Custom, Excise & Service Tax Tribunal
Messer Cutting Systems I Private Ltd vs Principal Commissioner Of Gst&Amp; ... on 14 September, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. E/41218/2018
(Arising out of Order-in-Appeal No. 48/2018 dated 16.2.2018
passed by the Commissioner of GST & Central Excise (Appeals),
Coimbatore)
M/s. Messer Cutting Systems India Pvt. Ltd. Appellant
Vs.
Commissioner of GST & Central Excise
Coimbatore Respondent
Appearance Shri M. Saravanan, Consultant for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent CORAM Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Date of Hearing / Decision: 14.09.2018 Final Order No. 42416 / 2018 The appellants are manufacturers of CNC machines and are availing the facility of CENVAT credit on inputs, capital goods and service tax credit on inputs service. On verification of records, it appeared to the department that when the appellants removed inputs as such, the activity tantamounts to trading activity and therefore are not eligible for the entire common credit of input services used for trading activity as well as manufacturing of final products. Show cause notice was 2 issued raising the above allegations and proposing to demand 5% / 6% of 10% of the value of traded goods as per Rule 6(3A) of CENVAT Credit Rules, 2004. After due process of law, the original authority confirmed the demand, interest and imposed penalties. In appeal, Commissioner (Appeals) upheld the same. Hence this appeal.
2. On behalf of the appellant, ld. consultant Shri M. Saravanan appeared and argued the matter. He submitted that the appellants had cleared certain spare parts and consumables along with the final products namely CNS machines. The department alleges that removal of such inputs / goods on which the appellant has availed input credit amounts to trading activity and therefore the appellants having not maintained separate accounts is not entitled to the credit on common input services for the trading activity. He explained that the appellant is not engaged in any trading activity and the inputs were removed as such as per Rule 3(5) of CENVAT Credit Rules, 2004. Since there is no trading activity, the allegation that Rule 6 is applicable and that appellant is not eligible for the credit on input services attributable to trading is incorrect and on wrong interpretation of law. He relied upon the decision of the Tribunal in the case of Lakshmi ring travellers (CBE) Ltd. Vs. Commissioner of Central Excise, Coimbatore vide Final Order No. 42443/2017 dated 27.10.2017; Commissioner of Central Excise, Ghaziabad Vs. UP Telelinks - 2015 (329) ELT 888 (Tri. 3 Del.) and Commissioner of Central Excise, Ghaziabad Vs. Mahaveer Cylinders Ltd. - 2016 (341) ELT 361 (Tri. All.).
3. The ld. AR Shri B. Balamurugan supported the findings in the impugned order. He submitted that the appellants were clearing the spare parts and consumables which were purchased from other manufacturers to the customers. The said activity is nothing but a trading activity. Hence having not maintained separate accounts for the common input service used for manufacture of finished goods as well as trading activity, they are liable to pay the amount as contemplated under Rule 6(3A) of CENVAT Credit Rules, 2004.
4. Heard both sides.
5. On perusal of the show cause notice, it is seen that the allegation against the appellant is that they have been clearing the machine spares and consumables purchased from other manufacturers and cleared it to the customers along with CNC machines. The department does not have a case that these spares and consumables are not integrally connected to the machines. They have also not denied that these are inputs for the appellants and also that the credit availed on such spares and consumables are not eligible. It is to be specifically stated that there is no allegation show cause notice that such goods are not inputs to the appellant. Thus when inputs are removed as such Rule 3(5) would come into application. There is clear distinction from Rule 3(5) from trading activity for the reason that 4 the credit is not eligible on traded goods whereas credit under Rule is eligible on inputs used for the clearance of final products. The Tribunal in the case of Lakshmi ring Travellers (CBE) (supra) had occasion to consider the very same issue and observed as under:-
"5. It is brought out from the facts that the appellant has reversed the credit when the inputs are removed as such from the factory. The department has taken the view that such removal amounts to trading and has directed the appellant to expunge the credit to the extent of the value of inputs removed by them. In fact, such removal of inputs from one factory to the sister unit under the excise law by reversing the credit cannot be considered as a trading activity requiring the appellant to reverse the CENVAT credit availed on input services. I find that the issue of show cause notice as well as the confirmation of demand is without any legal basis. The impugned order is set aside and the appeal is allowed with consequential relief, if any."
6. Similar view was taken by the Tribunal in the case of UP Telelinks (supra) and Mahaveer Cylinders Ltd. (supra) cited by ld. consultant for the appellant. Taking into consideration the facts of the case as well as the decisions as discussed above, I am of the view that the demand cannot sustain. The impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Dictated and pronounced in open court) (Sulekha Beevi C.S.) Member (Judicial) Rex