Custom, Excise & Service Tax Tribunal
Idea Cellular Ltd vs Commissioner Of Central Excise, ... on 28 December, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/28521/2013-SM, ST/28522/2013-SM [Arising out of Order-in-Appeal No. 190/2013 dated 10/09/2013 passed by the Commissioner of Central Excise, Customs & Service Tax, Cochin] [Arising out of Order-in-Appeal No. 191/2013 dated 10/09/2013 passed by the Commissioner of Central Excise, Customs & Service Tax, Cochin] Idea Cellular Ltd. 2nd Floor, Mercy Estate, Ravipuram, Cochin 682 015 Kerala Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Cochin C.R Building, I.S Press Road, Ernakulam, Cochin - 682 018 Kerala Respondent(s)
Appearance:
Shri V. Raghuraman and Shri. R. Murthy, Advocates #466, 9th Cross, 1st Block, Jayanagar, Near Madhavan Park, Bangalore 560 011 Karnataka For the Appellant Shri Parashiva Murthy, AR For the Respondent Date of Hearing: 28/12/2016 Date of Decision: 28/12/2016 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order Nos. 21514-21515 / 2016 Per: S.S GARG The appellants have filed these two appeals against the two impugned orders dated 10.09.2013 whereby the Commissioner rejected the appeals of the appellant but set aside the penalty under Rule 15. The particulars of these two appeals are as follows: Sl. No. Appeal No. Period Nature of Demand Amount (Rs.) 1 ST/28521/2013 April 2006 to September 2006 Interest for the period April 2006 to September 2006 27,04,821/-
2 ST/28522/2013 October 2006 to September 2007 Interest for the period October 2006 to September 2007 2,23,646/-
2. Briefly the facts of the case are that the appellant is engaged in providing Telecommunication Services and other related services in various States. In Appeal No. ST/28521/2013, a show-cause notice dated 15.10.2007 was issued which inter alia required the appellant to show-cause as to why interest and penalty should not be demanded under the following:
(a) An amount of Rs. 27,04,821/- (Rupees Twenty Seven Lakhs Four Thousand Eight Hundred and Twenty One only) being interest on inadmissible cenvat credit taken on capital goods as mentioned therein should not be demanded under Rule 14 of Cenvat Credit Rules, 2004 read with Section 75 of Finance Act, 1994;
Particulars Interest in Rs.
100% Credit availed on various capital goods instead of 50% during the year 2006-07 26,03,299/-
100% Credit availed on SIM cards as inputs instead of 50% during the year 2006-07 1,01,522/-
Total 27,04,821/-
(b) Penalty under Rule 15 of Cenvat Credit Rules, 2004 should not be imposed upon them for wrong availment of cenvat credit as mentioned above.
The appellant filed the reply to the show-cause notice contending that the item cannot be termed as capital goods merely because SIM cards are classified under Chapter 85. As the SIM cards are used for providing Telecommunication Services, hence it is inputs and not capital goods. However, adjudicating authority passed Order-in-Original dated 17.12.2008 wherein inter alia the demand of interest of Rs. 27,04,821/- (Rupees Twenty Seven Lakhs Four Thousand Eight Hundred and Twenty One only) along with imposition of penalty of Rs. 10,000/- (Rupees Ten Thousand only) under Rule 15 was confirmed. Aggrieved by the said order, appellant filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) rejected the appeal except for setting aside the penalty under Rule 15.
2.1. In the second Appeal No. ST/28522/2013, a show-cause notice dated 24.04.2008 was issued which required the appellant to show-cause as to why interest of Rs. 2,23,646/- (Rupees Two Lakhs Twenty Three Thousand Six Hundred and Forty Six only) and penalty should not be demanded due to the availment of inadmissible cenvat credit taken and utilized on the SIM Cards. Appellant filed the reply to the show-cause notice contending that the SIM Cards are used for providing Telecommunication Services and hence it is inputs and not capital goods. However, adjudicating authority vide Order-in-Original dated 19.11.2008 confirmed the demand of interest of Rs. 2,23,646/- (Rupees Two Lakhs Twenty Three Thousand Six Hundred and Forty Six only) along with imposition of penalty of Rs. 27,83,545/- (Rupees Twenty Seven Lakhs Eighty Three Thousand Five Hundred and Forty Five only) under Rule 15. Aggrieved by the said order, appellant filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) rejected the appeal except for setting aside the penalty under Rule 15. Aggrieved by both the orders passed in appeal by the Commissioner, appellants have filed these two appeals before this Tribunal.
3. Heard both the parties and perused the records.
4. Learned counsel for the appellant submitted that the impugned orders are not sustainable in law as the same are opposed to the clear principles of law laid down in several decided cases and are liable to be set aside. He further submitted that the demand of interest on the alleged credit availed on SIM card is wrong. He further submitted that SIM card fall in the definition of input and the adjudicating authority has also agreed that by virtue of their utility SIM card can be considered as input but the adjudicating authority has held that it is a capital goods. He further submitted that this finding is against the decisions rendered by the Supreme Court on this aspect. In support of his submission that the SIM cards are inputs, he placed reliance on the following decisions:
a) Idea Mobile Communication Ltd. Vs. C.C.Ex & Cus, Cochin 2011 (23) S.T.R. 433 (S.C)
b) Waters India (P) Ltd. Vs. CCE, Bangalore 2002 (147) E.L.T. 990 (Tri.-Bang.)
c) Digital Equipments (I) Ltd. Vs. CCE 1996 (86) E.L.T. 127 (Tribunal)
d) Philips Electronics India Ltd. Vs. CCE 2008 (228) E.L.T. 36 (Tri.-Kolkata) 4.1. He further submitted that in the case of Union Carbide India Ltd. Vs. CCEX., Calcutta-I 1996 (86) E.L.T. 613 (L.B.) and CCE & Cus. Vs. Modi Rubber Ltd. 2000 (119) E.L.T. 197 (Tri.-LB) wherein it has been held that the definition of input is very wide and covers all goods (with few exceptions) used for providing output service. He further submitted that SIM card would certainly qualify as input for the purpose of providing taxable service of mobile Telecommunication Services. Therefore, following the ratio of the above decisions, I hold that SIM card is an input and not capital goods. Further with regard to the excess credit availed on capital goods, he submitted that no interest can be demanded as the appellant is eligible to avail the excess credit w.e.f. 01.04.2007 and prior to this date they had not utilized the excess credit which is clear from the huge balance in cenvat credit account during the impugned period. This fact has even been admitted by the impugned order that the assessee has huge cenvat credit lying in their books. The learned counsel placed reliance upon the decision in the case of CCE Vs. Bill Forge Pvt. Ltd. 2011-TIOL-799-HC-KAR-CX wherein the decision of the Honble Supreme Court in the case of Ind-Swift Laboratories Ltd. has been specifically considered and distinguished in similar factual position and it has been clearly and categorically held that the interest cannot be demanded. This decision has been followed by so many subsequent decisions of the High Courts and the Tribunal. He also submitted that the principles laid down by the Honble High Court of Karnataka are fully applicable to the facts of the case involved herein particularly in view of the Larger Bench decision rendered in the case of J.K. Tyres & Industries Ltd. Vs. Asstt. Commissioner of Central Excise reported in 2016-TIOL-1781-CESTAT-BANG. inter alia holding that the decision of the Honble High Court of Karnataka in the case of Bill Forge Pvt. Ltd. would apply within the territory of Karnataka and constitutes operative law for the assessee in Karnataka notwithstanding any contrary view that may have been taken by other High Courts in this regard thereof. The Larger Bench decision has also been followed by this Tribunal in the case of Reid & Taylor (India) Ltd. Vs. CCE, Mysore 2016-TIOL-2020-CESTAT-BANG. It is pertinent to mention that the said view has already been followed even by the Honble High Court of Madras in the case of CCE Vs. Strategic Engineering Pvt. Ltd. 2014-TIOL-466-HC-MAD-CX inter alia holding that mere taking of credit which has been reversed without utilization, no liability for payment of interest or penalty would arise thereof. The similar principle has already been followed by CESTAT, Delhi in the case of Grasim Bhiwani Textiles Ltd. Vs. CCE 2016 (332) E.L.T. 865.
5. On the other hand the learned AR submitted that the appellant has irregularly taken credit and therefore he is liable to pay interest on the excess credit availed.
6. After considering the submissions of both the parties and the law cited by the counsel for the appellant cited supra, I am of the considered view that the case of the appellant is squarely covered by the decision of the jurisdictional Bench of the Honble High Court of Karnataka in the case of Bill Forge Pvt. Ltd. cited supra and all the principles laid down by the Larger Bench in the case of J.K. Tyres & Industries Ltd. cited supra. Therefore, in view of the binding precedents cited supra, I set aside the impugned orders by allowing both the appeals with consequential relief, if any.
(Operative portion of the Order was pronounced in Open Court on 28/12/2016) (S.S GARG) JUDICIAL MEMBER iss