interpretation of exemption clause
in para 29 as follows -
"The law is well-settled that a person who claims exemption
or concession has to establish that he is entitled to that
exemption or concession. A provision providing for an
exemption, concession or exception, as the case may be,
has to be construed strictly with certain exceptions
depending upon the settings on which the provision has
been placed in the statute and the object and purpose to be
achieved. If exemption is available on complying with
certain conditions, the conditions have to be complied with.
The mandatory requirements of those conditions must be
obeyed or fulfilled exactly, thought at times, some latitude
can be shown, if there is failure to comply with some
requirements which are directory in nature, the non-
Excise Appeal No.55537 of 2014
57
compliance of which would not affect the essence or
substance of the notification granting exemption."
39. The Constitution Bench then considered the doctrine of
substantial compliance and "intended use". The relevant
portions of the observations in paras 31 to 34 are in the
following terms -
"31. Of course, some of the provisions of an exemption
notification may be directory in nature and some are
mandatory in nature. A distinction between the provisions of
a statute which are of substantive character and were built
in with certain specific objectives of policy, on the one hand,
and those which are merely procedural and technical in
there nature, on the other, must be kept clearly
distinguished...
Doctrine of substantial compliance and "intended use"
32. The doctrine of substantial compliance is a judicial
invention, equitable in nature, designed to avoid hardship in
cases where a party does all that can reasonably be
expected of it, but failed or faulted in some minor or
inconsequent aspects which cannot be described as the
"essence" or the "substance" of the requirements. Like the
concept of "reasonableness", the acceptance or otherwise of
a plea of "substantial compliance" depends upon the facts
and circumstances of each case and the purpose and object
to be achieved and the context of the pre-requisites which
are essential to achieve the object and purpose of the rule
or the regulation. Such a defence cannot be pleased if a
clear statutory pre-requisite which effectuates the object
and the purpose of the statute has not been met. Certainly,
it means that the Court should determine whether the
statute has been followed sufficiently so as to carry out the
intent for which the statute was enacted and not a mirror
image type of strict compliance. Substantial compliance
Excise Appeal No.55537 of 2014
58
means "actual compliance in respect to the substance
essential to every reasonable objective of the statute" and
the Court should determine whether the statute has been
followed sufficiently so as to carry out the intent of the
statute and accomplish the reasonable objectives for which
it was passed.
33. A fiscal statute generally seeks to preserve the need to
comply strictly with regulatory requirements that are
important, especially when a party seeks the benefits of an
exemption clause that are important. Substantial
compliance with an enactment is insisted, where mandatory
and directory requirements are lumped together, for in such
a case, if mandatory requirements are complied with, it will
be proper to say that the enactment has been substantially
complied with notwithstanding the non-compliance of
directory requirements. In cases where substantial
compliance has been found, there has been actual
compliance with the statute, albeit procedurally faulty. The
doctrine of substantial compliance seeks to preserve the
need to comply strictly with the conditions or requirements
that are important to invoke a tax or duty exemption and to
forgive non-compliance for either unimportant and
tangential requirements or requirements that are so
confusingly or incorrectly written that an earnest effort at
compliance should be accepted.
34. The test for determining the applicability of the
substantial compliance doctrine has been the subject of a
myriad of cases and quite often, the critical question to be
examined is whether the requirements relate to the
"substance" or "essence" of the statute, if so, strict
adherence to those requirements is a precondition to give
effect to that doctrine. On the other hand, if the
requirements are procedural or directory in that they are
not of the "essence" of the thing to be done but are given
with a view to the orderly conduct of business, they may be
Excise Appeal No.55537 of 2014
59
fulfilled by substantial, if not strict compliance. In other
words, a mere attempted compliance may not be sufficient,
but actual compliance with those factors which are
considered as essential."
43. There is abundant jurisprudential justification for this.
In the Governance of rule of law by a written Constitution,
there is no implied power of taxation. The tax power must
be specifically conferred and it should be strictly in
accordance with the power so endowed by the Constitution
itself. It is for this reason that the Courts insist upon strict
compliance before a State demands and extracts money
from its citizens towards various taxes. Any ambiguity in a
taxation provision, therefore, is interpreted in favour of the
subject/assessee. The statement of law that ambiguity in a
taxation statute should be interpreted strictly and in the
event of ambiguity the benefit should go to the
subject/assessee may warrant visualizing different
situations. For instance, if there is ambiguity in the subject
of tax, that is to say, who are the persons or things liable to
pay tax, and whether the revenue has established
conditions before raising and justifying a demand. Similar is
the case in roping all persons within the tax net, in which
event the State is to prove the liability of the persons, as
may arise within the strict language of the law. There
cannot be any implied concept either in identifying the
subject of the tax or person liable to pay tax. That is why it
is often said that subject is not to be taxed, unless the
words of the statute unambiguously impose a tax on him,
that one has to look merely at the words clearly stated and
that there is no room for any intendment nor presumption
as to tax. It is only the letter of the law and not the spirit of
the law to guide the interpreter to decide the liability to tax
ignoring any amount of hardship and eschewing equity in
taxation. Thus, we may emphatically reiterate that if in the
event of ambiguity in a taxation liability statute, the benefit
Excise Appeal No.55537 of 2014
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should go to the subject/assessee. But, in a situation where
the tax exemption has to be interpreted, the benefit of
doubt should go in favour of the revenue, the aforesaid
conclusions are expounded only as a prelude to better
understand jurisprudential basis for our conclusion. We may
now consider the decisions which support our view.
44. In Hansraj Gordhandas case (supra), the Constitutional
Bench unanimously pointed out that an exemption from
taxation is to be allowed based wholly by the language of
the notification and exemption cannot be gathered by
necessary implication or by construction of words; in other
words, one has to look to the language alone and the object
and purpose for granting exemption is irrelevant and
immaterial.
45. In Parle Exports case (supra), a Bench of two-Judges
of this Court considered the question whether non-alcoholic
beverage base like Gold spot base, Limca base and Thumps
Up base, were exempted from payment of duty under the
Central Government notification of March, 1975. While
considering the issue, this Court pointed out the strict
interpretation to be followed in interpretation of a
notification for exemption. These observations are made in
para 17 of the judgment, which read as follows :
"How then should the Courts proceed? The expressions in
the Schedule and in the notification for exemption should be
understood by the language employed therein bearing in
mind the context in which the expressions occur. The words
used in the provision, imposing taxes or granting exemption
should be understood in the same way in which these are
understood in ordinary parlance in the area in which the law
is in force or by the people who ordinarily deal with them. It
is, however, necessary to bear in mind certain principles.
The notification in this case was issued under Rule 8 of the
Central Excise Rules and should be read along with the Act.
Excise Appeal No.55537 of 2014
61
The notification must be read as a whole in the context of
the other relevant provisions. When a notification is issued
in accordance with power conferred by the statute, it has
statutory force and validity and, therefore, the exemption
under the notification is as if it were contained in the Act
itself. See in this connection the observations of this Court
in Orient Weaving Mills (P) Ltd. v. Union of India, 1962
Supp 3 SCR 481 = AIR 1963 SC 98. See also Kailash Nath
v. State of U.P., AIR 1957 SC 790. The principle is well-
settled that when two views of a notification are possible, it
should be construed in favour of the subject as notification
is part of a fiscal enactment. But in this connection, it is well
to remember the observations of the Judicial Committee in
Coroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC
355, that it is only, however, in the event of there being a
real difficulty in ascertaining the meaning of a particular
enactment that the question of strictness or of liberality of
construction arises. The Judicial Committee reiterated in the
said decision at page 369 of the report that in a taxing Act
provisions enacting an exception to the general rule of
taxation are to be construed strictly against those who
invoke its benefit. While interpreting an exemption clause,
liberal interpretation should be imparted to the language
thereof, provided no violence is done to the language
employed. It must, however, be borne in mind that absurd
results of construction should be avoided."
In the above passage, no doubt this Court observed that
"when two views of a notification are possible, it should be
construed in favour of the subject as notification is part of
fiscal document". This observation may appear to support
the view that ambiguity in a notification for exemption must
be interpreted to benefit the subject/assessee. A careful
reading of the entire para, as extracted hereinabove would,
however, suggest that an exception to the general rule of
tax has to be construed strictly against those who invoke for
Excise Appeal No.55537 of 2014
62
their benefit. This was explained in a subsequent decision in
Wood Papers Ltd. case (supra). In para 6, it was observed
as follows :
"... In Collector of Central Excise v. Parle Exports (P) Ltd.,
(1989) 1 SCC 345, this Court while accepting that
exemption clause should be construed liberally applied
rigorous test for determining if expensive items like Gold
Spot base or Limca base of Thums Up base were covered in
the expression food products and food preparations used in
Item No. 68 of First Schedule of Central Excises and Salt Act
and held „that it should not be in consonance with spirit and
the reason of law to give exemption for non-alcoholic
beverage basis under the notification in question‟. Rationale
or ratio is same. Do not extend or widen the ambit at stage
of applicability. But once that hurdle is crossed construe it
liberally. Since the respondent did not fall in the first clause
of the notification there was no question of giving the clause
a liberal construction and hold that production of goods by
respondent mentioned in the notification were entitled to
benefit."
46. The above decision, which is also a decision of two-
Judge Bench of this Court, for the first time took a view that
liberal and strict construction of exemption provisions are to
be invoked at different stages of interpreting it. The
question whether a subject falls in the notification or in the
exemption clause, has to be strictly construed. When once
the ambiguity or doubt is resolved by interpreting the
applicability of exemption clause strictly, the Court may
construe the notification by giving full play bestowing wider
and liberal construction. The ratio of Parle Exports case
(supra) deduced as follows :
"Do not extend or widen the ambit at stage of applicability.
But once that hurdle is crossed, construe it liberally".
Excise Appeal No.55537 of 2014
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47. We do not find any strong and compelling reasons to
differ, taking a contra view, from this. We respectfully
record our concurrence to this view which has been
subsequently, elaborated by the Constitution Bench in Hari
Chand case (supra).
52. To sum up, we answer the reference holding as under
-
(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue."
4.17 As we find that appellant have failed to comply with the test laid down by the Hon‟ble Supreme Court and establish that all these activities were in relation to repair, modernization or renovation of factory we are not in position to agree the contention raised by the appellant for first time in appeal before us contrary to their own admissions and submissions before the investigating and adjudicating authority.
4.18 In respect of remaining services i.e. Manpower Supply Services, and Anti termite/ Pesticide Treatment Services, the credit has been sought to be denied for the reason that these services were used by the appellant in relation to the construction activities of setting up of the manufacturing unit. In absence of any evidence to the contrary being made available we are not in position to hold a contrary view. Interestingly from the ER-1 returns filed by the appellant we tabulate the production and clearance month wise as per the returns filed:
3. Details of the Manufacture, Clearance and Duty Payable Details of Clearance Excise Appeal No.55537 of 2014 64 CETSH Descripti Unit of Openin Quantity Quantit Closin Assessab Type of No on of Quantit g Manufactur y g le Value Clearan Goods y Balanc ed Cleare Balanc (Rs.) ce e d e September 2011 220210 PEPSI L 0 0 0 0 0 Home 10 Clearan ce October 2011 220210 PEPSI L 0 0 0 0 0 Home 10 Clearan ce November 2011 220210 PEPSI L 0 0 0 0 0 Home 10 Clearan ce December 2011 220210 PEPSI L 0 0 0 0 0 Home 10 Clearan ce February 2012 220210 PEPSI L 0 0 0 0 0 Home 10 Clearan ce March 2012 220210 PEPSI L 0 134745 68208 66537 1797456 Home 10 8 Clearan ce From the table above which has been made on the basis of the ER-1 returns filed by the Appellant and made available to us it is evident that there was no manufacturing activity undertaken by the appellant till month of March 2011. In absence of any evidence to effect that appellant was undertaking any manufacturing activities during the period prior to March 2012, we are constrained to agree with the findings recorded in the a impugned order for denying this credit. We also observe that appellant has during the Month of February 2012 and March 2012 have taken huge amount of CENVAT Credit against capital goods both imported and indigenously procured. We have detailed the said credit in table in para 4.5. Thus what so ever credit has been availed by the appellant in respect of these services upto March 2012 is not admissible as the said credit is Excise Appeal No.55537 of 2014 65 attributable to the service received for construction and setting up of the plant.
4.19 We also find that appellant has availed CENVAT credit in respect of the Manpower Supply Services (April 2012 to December 2012) and Security Services (April 2012 to November 2012). This credit has been availed by the appellant after the commencement of production activities. As these services have been received by the appellant during the period after commencement of production, the denial of credit by attributing the same to setting up of the manufacturing unit cannot be justified. Thus, credit of Rs.2,94,243.66/- taken by the appellant against security services and the credits taken by the appellant towards man power supply services from April 2012 onwards is held admissible. This credit would in fact explain the difference between the amount of credit debited by the appellant and that is demanded in the impugned order. However, the exact amount of the credit in respect of these two services after March, 2012 needs to be worked out by the original authority and the reduced from the demand made by the impugned order.
4.20 Appellant has pleaded estoppels relying on various decisions. The said principle as stated in the decisions of Hon‟ble Supreme Court and other forums talk about estoppel in law. We have no quarrel with the said preposition. However the said principle cannot be said to be applicable where finding of fact is concerned. In case of System and Components [2004 (165) ELT 136 (SC)] Hon‟ble Supreme Court observed as follows:
5.The Appeal filed by the Department has been disposed of by the Tribunal by holding that the Department has not proved that these parts were specifically designed for manufacture of Water Chilling Plant in question. The Tribunal has noted the Technical details supplied by the Respondents and the letter of the Respondents dated 30th November, 1993 giving details of how these parts are used in the Chilling Plant. The Tribunal has still strangely held that this by itself is not sufficient to show that they are Excise Appeal No.55537 of 2014 66 specifically designed for the purpose of assembling the Chilling Plant. We are unable to understand this reasoning.
Once it is an admitted position by the party itself, that these are parts of a Chilling Plant and the concerned party does not even dispute that they have no independent use there is no need for the Department to prove the same. It is a basic and settled law that what is admitted need not be proved.
4.21 Thus, we find that the appellant had even prior to issue of the show cause notice debited the entire amount of inadmissible credit which has been admitted by the adjudicating authority. He has also set aside the demand for interest. In our view this was a fit case where the proceedings should have been closed following the dictum of sub-section (2) of Section 11A of Central Excise Act, 1944. Thus, we do not find any merit in the penalty imposed on the appellant under Rule 15 (1) of the CENVAT Credit Rules, 2004.
4.22 Thus summarizing our findings:
Quantum of demand needs to be re-determined by the original authority as per the observations made in para 4.19.
Penalty imposed under Rule 15 (1) is set aside as per para 4.21.
5.1 The appeal is partly allowed as indicated in para 4.22.
(Order pronounced in open court on-13 November, 2024) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp