Custom, Excise & Service Tax Tribunal
M/S. Apotex Research Pvt. Limited vs Appearance on 30 January, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/21574/2014-SM, E/21575/2014-SM, E/21384/2015-SM, E/21602/2016-SM [Arising out of Order-in-Appeal No. 28/2014-CE dated 29/01/2014 passed by Commissioner of Central Excise, BANGALORE-I (Appeal).] [Arising out of Order-in-Appeal No. 29/2014-CE dated 29/01/2014 passed by Commissioner of Central Excise, BANGALORE-I (Appeal).] [Arising out of Order-in-Appeal No. 187/2015-CE dated 26/03/0201 passed by Commissioner of Central Excise , BANGALORE-I (Appeal) ] [Arising out of Order-in-Appeal No. 132/2016-CE dated 14/09/2016 passed by Commissioner of Central Excise , BANGALORE-I (Appeal) ] M/s. Apotex Research Pvt. Limited Plot No.1, Bommasandra Industrial Area, 4th Phase, Bommasandra Industrial Estate, Jigani Link Road, BANGALORE - 560001 KARNATAKA Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax POST BOX NO 5400, CR BUILDINGS, BANGALORE 560 001. KARNATAKA Appearance: Respondent(s)
Mr. S.SIVAKUMAR ADV #1/1, 7TH MAIN, 2ND STAGE, INDIRANAGAR, BANGALORE-560 038 Dr. Ezhilmathi, AR For the Appellant For the Respondent Date of Hearing: 18/01/2017 Date of Decision: 30/01/2017 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order No. 20104-20107 / 2017 Per : S.S GARG The appellants have filed four appeals against different impugned orders, the details of which are given below:
Appeal No. OIA No. Period Amount E/21574/2014 No.28/2014CE April 2010 - June 2011 Rs. 16,91,354/- E/21575/2014 No.29/2014-CE July 2011 - May 2012 Rs.7,96,943/- E/21384/2015 No.187/2015-CE June 2012 - January 2013 Rs.6,37,076/- E/21602/2016 No.132/2016-CE February - December 2013 Rs.8,76,235/-
2. In all the appeals, the issue involved is identical i.e., denial of CENVAT credit of service tax paid on renting of immovable property located at Mumbai. All the four appeals are being disposed of by this common order. For the sake of convenience, the facts of the appeal No. E/21602/2016 are taken.
2.1 Briefly the facts of the case are that the appellant is a 100% EOU engaged in the manufacture and export of pharmaceutical products and they are also registered under the service tax department and are availing CENVAT credit of duty paid on inputs and input services. As a pharmaceutical industry, appellants have taken premises on rental basis in Mumbai for accommodating their office for executing the regulatory activities relating to their manufacturing of export goods at Bangalore for which they are having Central Excise Registration. The appellants have availed CENVAT credit of service tax paid on rental charges of Mumbai premise at their manufacturing unit at Bangalore. The additional Commissioner of Central Excise, Bangalore issued a show-cause notice dated 14.2.2014 demanding reversal of CENVAT credit of service tax on the ground that the service tax paid pertains to the rental charges of immovable property situated at Mumbai, housing the corporate office of the assessee. These premises are not connected to the manufacturing activity and clearance of the finished goods, therefore the service received is not in or in relation to the manufacture of final product and clearance thereof. Further, the renting of immovable property is not specifically recognized as an input service as per Rule 2(l) of CENVAT Credit Rules (CCR), 2004. Appellant filed reply to the show-cause notice and explained how the input services is related to their manufacturing operations and requested for dropping the demand proposed in the show-cause notice. Thereafter, the adjudicating authority vide Order-in-Original confirmed the demand. Aggrieved by the said order, appellant filed appeal before the Commissioner (A) who vide order dated 14.9.2016 dismissed the appeal and hence, these present appeals.
3 Heard both the parties and perused the records.
4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the said decision is based on wrong interpretation of legal provisions and also passed ignoring the various precedent decisions of the higher judicial fora. He further submitted that CENVAT credit has been denied by observing that the services availed beyond the point of removal of goods from the factory and therefore, service is not used in relation and in relation to the manufacture. He further submitted that the original authority has also wrongly observed that the said property in Mumbai is occupied by Apotex Research Pvt. Ltd. consisting of three companies viz., ARPL Unit-I, ARPL Unit-II and Apotex Pharmachem India. All these companies are having different registration and the Mumbai office is being used by these companies and therefore they are not entitled to CENVAT credit. He further submitted that this finding of the original authority which has been upheld by Commissioner (A) is absolutely wrong. He also submitted that the Mumbai premises is indeed used by only the appellant alone and is not being used by any other company not even the sister concern of the appellant. He further submitted that the regulatory work is part and parcel of manufacturing activity insofar as pharmaceutical industry is concerned and the Mumbai office of the appellant which is carrying out the manufacturing related regulatory function, is an extended arm of the Bangalore manufacturing unit and hence, credit cannot be denied. He also submitted that the appellants have submitted the details of the persons employed in Mumbai office and they are basically technical engineers closely connected with the manufacturing operations. He further submitted that the sister concern Apotex Pharmachem (India) Pvt. Ltd. has not employed even a single person at the Mumbai office of the appellant. To this extent, he filed an affidavit of the MD stating that the employees working in Mumbai office belong to the appellant alone and not to any other company. The counsel further submitted that at their Mumbai office, following regulatory works is conducted.
* Regulatory activity related to review of commercial documents, change control form for commercial production by Regulatory affairs.
* Work on annual product quality review process for commercialization of products by Regulatory affairs.
6* Compile regulatory changes and to get approval for commercial product changes at their manufacturing facility.
* Review and approval of all commercial production, process changes through change control form by Regulatory affairs.
* Actively participate in commercial production challenges from regulatory fronts to get approved and maintain throughout the life cycle of commercial products by Regulatory affairs.
The above activities are pre-manufacturing activities which are pre-requisite for manufacturing of the pharmaceutical industry. He also submitted that the appellant had to take from time to time various licensing permissions from the drug authorities located in Mumbai under the Drugs and Cosmetics Act, 1940 and Drugs and Cosmetic Rules, 1945 and this kind of approval is an ongoing process spread over a period of time. He further submitted that the impugned order has travelled beyond the show-cause notice, as in the show-cause notice the only ground was that the immovable property situated at Mumbai houses the corporate office of the appellant and there is no allegation to the effect that these premises are used by sister companies and it is only in the Order-in-Original that the adjudicating authority took the view that premises is also used by the sister companies which in fact is not a correct finding. He further submitted that this Tribunal in the appellant's own case vide Final Order No.21411/2016 dated 16.12.2016 has allowed the CENVAT credit of service tax paid on rent of Mumbai premises.
4.1 The learned counsel for the appellant relied upon the following decisions:
i. National Engineering Industries Ltd. vs. CCE-I: 2013 (30) STR 511 ii. Jaypee Rewa Cement plant vs. CCE: 2009 (7) TMI 488 iii. Indian Rail and Industries Ltd.: 2006 (8) TMI 7 iv. CST vs. Eltek SGS Pvt. Ltd.: 2014 (1) TMI 95
5. On the other hand, the learned AR reiterated the findings of the impugned order and submitted that the Mumbai office is not at all connected with the manufacturing process and the same is situated beyond the place of removal which has the factory at Bangalore.
6. After considering the submissions of both the parties and after going through the judgments cited supra, I am of the view that the appellants are entitled to CENVAT credit of service tax paid on rent of Mumbai premises as the said premises is directly related to the manufacturing activity. Moreover, in the appellants own case this Tribunal has already held vide Final Order No.21411/2016 dated 16.12.2016 wherein the Tribunal has observed as under:
3. Now coming to the second allegation on which refund has been denied is that the services of Renting of Immovable Property is used at Mumbai Office and hence not eligible. To this the learned counsel submitted that the Mumbai premises of the appellant are used for regulatory activities which are directly related to the manufacture of pharmaceutical manufacturing, which is a legal pre-requisite of the Pharma Industry. It also includes regulatory activity pertaining to review of commercial documents, change control form for commercial production by regulatory affairs, compile regulatory changes and to get approval for commercial product changes at manufacturing activity. Review and approval all commercial production, process changes through change control form by regulatory affairs. He also submitted that about 15 engineers of the appellant are working in Mumbai premises to carry out the above referred pre-manufacturing related activities and all these activities are directly in relation to their manufacturing activity and fall in the definition of input service as contained in Rule 2(1) of Cenvat Credit Rules 2004. In support of this he relied upon the decision in the case of National Engineering Industries Ltd. Vs. CCE, Jaipur (supra) wherein it has been observed that cenvat credit of service tax relating to rental of immovable property, security guard appointed at the residence of central office and cycle stand, maintenance of registered office at Kolkata and corporate office at New Delhi and telephone/ courier services etc., the services were not availed at Jaipur but at places other than the place of manufacture, do not carry weight in view of various decisions of the Tribunal. Further he also relied upon the decision of Jaypee Rewa Cement Plant Vs. CCE, Bhopal [2009 (7) TMI 488-CESTAT, New Delhi] and the case of Indian Rail and Industries Ltd. [2006 (8) TMI 7 CESTAT- Mumbai] wherein it has been observed that there is no such stipulation that the input services must be provided or received in the factory of manufacture. Similarly, he also relied upon the decision in the case of CCE, Bangalore-III vs. T.G. Kirloskar Automotive Pvt. Ltd. in respect of Central Excise Appeal Nos.133 and 134/2009. Therefore keeping in view the ratio of the decision cited supra, I am of the opinion that the appellant is entitled to refund of cenvat credit in respect of Renting of Immovable Property Services. The next input service on which the cenvat credit has been denied is that the Security Service is not received at Unit I but received at Unit II. The learned counsel for the appellant stated that Unit I and Unit II of the appellant are located at Plot No. 1 and 2 are having one centralized registration for providing output service right from 2009 and therefore the appellant is entitled to claim refund in respect of services received in Plot No. 2 as well. In support of his submission, appellant relied upon the following decisions:
"CCE, Salem vs. Chemplast Sanmar Ltd. 2007 (208) E.L.T. 208 (Tri.-Chennai)"
7. In view of the above discussions, I am of the considered view that the impugned order denying the CENVAT credit in respect of service tax paid on renting of immovable property located in Mumbai is wrong and therefore, I set aside the impugned order to that extent by allowing all the four appeals of the appellant.
(Order was pronounced in Open Court on 30/01/2017.) S.S GARG JUDICIAL MEMBER ry 9