Custom, Excise & Service Tax Tribunal
Kenersys India Pvt. Ltd vs Pune Iii on 19 January, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: ST/89299/2014
[Arising out of Order-in-Appeal No: PUN-EXCUS-003-APP-030-14-15 dated 20th June 2014 passed by the Commissioner of Central Excise (Appeals), Pune III.]
For approval and signature:
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Kenersys India Pvt. Ltd.
Appellant
Vs
Commissioner of Central Excise
Pune III
Respondent
Appearance:
Shri Sachin Chitnis, Advocate for the appellant Shri S.R. Nair, Enquiry Officer (AR) for the respondent CORAM:
Honble Shri C J Mathew, Member (Technical) Date of hearing: 19/01/2016 Date of decision: 08/07/2016 ORDER NO: ____________________________ The core of the dispute between M/s Kenersys India Pvt Ltd and Revenue in order-in-appeal No: PUN-EXCUS-003-APP-030-14-15 dated 20th June 2014 relates to availment of CENVAT credit on certain services engaged by them in the course of providing erection, commissioning and installation agency service to various clients.
2. M/s. Kenersys India Pvt Ltd specializes commissioning of wind operated electrical generators. Most of these project sites are located at remote places and on barren land that requires certain preparations before the structures can be erected. Among these are construction of roads.
3. M/s Kenersys India Pvt Ltd while executing these projects during 2008-07 to 2011-12, allegedly availed CENVAT credit of ? 455291/- against invoices raised by contractors assigned to construct these roads. Revenue, being of the opinion that no tax was leviable on construction of roads, considered this availment to be ineligible in terms of Rule 3 of CENVAT Credit Rules, 2004. The said Rules are extracted as below:
(1) A .. or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -
(i) .
(ii)
(ix) the service tax leviable under section 66 of the Finance Act;
4. The appellant has contested the disallowance of CENVAT credit on the ground that they had made use of the contractors providing commercial or industrial construction service and that the payments effected to these contractors included a service tax component which had been duly discharged by them; consequently, they are entitled to avail CENVAT credit of the tax so paid.
5. Learned Counsel for the appellant place reliance on the decisions of this Tribunal in Deloitte Haskins & Sells v. Commissioner of Central Excise, Thane I [2015 (38) STR 1220 (Tri.Mumbai)], Crown Products Pvt Ltd v. Commissioner of Central Excise [2012 (28) STR 406 (Tri.-Mumbai)], Lanxes ABS Ltd v. Commissioner of Central Excise, Vadodara [2010 (259) ELT 551 (Tri.Ahmd.)], Neptune Equipments Pvt Ltd v. Commissioner of Central Excise, Ahmedabad [2010 (259) ELT 588 (Tri. Ahmd.)] and the decision of the Honble High Court of Bombay in Commissioner of Central Excise & Customs, Aurangabad v. Endurance Technology Pvt Ltd [2015-TIOL-1371-HC-MUM-ST]
6. Learned Authorised Representative contested the submissions of the appellant on the ground that the CENVAT Credit Rules supra allowed taking of the CENVAT credit only where service tax is leviable. He drew attention to the distinction between levy and collection as held by the Honble Supreme Court in Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd [1978 (2) ELT (J 416) (SC)] with particularly reference to:
19.? It may be observed that this finding, that the procedure of a provisional acceptance of the Companys estimates was adopted, seems inconsistent with another finding that what took place was a final adjustment of accounts within the purview of the 3rd proviso to Rule 9, set out above, constituting a levy according to law. The Division Bench appears to have regarded this procedure of an almost mechanical levy as equivalent to a complete assessment followed by the payment of the tax which constituted a valid levy. Hence it concluded that, there being a legally recognised levy, the only procedure open to the Collector for questioning its correctness was one contemplated by Rule 10 so that a demand for a short levy had to be made within 3 months of the final settlement of accounts as provided specifically by Rule 10. The Division Bench considered this procedure to be an alternative to an assessment under Rule 52 at the proper time and also to a provisional assessment in accordance with the procedure laid down in Rule 10-B. But, to regard the procedure under Rule 10 as an alternative to an assessment would be to over-look that it pre-supposes an assessment which could be reopened on specified grounds only within the period given there 20. The term levy appears to us to be wider in its import than the term assessment. It may include both imposition of a tax as well as assessment. The term imposition is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rates at which it has to be taxed. The term assessment, on the other hand, generally used in this country for the actual procedure adopted in fixing the toiletry to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate levy with an assessment as well as with the collection of a tax when it held that when the payment of tax is enforced, there is a levy. We think that, although the connotation of the term levy seems wider than that of assessment, which it includes, yet, it does not seem to us to extend to collection. Article 265 of the Constitution makes a distinction between levy and Collection". We also find that in N. B. Sanjana v. The Elphinstone Spg. &. Wvg. Mills Co. Ltd. AIR 1971 SC 2039 at p. 2045 this Court made a distinction between levy and collection" as used in the Act and the Rules before us. It said there with reference to Rule 10 :
We are not inclined to accept the contention of Dr. Syed Mohammad that the expression levy in Rule 10 means actual collection of some amount. The charging provision Section 3 (1) specifically says There shall be levied and collected in such a manner as may be prescribed the duty of excise... It is to be noted that sub-section (1) uses both the expressions levied and collected and that clearly shows that the expression levy has not been used in the Act or the Rules as meaning actual collection."
21.? We are therefore, unable to accept the view that merely because the account current, kept under the third proviso (erroneously mentioned as second proviso by the Division Bench) to Rule 9, indicated that an accounting had taken place, there was necessarily a legally valid or complete levy. The making of debit entries was only a mode of collection of the tax. Even if payment or actual collection of tax could be spoken of as a de facto levy" it was only provisional and not final. It could only be clothed or invested with validity after carrying out the obligation to make an assessment to justify it. Moreover, it is the process of assessment that really determines whether the levy is short or complete. It is not a factual or presumed levy which could, in a disputed case, prove an assessment. This has to be done by proof of the actual steps taken which constitute assessment.
7. Learned Counsel for the appellant contends that as a user of the service determination of leviability of a tax was not their prerogative. That the liability to pay tax devolves on provider of taxable service who alone is accountable to the tax collecting authorities for due discharge of tax liability cannot be in doubt. In support of its contention of in competence to question tax liability, reliance was placed on the decision of this Tribunal in Newlight Hotels and Resorts Ltd v. Commissioner of Central Excise and Service Tax, Vadodara [2014-TIOL-2237-CESTAT-AHM] which rendered its findings on the basis of the decision of the Honble Supreme Court in Sarvesh Refractories (P) Ltd v. Commissioner of Central Excise & Customs [2007 (218) ELT 488 (SC)] holding:
4. Heard both sides and perused the case records. The primary issue involved in the present proceedings argued by the appellant is whether or not duty determined and classification of services made at the service providers end can be charged by the authorities having jurisdiction over the service recipients end. Appellants have relied upon a series of case laws including those laid by the Apex Court as tabulated in Para 2 above. The judgment of CCE Pondicherry vs. Mohan Breweries and Distilleries Limited [2010 (259) ELT 176 (Mad.)] = 2010-TIOL-675-HC-MAD-CX, delivered by Madras High Court is relevant. The facts of that case and the conclusions arrived at in that case are as follows:-
3. The short facts which are required to be stated are that the first respondent is engaged in the manufacture of glass bottles falling under Chapter 70 of the Central Excise Tariff. On verification of MODVAT documents for the month of October, 1999, the authorities of the appellant noticed that Rs. 3,44,000/- was availed as credit on Capital Goods for No. 1 of Hindustan 2021 Loader with 2 Bar, which was classified by invoice No. 20076 dated 21-8-1999 of M/s. Hindustan Motors Limited, Pondicherry. The invoice product was classified under the heading 84.29. As 84.29 was specifically excluded item under Rule 57-Q of the Central Excise Rules, 1944, a show-cause notice was issued to the first respondent on 7-3-2000. The first respondent filed its reply. After affording personal hearing, the original authority by its order dated 27-11-2000 held that since the capital goods for which Modvat credit was availed is a goods classified under 84.29. Even as per invoice of the manufacturer, the said item is specifically excluded in the table annexed to Rule 57-Q. The credit availed cannot be allowed and consequently, apart from ordering recovery of Rs. 3,44,000/- a penalty of Rs. 25,000/- was imposed. The first respondent preferred an appeal before the Commissioner (Appeals). The appeal came to be allowed by order dated 18-8-2003. Aggrieved by the order of the Commissioner (Appeals), the appellant approached the Tribunal. The Tribunal by the order impugned dated 13-10-2004 in Final Order No. 890/2004 [2005 (179) E.L.T.220 (Tribunal)], having confirmed the order of the lower authority, confirmed the order of the original authority.
4. Mr. K. Ravi Anantha Padmanabhan, learned Senior Standing Counsel for the appellant in his submissions after referring to Rule 57-Q and the table annexed to it and also bringing to our notice the fact that the manufacturer of the product except having mentioned the product item as falling under 84.29 having regard to the decision of the Honble the Supreme Court in the decision in Sarvesh Refractories (P) Ltd. v. Commissioner of C. Ex & Customs - 2007 (218) E.L.T. 488 (S.C.), = 2007-TIOL-233-SC-CX the Tribunal was not justified in law in having reclassified the product under the heading 84.28. Learned Senior Standing Counsel for the appellant also contended that indisputable product for which MODVAT credit was claimed by the first respondent is called shovel loader and that as per the description found in heading 84.29 shovel loader is one of the items and that by no stretch of imagination it would fall under the heading 84.28 under which classification the items viz., on the other lifting, handling, loading or unloading machinery (for example lifts, escalators, conveyors, teleferies, are specified. Learned Senior Standing Counsel would therefore, contend that the order of the Tribunal is liable to be set aside.
5. As against the above submissions, Mr. C. Saravanan, learned counsel for the first respondent contended that even if the product shovel loaderis excluded item falling under 84.29, having regard to clause 5 in the table annexed to Rule 57-Q it can be brought under other accessories and as such when the first respondent has been using the said shovel loader in the first process of manufacture of glass in the factory premises, applying the decision of the Honble the Supreme Court in Commr. of C. Ex., Jaipur v. Rajasthan Spinning & Weaving Mills Ltd. [2010 (255) E.L.T. 481 (S.C.)] = 2010-TIOL-51-SC-CX, it should be held that the first respondent was entitled for credit availed. Extending the above submissions, learned counsel contended that even by applying the decision of the Honble Supreme Court in Sarvesh Refractories (P) Ltd. v. Commissioner of C. Ex. & Customs [2007 (218) E.L.T. 488 (S.C.)] = 2007-TIOL-233-SC-CX, if the shovel loader by virtue of its classification as falling under 84.29 has been excluded since such a classification has been specified by the manufacturer of product itself. The first respondents contention based on clause 5 of the table annexed to Rule 57-Q should be allowed to be exempted by the lower authorities. Learned counsel made the above alternate submission while contending that the Tribunal was justified in classifying the capital goods as one falling under the heading 84.28.
6. Having considered the submissions of respective counsel, we find that the Commissioner of Appeals as well as the Tribunal have committed serious error in classifying the capital goods as one falling under 84.28. The decision reported in 2007 (218) E.L.T. 488 (S.C.) = 2007-TIOL-233-SC-CX supra, the Honble Supreme Court set at rest the legal position as under in paragraph No. 6 which reads as under:
The finding recorded by the Tribunal is unexceptionable. We agree with the view taken by the Tribunal that the appellant could not get the classification of Loadallchanged to Heading 84.27 from 84.29, as declared by the manufacturer insofar as the penalty imposed by the authority-in-original is concerned, we are of the view that a case for imposition of penalty is not made out and accordingly the same is set aside and deleted. Rest of the order of the Tribunal restoring the order of the authority-in-original is confirmed.(emphasis added).
In the light of the said categorical pronouncement of the Honble Supreme Court and applying the same to the facts of this case, when it is not in dispute that the manufacturer declared the product as one falling under shovel loader under the heading 84.29, there is no scope for any other authority to classify the same under any other heading. We also perused the heading 84.29 and 84.28 as prescribed under the Central Excise Tariff 1999-2000. Shovel loader is one of the specific product under the heading 84.29. In the table annexed to Rule 57-Q, clause 2, while all goods falling under Chapter 84 were held to be entitled for Modvat credit, specific exclusion in respect of the product falling under heading 84.29 to 84.37 had been made. Therefore, when the product falling under 84.29 had been specifically excluded for the purpose of availing MODVAT credit and the shovel loaderwas the product with reference to which the first respondent availed MODVAT credit, there was no scope for allowing such MODVAT Credit availed by the first respondent. The alternate contention of the first respondent by relying upon clause 5 of the table annexed to Rule 57-Q, is concerned, at the very outset, it will have to be stated that specific product in a specific description falling under specific heading having been specifically excluded for claiming MODVAT credit under Rule 57-Q read along with the table annexed to it, it will not be permissible for any authority much less, for this Court to countenance such a claim.
4.1 Honble Madras High Court while arriving at the above conclusion relied upon the judgment of Honble Supreme Court in the case of Sarvesh Refractories Pvt. Limited vs. Commissioner [2007 (218) ELT 488 (SC)] = 2007-TIOL-233-SC-CX. Para 2 to 6 of this order of Honble Apex Court are relevant and are reproduced below:-
2. The appellant purchased Loadall from M/s. Escorts JCB Ltd. The cost element of the Loadallincluded excise duty to the tune of Rs.1,79,328/-. The appellant claimed Modvat credit in respect of the said item under Rule 57Q of the Central Excise Rules, 1944 (for short, the Rules).
3. Since the said item had been classified by M/s. Escorts JCB Ltd., the manufacturer and supplier, under Heading 84.29 and had paid duty under the said heading, the authority-in-original, viz., Dy. Commissioner disallowed the Modvat credit to the appellant by observing that the said Heading 84.29 has been specifically ousted from the definition of capital goods under Rule 57Q of the Rules. The Dy. Commissioner also imposed a penalty of Rs. 50,000/- under Rule 173Q (bb) of the Rules.
4. On appeal filed by the appellant, the Commissioner (Appeals) observed that Loadall being an improvised version of material handling equipment would properly fall under Heading 84.27 and not under Heading 84.29. It was further observed that forklift truck or crane or similar material handling equipments have been held to be eligible capital goods. On this finding, the Commissioner (Appeals) held that the appellant would be entitled to claim Modvat credit.
5. Revenue, being aggrieved, filed an appeal before the Tribunal which was accepted by setting aside the order of the Commissioner (Appeals) and restoring that of the authority-in-original. It was held that the Loadall having been classified by the Central Excise Officer having jurisdiction over the manufacturers factory as falling under Heading 84.29, the appellant, who is the consumer of those goods, could not get the classification of the manufacturer changed from 84.29 to 84.27.
6. The finding recorded by the Tribunal is unexceptionable. We agree with the view taken by the Tribunal that the appellant could not get the classification of Loadall changed to Heading 84.27 from 84.29, as declared by the manufacturer. Insofar as the penalty imposed by the authority-in-original is concerned, we are of the view that a case for imposition of penalty is not made out and accordingly the same is set aside and deleted. Rest of the order of the Tribunal restoring the order of the authority-in-original is confirmed.
5. In view of the above interpretation of law made by the Courts, including the Apex Court, no option is left with the Revenue to change the classification/ assessments of the services at the service recipients end. The service tax paid by M/s. IHCL was at the behest of the department and was not altered during the disputed period. Credit of service tax paid on the invoices can not be denied or utilisation reduced on the grounds that classification of the services was wrongly done at the service providers end. Appeal filed by the appellant is thus required to be allowed on this ground alone. We have not considered the other issues raised by the appellant regarding utilisation of accumulated credit after 01.4.2008 or the time barred nature of the demands.
8. In view of the above, the leviability, or otherwise, of service tax on construction of roads having specific exclusion in the definition of commercial or industrial construction services in section 65(25b) of Finance Act, 1994 is beyond the scope of this appeal. That decision can follow only on a challenge to levy by the provider of the service or if Revenue sought to recover any amount in relation to such service. There can be no doubt that the provider of service who is as registered assessee under Finance Act, 1994 would be filing returns of tax collected along with payments received for construction of roads and which, having been accepted by the Revenue, attains finality in relation to leviability. Had such tax not been leviable it was the bounden responsibility of Revenue to scrutinize the return and accord a finding that the tax not due has been paid. In failing to take such action on the return filed by the service provider Revenue is barred from raising a ground of non leviable. By no stretch of imagination is it possible for the recipient of the service to decline to pay service tax component on the bill raised by the service provider. There is no doubt that Rule 3 of the CENVAT Credit Rules 2004, as claimed by the learned Authorised Representative, is the foundation for allowing of CENVAT credit on tax which is leviable under Finance Act, 1994. However, Rule 4 of the said Rules limit the taking of CENVAT credit to the amount including the service tax component paid to such service provider. Consequently, the recipient of the service in the course of providing of an output service will legally and appropriately take the credit which is indicated in the invoice. The service provider has paid tax as provider of commercial or industrial construction service. The appellant having discharged service tax due, it is not open to the appellant either to change that classification or to conclude that the tax is not leviable. Indeed there is no justifiable cause for the appellant to do so.
9. The scheme of CENVAT credit is intended to prevent the cascading effect of tax. A tax, whether rightly or wrongly paid, needs to be set-off if the cascading effect is to be avoided and that is the rationale for the scheme of CENVAT credit to be operated on the invoice received from suppliers of goods or service and the invoice raised on recipient of the output service. There is no dispute on the authenticity of the invoice. The taking of CENVAT credit, therefore, cannot be faulted. In view of the above, and particularly in the context of the decision of the Honble Supreme Court in Sarvesh Refractories (P) Ltd (supra) the impugned order is set aside and the appellant held to be eligible to avail and utilize CENVAT credit of tax charged on the consideration paid for construction of roads to contractors of the appellant.
(Pronounced in Court 08/07/2016) (C J Mathew) Member (Technical) */as 13