Custom, Excise & Service Tax Tribunal
M/S. Oil & Natural Gas Corporation Ltd vs Commissioner Of Central Excise, ... on 13 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/86070, 85916, 85917/13-MUM (Arising out of Order-in-original No. 27-29/AT(27-29) COMMR/RGD/12-13 dated 25/9/2012 passed by Commissioner of Central Excise, Customs & Service Tax, Raigad.) For approval and signature: Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
=======================================================
M/s. Oil & Natural Gas Corporation Ltd.
:
Appellants
VS
Commissioner of Central Excise, Customs and Service Tax, Raigad
:
Respondent
Appearance
Shri. Gajendra Jain, Advocate with Shri. Ashish Philip, Advocate for the Appellant
Shri. Hitesh Shah, Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. P.K. Jain, Member (Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 13/3/2015
Date of decision /2015
ORDER NO.
Per : Ramesh Nair
These three appeals are directed against order-in-original No. 27-29/AT(27-29) COMMR/RGD/12-13 dated 25/9/2012 passed by the Commissioner of Central Excise, Customs & Service Tax, Raigad, wherein he passed following order:
(i) I order that the Cenvat Credit of Service Tax distributed by input service distributors on services rendered in relation to the manufacture of exempted goods produced at the oilfields of Mumbai Offshore is inadmissible to M/s. Oil & Natural Gas Corporation Ltd, Uran plant, situated at Uran, Dist. Raigad.
(ii) I determine the amount of Cenvat credit of service tax payable by and recoverable from M/s. Oil & Natural Gas Corporation Ltd, Uran plant, situated at Uran, Dist Raigad as Rs. 113,46,82,739.00(Rupees one hundred thirteen crore forty six lakh eighty two thousand seven hundred thirty nine only) distributed by input service distributors on services rendered in relation to the manufacture of exempted goods manufactured in the oilfields of Mumbai Offshore during the period from December 2009 to July 2011 under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(2) of erstwhile Central Excise Act prior to 8/4/2011 and under Section 11A(5) of the Central Excise Act, 1944 from 8/4/2011 onwards.
(iii) I impose penalty of Rs. 113,46,82,739.00((Rupees one hundred thirteen crore forty six lakh eighty two thousand seven hundred thirty nine only) under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC/11AC(b) of the erstwhile Central Excise Act, 1944 Central Excise Act, 1944.
(iv) I order recovery of interest at the appropriate rates as applicable, in force, under Rule 14 of the Cenvat Credit, 2004 read with Section 11AB/11AA of the erstwhile Central Excise Act, 1944, on the amount so determined to be so payable by them as at Sr. (ii) above, from the date on which the said Central Excise duty became due and until the same is paid by them.
(v) I do not impose penalty under Rule 26 of Central Excise Rules, 2002 on the said six input service distributors.
2. In the present case the credit was denied on two grounds namely:
* The Cenvat Credit distributed by the ISD pertains to input services availed and used exclusively at the oil fields of Mumbai offshore to produce exempted crude oil. Hence, credit of input services used for the production of crude oil cannot be availed at Uran factory of appellants.
* The Uran factory of the appellants are not entitled to Cenvat credit of service tax paid on the input services received by the administrative divisions prior to the registration as ISD but distributed by the ISD after taking registration.
3. These present appeals of appellant were heard alongwith appeal No. E/1267/11-MUM of the same appellant by this bench. Both sides adapted their submission made in respect of Appeal No. E/1267/11-MUM as the issue involved in both cases is common. This Tribunal in the said appeal passed a Final Order No. A/1949/15/EB dated 9/7/2015 wherein this Tribunal has held as under:
6. When the matter first time came before this Tribunal, the issue involved was whether the credit availed by the appellant is in respect of exempted goods i.e. crude oil etc. therefore whether the credit is admissible. Secondly, credit can be allowed in respect of services received by the input service distributor before the registration under input service distributor and distributed the same after the registration. This Tribunal had passed following order:
2013 (31) S.T.R. 214 (Tri. - Mumbai) Oil & Natural Gas Corporation Ltd.
Versus COMMR. OF C. EX., RAIGAD
7.?In view of the above, we hold that credit of Service Tax paid on input services used in manufacture of Crude Oil and Natural gas at Mumbai Offshore is not admissible to Uran Plant. Since credit is not admissible we do not go into second aspect of admissibility of credit only after date of registered as ISD. We therefore, uphold Commissioners Order regarding confirmation of demand of Rs. 40,57,15,129/- under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act. Since confirmation of demand is upheld, interest on the demand amount is also recoverable under Rule 14 of Cenvat Credit Rules read with Section 11AB of Central Excise Act.
7.2?Coming to issue of imposition of penalty on Uran Plant, it is the contention of the appellants that demand pertains to period up to November, 2009 and in that period Rule 15(1) and Rule 15(2) of the Cenvat Credit Rules, 2004 did not cover wrong availment of input service credit. We find that Rule 15 has been amended with effect from 27-2-2010 incorporating input services in Rule 15(1) and 15(2) of Cenvat Credit Rules, 2004. Therefore, penalty under Rule 15(1) and 15(2) is not imposable. Similarly, under Rule 15(4) penalty is imposable on output service provider. Therefore, penalty is imposable only under Rule 15(3) of Cenvat Credit Rules and maximum penalty under Rule 15(3) is Rs. 2000/- only. We therefore, find considerable force in the submissions of the appellants and reduce the penalty imposed under Rule 15 of the Cenvat Credit Rules to Rs. 2000/- on the appellants.
7.3?As regards imposition of penalty on ISDs, we find that in show cause notice penalty was proposed under Rule 25/26 of Central Excise Rules but in the Order-in-Original penalty is imposed under Rule 15 of Cenvat Credit Rules. Penalty needs to be set aside on this ground alone. Penalty has been imposed under Rule 15(4) of the Cenvat Credit Rules. Rule 15(4) as it existed during the relevant period pertains to imposition of penalty on output service provider. Accordingly, penalties imposed on ISDs are set aside.
8.?In view of the above, appeal filed by ONGC Uran Plant is partly allowed. Appeals filed by ISDs are allowed.
The above order was challenged by the appellant before Honble Bombay High Court wherein Honble High Court has passed following order: which is reproduced below:
2013 (32) S.T.R. 31 (Bom.)
13.?The Appeal before the Court raises a question of construction of the Cenvat Credit Rules, 2004. Under Rule 3(1), a manufacturer or producer of final products or a provider of taxable service is allowed to take Cenvat credit inter alia of the duty of excise specified in the First and Second Schedules to the Central Excise Tariff Act, paid on the following :-
(i)any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and
(ii)any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004. ?????????????????????(Emphasis supplied) In the present case, it is clause (ii) which is of relevance. Hence, in order to enable a manufacturer to avail of Cenvat credit, the requirement is that the duty of Excise ought to have been paid on any input service received by the manufacturer of a final product. The expression input service is defined in Rule 2(l) as follows :-
(l)Input service means any service, -
(i)used by a provider of taxable service for providing an output service, or
(ii)used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place or removal. ??????????????????????(emphasis supplied) Here again, clause (ii) is of relevance. Under clause (ii) of Rule 2(l), the expression input service is defined in broad terms. In order to be an input service under clause (ii), the following requirements must be satisfied. Firstly, the expression requires the utilisation of any service; secondly, the service must be used by the manufacturer; and thirdly, the service may be used, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal. The expression directly or indirectly has a wide import. The service, in other words, need not be a service which is directly used by the manufacturer in the manufacture of a final product. The definition of input service comprehends within its sweep a service which is used by the manufacturer even indirectly, and in or in relation to the manufacture of a final product. Where the legislature or its delegate uses the expression in or in relation to its object and purpose is to widen the scope and purview of the entitlement. When the words directly or indirectly and in or in relation to the manufacture of final products are used in conjunction that is indicative of the comprehensive sweep and ambit of the statutory provision. Rule 6(1) stipulates that no Cenvat credit shall be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, save in the circumstances which are mentioned in Rule 6(2). Rule 6(2) deals with a situation where inter alia a manufacturer manufactures both dutiable final products as well as exempted goods. In such a situation, in order to avail of Cenvat credit, the manufacturer is required to maintain separate accounts for the receipt, consumption and inventory of inputs and input services meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods. Rule 6(2) stipulates that a manufacturer can take Cenvat credit only on that quantity of input service which is intended for use in the manufacture of dutiable goods. In other words, Cenvat credit is not admissible on that quantity of input or input service which is not intended for use and is not used in the manufacture of dutiable goods. Rule 6(5) confers an option to follow one of two courses of action to a manufacturer not opting to maintain separate accounts. Under Rule 6(5), which has a non obstante provision over-riding sub-rules (1), (2) and (3) credit of the whole of the service tax paid on taxable services of a specified description is allowable unless such a service is used exclusively in or in relation to the manufacture of exempted goods or provision of exempted services. In other words, where a service is of the description which is specified in Rule 6(5), the manufacturer is entitled to credit of the whole of the service tax unless the service is used exclusively, that is to say solely in or in relation to the manufacture of exempted goods or any provision of exempted services.
14.?Now, in the present case, ONGC is a manufacturer both of dutiable and exempted products. Crude oil as well as natural gases are exempted products. The Tribunal has held against the Appellant in regard to its entitlement to avail of input service on the ground that crude oil at Mumbai Offshore is in itself a saleable commodity since it is transferred or sold in part to other purchasers at Mumbai Offshore. According to the Tribunal, the input services are entirely being used in the manufacture of crude oil/natural gas both of which are exempted from duty and that in consequence the Appellant is not entitled to Cenvat credit. The Appellant, as a manufacturer of exempted products would not be entitled to Cenvat credit on such quantity of input service which is used in the manufacture of exempted goods, this being the plain stipulation contained in Rule 6(1). This is subject to Rule 6(5) which has an overriding provision which allows the availment of Cenvat credit in respect of certain specified taxable services unless they are used exclusively in or in relation to the manufacture of exempted goods. But the point to note is that merely because the Appellant manufactures exempted goods, that would be no justification to disallow to it the benefit of availing of Cenvat credit on that quantity of input service which is utilised in or in relation to the manufacture of dutiable final products. As we have noted earlier, the definition of the expression input service is cast in broad terms. The expression input service means any service used by the manufacture, whether directly or indirectly or in or in relation to the manufacture of final products. It is impossible to accept the hypothesis that would assert, that input services that are utilized by the Appellant in or in relation to the process of manufacture that takes place at Mumbai Offshore is not a service that is used by the manufacturer in or in relation to the manufacture of dutiable final products. The dutiable final products that are manufactured by the Appellant at its Uran plant are fundamentally premised upon the manufacturing process which commences at Mumbai Offshore. There can be no manner of doubt that the input services which go into the process of production at Mumbai Offshore meet the description of services that are utilised by the manufacturer directly or indirectly in or in relation to the manufacture of dutiable final products. The manufacture of the dutiable final products cannot take place without the process in question. To accept the contention of the Revenue would be to completely ignore the implication of the words used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. Such a construction as proposed by the Revenue is impermissible. These words used in the subordinate legislation fulfill the statutory object and purpose of presenting a cascading effect and burden of duty. They must be given their plain and natural meaning. At the same time, it would be necessary to clarify that Cenvat credit can be availed of only on that quantity of input service which is used in the manufacture of dutiable goods.
15.?In arriving at this conclusion, we have placed reliance on two judgements of the Supreme Court. The first judgment is a judgement in Escorts Ltd. v. Commissioner of Central Excise, Delhi [2004 (171) E.L.T. 145 (S.C.)]. In Escortss case, the Appellant manufactured tractors and availed of Modvat credit in respect of duties paid on inputs which were used in the manufacture of parts. The parts were cleared to another factory of the Appellant, without payment of duty, by claiming the benefit of an exemption Notification. The parts were used in the manufacture of tractors on which duty was paid. Modvat credit was denied on the ground that the parts constituted final goods in themselves which were cleared without the payment of duty. The Appellant claimed that the final products were not the parts but tractors and that since duty was paid on tractors, Modvat credit was allowable. The Tribunal affirmed the view that was taken in the course of adjudication proceedings that since no duty was paid on the parts, Modvat credit could not be availed of. This view was set aside in appeal by the Supreme Court. Before the Supreme Court, it was conceded that where parts were cleared for sale in the open market or in cases where the parts are used for manufacture of small tractors, on which no duty is paid, the Appellant could not claim Modvat credit and did not do so. The Supreme Court held that the purpose of the exemption Notification and of Rule 57C of the then Central Excise Rules, 1944 was to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. The Supreme Court held that Rule 57D(2) indicates that an intermediate product may also come into existence in the manufacture of a final product and even though no duty is paid on the intermediate product as it is exempted from whole of the duty, credit would still be allowed so long as duty is paid on the final product. Finally, it was held that the mere fact that the parts were cleared from one factory to another factory belonging to the Appellant would not disentitle the Appellant from claiming the benefit of Modvat credit. That was, therefore, a case where at the intermediate stage, the parts which constituted an input in the manufacture of tractors were exempted from excise duty. The final product, the tractor, was dutiable. The test which was laid down by the Supreme Court was that so long as the final product was dutiable, the assessee would be entitled to the benefit of Modvat credit.
16.?The second decision of the Supreme Court to which a reference must also be made is that in Collector of Central Excise v. Solaris Chemtech Limited [2007 (214) E.L.T. 481 (S.C.)]. The explanation to Rule 57A defined input inter alia to include inputs used as fuel, this clause being brought into existence on 1 March, 1994. In that case, Low Sulphur Heavy Stock (LSHS) was used by the assessee as fuel for generating electricity which was in turn captively consumed for the production of caustic soda and cement. The Revenue contended that LSHS generates electricity, but that process did not result into the manufacture of cement and caustic soda and, therefore, Modvat credit was not admissible for the duty paid on LSHS. Electricity, as the Supreme Court noted, is not an excisable item. The Supreme Court held that without the utilisation of LSHS, it was not possible to manufacture cement or caustic soda and, therefore, LSHS fell within the ambit of the expression used in or in relation to manufacture of the final products. The wide ambit of the expression used in or in relation to the manufacture of the final product has been emphasised by the Supreme Court in the following observations :-
Lastly, we may point out that in order to appreciate the arguments advanced on behalf of the Department one needs to interpret the expression in or in relation to the manufacture of final products. The expression in the manufacture of goods indicates the use of the input in the manufacture of the final product. The said expression normally covers the entire process of converting raw-materials into finished goods such as caustic soda, cement etc. However, the matter does not end with the said expression. The expression also covers inputs used in relation to the manufacture of final products. It is interesting to note that the said expression, namely, in relation to also finds place in the extended definition of the word manufacture in Section 2(f) of the Central Excises and Salt Act, 1944 (for short, the said Act). It is for this reason that this Court has repeatedly held that the expression in relation to must be given a wide connotation. The Explanation to Rule 57A shows an inclusive definition of the word inputs. Therefore, that is a dichotomy between inputs used in the manufacture of the final product and inputs used in relation to the manufacture of final products. The Department gave a narrow meaning to the word, used in Rule 57A. The Department would have been right in saying that the input must be raw-material consumed in the manufacture of final product, however, in the present case, as stated above, the expression used in Rule 57A uses the words in relation to the manufacture of final products. The words in relation to which find place in Section 2(f) of the said Act has been interpreted by this Court to cover processes generating intermediate products and it is in this context that it has been repeatedly held by this Court that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the final product. Therefore, the words in relation to the manufacture have been used to widen and expand the scope, meaning and content of the expression inputs so as to attract goods which do not enter into finished goods. In the case of M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. v. The Sales Tax Officer, Kanpur and Another - AIR 1965 SC 1310, this Court has held that Rule 57A refers to inputs which are not only goods used in the manufacture of final products but also goods used in relation to the manufacture of final products. Where raw-material is used in the manufacture of final product it is an input used in the manufacture of final product. However, the doubt may arise only in regard to use of some articles not in the mainstream of manufacturing process but something which is used for rendering final product marketable or something used otherwise in assisting the process of manufacture. This doubt is set at rest by use of the words used in relation to manufacture. In the present case, the LSHS is used to generate electricity which is captively consumed. Without continuous supply of such electricity generated in the plant it is not possible to manufacture cement, caustic soda etc. Without such supply the process of electrolysis was not possible. Therefore, keeping in mind the expression used in relation to the manufacture in Rule 57A we are of the view that the assessees were entitled to MODVAT credit on LSHS. In our opinion, the present case falls in clause (c), therefore, the assessees were entitled to MODVAT credit under Explanatory clause (c) even before 16-3-1995. Inputs used for generation of electricity will qualify for MODVAT credit only if they are used in or in relation to the manufacture of the final product, such as cement, caustic soda etc. Therefore, it is not correct to state that inputs used as fuel for generation of electricity captively consumed will not be covered as inputs under Rule 57A. We are fortified in the conclusion which we have drawn from these binding principles which have been enunciated in the judgments of the Supreme Court.
17.?For these reasons, we have come to the conclusion that the Tribunal was in error in coming to the conclusion that the Appellant was disentitled to the benefit of Cenvat credit in respect of the input services used in or in relation to the manufacture of dutiable final products on the ground, as the Tribunal held, that crude oil which is subject to a further process of manufacture at the Uran plant for the production of dutiable final products is exempted from Central Excise duty. ONGC admittedly also produces dutiable final products. The production of those dutiable products is possible only on the continuous supply of crude oil. We, however, clarify that as a manufacturer of both dutiable and exempted goods, the Appellant would be required to comply with the discipline and rigour of Rule 6 and would be entitled to take Cenvat credit only on that quantity of input service which is used in the manufacture of the ultimate dutiable product. We accordingly answer question (a) in the negative.
Taking into consideration of the facts and circumstances of the present case that though the crude oil may be exempted but the same is used in the further process as intermediate products in the appellants own factory and the resultant final product is dutiable, the Honble High Court held that the appellant are entitled for Cenvat credit. However, The Honble High Court has remanded the matter only to decide the issue that whether the credit can be availed on the input service distributors invoices issued in respect of service received by the input service distributor prior to the registration as input service distributor. Therefore in the present case the issue to be decided by us is whether the credit availed on the invoices of input service distributors received in respect of input services prior to the registration as input service distributors is admissible or otherwise. Before going into details, it is necessary to read relevant statutory provisions. Rule 2(m) of Cenvat Credit Rules, 2004 defines input service distributor as under:
Rule 2(m) defines input service distributor as under:
input service distributor means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be.
In the above definition it provides that the input service distributor should receive invoices under Rule 4(a) of the Service Tax Rules, 1994 towards purchase of inputs services and issues invoices for the purpose of distribution of credit of service tax paid on the said service to such manufacturer or producer or provider, as the case may be. The Rule 2(m) does not stipulates any condition that the invoices issued under Rule 4(a) in respect of purchase of input service should pertain to period prior to the registration or after registration. Therefore it is clear that the purchase of input service by the office of the manufacturer may be for the period prior to the registration and because of this reason there is no prohibition in the above Rule 2(m)for distributing services and issuance of input service distribution invoices.
Rule 3(i) of Cenvat Credit Rules, provides :
3. CENVAT credit. -
(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978 ( 40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ( 58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
[ Substituted vide Notification No. 27/2007-Central Excise (N.T.) dated 12-05-2007 ]
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) (vi) and (via);[Substituted vide Notification No. 10/2007-Central Excise (N.T.) dated 01-03-2007 ] (viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, [OMITTED- as substituted by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law ]:
(In clause (viia), portion beginning with the words and figures "as substituted by clause 72" and ending with the words "the force of law" has been omitted vide Notification No. 22/2005 -Central Excise (N.T.), dated 13/05/2005) Provided that a provider of taxable service shall not be eligible to take credit of such additional duty;
In view of above, a manufacturer of final product shall be allowed, credit of duty paid on inputs and capital goods as well as service tax paid on input service received by him. In the present case, services on which the Cenvat Credit was taken by the appellant have been admittedly received and used in or in relation to the manufacture of the dutiable final product which has been observed by the Honble High Court also. Therefore, foremost condition is, input should be received by the appellant and same should be used in or in relation to the manufacture of their dutiable final product is not under dispute. Rule 9(1) of Cenvat Credit Rules provides documents on which the Cenvat Credit can be availed which is reproduced below:
9. Documents and accounts.-
(1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :-
(a) an invoice issued by-
(i) a manufacturer for clearance of -
(I) inputs or capital goods from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer;
(II) inputs or capital goods as such;
(ii) an importer;
(iii) an importer from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002;
(iv) a first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002; or
(b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules, 2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made there under with intent to evade payment of duty.
Explanation.- For removal of doubts, it is clarified that supplementary invoice shall also include challan or any other similar document evidencing payment of additional amount of additional duty leviable under section 3 of the Customs Tariff Act; or
(c) a bill of entry; or
(d) a certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office; or
(e) a challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii), (iv), (v) and (vii) of clause (d) of sub-rule (1) of rule (2) of the Service Tax Rules, 1994; or (In clause (e) the words, brackets and figures "sub-clauses (iii), (iv), (v) and (vii)" has been amended vide Notification No. 10/2006-CE(N.T.), dated 25/04/2006) (In clause (e) words ", (iv) and (v)" has been substituted vide Notification No. 28/2005-CE(N.T.), dated 07/06/2005)
(f) an invoice, a bill or challan issued by a provider of input service on or after the 10th day of, September, 2004; or
(g) an invoice, bill or challan issued by an input service distributor under rule 4A of the Service Tax Rules, 1994.
Provided that the credit of additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be allowed if the invoice or the supplementary invoice, as the case may be, bears an indication to the effect that no credit of the said additional duty shall be admissible;
[ inserted vide Notification No. 35/2007 - CE(NT), dated 14-09-2007 ] From the above rule, it is observed that the appellant being manufacturer can avail the Cenvat credit on the, amongst documents, invoices issued by input service distributors under Rule 4A of Service Tax Rules, 1994. In the present case the appellant has availed credit on invoices issued by the input service distributors under Rule 4A, therefore the documents on which credit was taken is the documents covered under the above rule therefore invoices received by the appellant is not under dispute. As regard the input service distributor they are supposed to take credit on invoices issued by provider of input service. In the present case this is also not under dispute that the input service distributor has taken credit on the invoices issued by the service provider. Therefore the documents i.e. invoices issued by input service distributor could not be said to have been issued illegally. Above provisions also does not provide any restriction clause that the credit is not allowed in respect of invoices issued by input service distributors in respect of service received by them prior to registration as input service distributor, therefore we are of the view that documents issued by input service distributors and availment of cenvat credit by the appellant on such documents cannot be found fault. We also observed that on the part of the appellant there is no contravention or violation of availment of Cenvat Credit for the reason that invoices on which Cenvat Credit was availed is valid and has not been held invalid. Input service was received by the appellant, input service covered by the said invoices has been used in or in relation to the manufacture of dutiable final product. In these facts, we find no fault or contravention of the provisions on the part of the appellant therefore Cenvat credit, irrespective any discrepancy, if any found on the part of the input service distributor, Cenvat Credit to the appellant cannot be denied on the ground that input service distributor have received services prior to the obtaining registration as input service distributors. We have gone through the judgments relied upon by both sides. We find that identical issue has been dealt in the judgments of M/s. Dagger Forst Tools Ltd (supra), wherein this Tribunal held as under
The appellant M/s. Dagger Forst Tools Ltd., have a number of manufacturing units at Thane, Ambernath and Aurangabad. Their office at Thane has registered themselves as input service distributor with effect from 4-10-2008. Thereafter, they distributed the credit of Service Tax paid on common input service such as Consultancy services, advocate services, house keeping, security etc., to their various units in proportion to the turnover of the unit. These services were received by them during the period February, 2008 to October, 2008. The Department was of the view that since the appellant registered themselves as input service distributor only from 4-10-2008, they can distribute credit only of the taxes paid on or after 4-10-2008 and not the taxes paid prior to 4-10-2008. Accordingly, a show cause notice was issued and the appellant was denied credit amounting to Rs. 4,61,039/- on the ground that the services were received prior to 4-10-2008 and the taxes were also paid prior to that date and, therefore, the appellant could not have distributed the credit in respect of the taxes paid.
6.2?Input service distribution is a facility granted to a manufacturer/service provider who operates from a number of premises. There is no restriction under the Cenvat Credit Rules, 2004, with regard to the period for availing Cenvat credit of Service Tax paid. In other words, a manufacturer/input service provider can avail Cenvat credit of the Service Tax paid irrespective of any time limitation. The only condition to be satisfied is that they should have paid the Service Tax prior to availing the credit. So long as this condition is satisfied, there is no time-limit prescribed in the Rule within which the Cenvat credit has to be taken. If that be so, there is no reason why in the case of input service distributor alone, a restriction should be placed with respect to availment of Cenvat credit i.e. input service distributor is permitted to distribute only taxes paid on or after registration. Such a restriction is totally unwarranted and is not provided for in the law. Therefore the order passed by the lower Appellate Authority is not in accordance with the law and the same is liable to be set aside.
From the above judgment it can be seen that the period for which service was received was Feb-2008 to Oct- 2008 and the input service distributors registered themselves only on 4/10/2008 and the services received during Feb,2008 to Oct, 2008 have been distributed. Honble Tribunal has allowed credit and held that there is no restriction under Cenvat Credit Rule, 2004 with regard to the period for availing Cenvat Credit on service tax paid. We further observed that in the various judgments this Tribunal even in cases where cenvat credit was availed on the invoices which are in the name of the head office which is not registered as input service distributors, the credit was allowed only on the reasoning that there is no dispute about the payment of service tax, receipt of service and use thereof the relevant portion of the order of some of those judgments are reproduced below:-
2014 (34) S.T.R. 278 (Tri. - Del.) PUNJAB NATIONAL BANK Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-I
5.?I have considered the submissions from both the sides and perused the records. There is no dispute that the appellant are the Zonal Audit Head office of Punjab National Bank and though they are registered in respect of banking services since October 2004, they were actually responsible only for audit of the records of the Branches of PNB within their jurisdiction and it is the branches which were providing banking services and were individually registered for service tax payment. There is no dispute that the Appellant as Zonal Audit Office were not providing banking/financial services. The point of dispute is as to whether in this factual background, the appellant as Zonal Audit Office of PNB could take Cenvat credit on the basis of invoices issued in their name and distribute the same to the branches as input service distributor. In this case, there is no dispute that the services in question had been received and are covered by the definition of Input service and if the appellant had obtained separate registration as input service distributor, there would have been no objection to availing Cenvat credit on the basis of invoices in the name of Zonal Audit Office and distributing the same to the branches of PNB. In the peculiar facts and circumstances of the case, when the Appellant, though not providing the banking/financial services, were registered as provider of banking service since 2004, they should be treated as registered as ISD also, as they were for all practical purposes, functioning as input service distributor and the availment of service tax credit and its distribution to various branches by issue of invoices were being reflected in the ST-3 returns being filed by them, which is what a registered Input Service Distributor would have done. I have gone through the judgments cited by the ld. D.R. but none of them are applicable to the facts of this case. I, therefore, hold that the Appellant could take the Cenvat credit and distribute the same by issuing invoices to their branches. The impugned order is, therefore, not sustainable. The same is set aside. The appeal is allowed.
2014 (34) S.T.R. 758 (Tri. - Ahmd.) Demosha chemicals pvt. Ltd.
Versus Commissioner of c. Ex. & s.t., daman
8.?Undisputed facts are appellant is having two units. The invoices which are raised for the services rendered were in the name of the head office and their head office was not registered as input service distributor.
9.?On perusal of the records, it transpires that the Cenvat credit which has been availed for the appellant of the Service Tax paid based on invoices/challans was in respect of the services provided by the Banks, Insurance Companies, transporters, Telecom Service, CHAs, Couriers, repairing & maintenance services. The invoices were issued on the name of the registered/head office situated at Mumbai. It transpires from the records that there is no dispute as to the fact that the services were rendered in this case. The dispute as correctly pointed out by the ld. Counsel is only on the ground that the head office of the appellant having not being registered as input service distributor, the entire tax paid by service provider could not be availed as Cenvat credit by the appellant, as there were two units. In the entire records, I did not find any such allegation nor there is any findings to indicate that the appellant herein had availed more than the eligible Cenvat credit of the Service Tax paid in both the units. The Cenvat credit availed by the appellant is exactly the amount which has been charged as Service Tax by the Service provider. I find strong force to the contentions raised by the ld. Counsel that the judgment/order of this bench in the case of Doshion Limited (supra) (para 5) and Modern Petrofils (supra) (para 4) are directly on the point wherein the Bench has held as under :
Doshion Limited v. Commissioner of Central Excise, Ahmedabad - 2013 (288) E.L.T. 291 (Tri.-Ahmd.) :
5.?We have considered the submissions made by both sides. We find considerable force in the arguments advanced by the learned counsel. The registered office and Vatva office both are located in the same place and appellant has simply utilised the credit at Vatva instead of distributing it to various units. As submitted by the learned counsel, during the relevant period, there was no restriction for utilisation of such credit without allocating proportionately to various units. The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathetically. Further, it is also noticed that appellant has not got any extra benefit by doing this. In fact from the statement of Shri Chandresh C. Shah, as explained that above Cenvat credit available to them, 20% of service tax payable only was paid and balance was paid in cash. In fact, proper distribution would have enabled them to utilize full credit. It would show that the exercise is totally Revenue neutral and no loss has been caused to the Revenue (in fact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time and in the light of the decision cited by the learned counsel, the procedural irregularity has to be ignored and the demand confirmed has to be set aside on this ground. In the result, demand for Cenvat credit of Rs. 1,07,07,142/- with interest and penalty equal to the same imposed under Section 11AC of Central Excise Act, 1944 are set aside.
Modern Petrofils v. Commissioner of Central Excise, Vadodara - 2010 (20) S.T.R. 627 (Tri.-Ahmd.) :
4.?I have considered the submissions made by both the sides. I find that Commissioner has rightly followed the decision of this Tribunal in the case of DNH Spinners. Even though the appellants have multiple divisions, in the absence of any dispute about the receipt of the services in question by the factory to whom credit has been passed on, the ratio of the cited decision is applicable. In fact Commissioner proceeded to say that the appellants should have followed the procedure of issue of invoices by the head office as an input service distributor but observed that as far as the present appeal is concerned, the proceedings are limited by the ground taken in the show cause notice and upheld in the OIO which was that appellants had taken credit wrongly since invoice was not in their name but in the name of their head office. Because of this ground, the whole case becomes one of the invoice not being in the name of the factory. In view of the fact that the invoice was in the name of the head office and there was no dispute raised in the show cause notice as to the admissibility of input service credit to the factory on the ground that the input service was not relatable to the factory, the omission becomes a total curable defect and is a condonable one. Under these circumstances, the conclusion reached by the Commissioner to drop the demand cannot be found fault with. The Commissioner also has taken a view that merely because the appellants did not disclose to the department that they have availed credit on the basis of documents not prescribed under Rule 9(2) of Cenvat Credit Rules, 2004, it can be said that there was suppression of fact, wilful misstatement, etc. He has relied upon the decision of the Honble Supreme Court in the case of M/s. L&T Ltd. [2007 (211) E.L.T. 513 (S.C.)]. In view of the fact that there is no allegation of non-receipt of input service or the allegation of service not relatable to the factory and also in view of the fact that invoice was in the name of head office of the same factory and not in the name of someone else, the decision of the Commissioner that extended period is not invocable also has to be upheld. Since I have taken a view that appellants are eligible for the credit and suppression of facts and extended period are not invocable, the question of penalty does not arise. Accordingly the penalty imposed is also set aside. In view of the above discussion, appeal filed by the Revenue is rejected and appeal filed by the party is allowed.
10.?In view of the foregoing, since there was no provisions for distribution of the Cenvat credit availed by the head office as ISD proportionately to various units (the provision is brought in the statute from 17-5-2012), I am convinced that the ratio of the decisions as cited herein above as the issue is in favour of the assessee. Accordingly, I set aside the impugned order and allow the appeal with the consequential relief, if any.
2010 (250) E.L.T. 352 (Kar.) COMMISSIONER OF C. EX., BANGALORE-I Versus RAJA MAGNETICS LTD.
10.?We have bestowed attention to the submissions made at the Bar and the grounds raised in the appeal.
11.?While learned counsel for the appellant is correct in the submission that requirement of sub-rule [1] of rule 9 of the Central Excise Rules, 2002 should be necessarily complied and an embargo occurs under sub-rule [2] of rule 9 of the rules for claiming such Cenvat credit who has not complied with the requirement of sub-rule [1] of rule 9 of the rules, in the present case and as indicated by the appellate commissioner and by the Tribunal, the authorities having found as a matter of fact that in respect of the value of the goods amounting to Rs. 68,052/- the duty, in fact, had been paid at one point or the other and such duty paid goods constitute an input in respect of which assessee had availed of Cenvat credit, that in our opinion, is substantial compliance of the requirement and does not involve a question of law of general importance either for the assessee or for other assessees and for different periods, as in the peculiar circumstances of particular facts of the assessee for the relevant period, the question is answered by the appellate commissioner and affirmed by the Tribunal and therefore we do not find this to be a fit case to be admitted for examination within the scope of section 35G of the Act.
12.?Accordingly, the appeal is dismissed.
We also agree with the submission of Ld. Counsel that if at all there is any lapse on the part of the input service distributors or even on the part of the appellant it is only procedural lapse and for which Cenvat credit cannot be denied, this has been held in various judgments of this Tribunal, some of the judgments are referred below:
2012 (278) E.L.T. 492 (Tri. - Ahmd.) Commissioner Of Central Excise, Vapi Versus Samita Conductors Ltd.
3.?I have considered the submissions. I find that the decision in the case of Jindal Photo Limited was rendered in exactly similar circumstances. In that case also the registration was not taken by the head office as input service distributor. Further, I am unable to appreciate the stand taken by the Revenue that this decision is not applicable in view of the judgment in the case of Jindal Photo Limited deals with modvat/cenvat credit of goods and in this case the question involved is services. This itself is a wrong submission since in Jindal Photo Limited case also the ratio involved was cenvat credit on input services only. Further, it has also been submitted that receipt of goods is verifiable but not the services. In this connection it would be worthwhile to see the provisions to provisos of sub Rule 2 of Rule 9 of Cenvat Credit Rules, 2004. According to the said proviso, if the invoices do not contain all the particulars but contains certain details specified therein, the Assistant Commissioner can allow the credit on the basis of such defective documents, if the goods or services covered by such documents, have been received and accounted for in the books of accounts of the receiver. The submissions made by the appellant in this case is contrary to the provisions of law which require the Assistant Commissioner/Dy. Commissioner to verify whether input services have been received or not. This amounts to a submission that while formulating the Rules, the Government did not consider the practicability or otherwise of verification of receipt of input services. It is the duty of the executives to implement the provisions of rules and if there is any problem in implementing the rules, the rules have to be got amended but certainly the submissions like this not called for. In view of the fact that the ratio is covered by the decision of this Tribunal and I do not find anything wrong with the decision of the Commissioner in following the same and I also find the submission that why this decision is not applicable are not at all correct, I find no merit in the appeal filed by the Revenue and accordingly reject the same.
2013 (288) E.L.T. 291 (Tri. - Ahmd.) Doshion Ltd.
Versus Commissioner of Central Excise, Ahmedabad
5.?We have considered the submissions made by both sides. We find considerable force in the arguments advanced by the learned counsel. The registered office and Vatva office both are located in the same place and appellant has simply utilised the credit at Vatva instead of distributing it to various units. As submitted by the learned counsel, during the relevant period, there was no restriction for utilisation of such credit without allocating proportionately to various units. The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathetically. Further, it is also noticed that appellant has not got any extra benefit by doing this. In fact from the statement of Shri Chandresh C. Shah, as explained that above Cenvat credit available to them, 20% of service tax payable only was paid and balance was paid in cash. In fact, proper distribution would have enabled them to utilise full credit. It would show that the exercise is totally Revenue neutral and no loss has been caused to the Revenue (infact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time and in the light of the decision cited by the learned counsel, the procedural irregularity has to be ignored and the demand confirmed has to be set-aside on this ground. In the result, demand for Cenvat credit of Rs. 1,07,07,142/- with interest and penalty equal to the same imposed under Section 11AC of Central Excise Act, 1944 are set-aside.
2013 (31) S.T.R. 62 (Tri. - Ahmd.) Precision Wires India ltd.
Versus Commissioner of Central Excise, Vapi
7.?I find that factually there is no dispute regarding the receipt of input services at the head office. It is also undisputed that the said services can be distributed by the head office to the various factories and the appellants factory being one of them. It is also undisputed that the appellant is eligible to avail the Cenvat credit of such services which has been received by the head office and distributed to them. I find strong force in the contentions raised by the learned counsel that the judgment of this tribunal in the case of Jindal Photo Limited (supra) and Samita Conductors Limited - 2012 (278) E.L.T. 492 (Tri.-Ahmd.), will directly cover the issue in the case in hand.
8.?As regards the reliance placed by the learned Additional Commissioner (AR) on the Division Bench decision in the case of Hindustan Coca Cola and Beverages Pvt. Limited (supra), I find that the said order of the tribunal is an interim order while disposing the stay petition and it is not a final order. The orders which have been relied upon by the learned counsel as mentioned in hereinabove are the final orders and in respect of an identical issue.
9.?In my view, the ratio laid down by this Bench in the case of Jindal Photo Limited will cover the issue in favour of the appellant herein. Accordingly, in view of the foregoing, in the facts and circumstances of this case, I find that the impugned order is liable to be set aside and I do so.
In view of the above judgments, we find that in the case where credit was taken even without obtaining the input service distributor registration by head office and without following procedure laid down for said purpose, the credit has been allowed on the ground that registration and issuance of input service distributor invoices is procedural requirements. We agree with these propositions for the reason that important aspect for availing the credit is that service which has been provided by the service provider, it should have service tax paid character, invoices as against sale of service should be tax paid. The registration and issuance of input service distributor invoices is merely a procedural requirement. In this procedure neither input service distributor makes any payment of service tax nor utilized credit for payment of any duty. Procedure for input service distributor is only, in order to maintain co-relation between the purchase of service and distribution thereof to the unit of the registered person who are under same entity. As per the facts of the present case, the case of the appellant is on better footing for the reason that they have availed cenvat credit on the valid invoices issued by input service distributors. As regard the reliance on various judgments by the Ld. A.R. ,we found that in the case of Showa India (P) Ltd. (supra), the fact was that appellant availed the Cenvat Credit against invoices issued and services received were prior to their Central Excise registration. However in the present case the fact is entirly different that the appellant was very much registered with the Central Excise and credit was availed on the invoices issued after appellants registration and services received and used was also during the period when the appellant was registered with the Central Excise, therefore facts of the both the cases are entirely different, hence the said judgment cannot be applied in the present case. As regard the Balmer Lawrie & Co. Ltd.(supra) case, we find that the said judgment is on the issue of invoices issued by the dealer without registration on which credit was taken. In the said judgment, this Tribunal has held that credit cannot be availed on the invoices issued by non registered dealer. In the present case, the invoices issued by input service distributor is in the capacity registered of input service distributor. Therefore facts are different firstly it relates to the unregistered dealer and secondly receipt of inputs and dealers are different entities. In the present case the input service distributor is not different entity, it is part of the same entity and invoices were issued only after obtaining registration therefore facts of this case are entirely different, hence the Balmer Lawrie & Co. Ltd (supra) judgment cannot be made applicable in present case. As regard various judgments. Eagle Flask Industries Limited and Hari Chand Shri Gopal (supra) cases on the issue that condition provided for availing any benefit has to be strictly complied with, in absence of the same, benefit provided under scheme cannot be extended to the assesse. As we discussed above, in the present case the appellant has availed Cenvat credit on the invoices issued by the input service distributor after obtaining the registration, therefore the invoices on which credit was taken are valid documents. Since in our view there is no even procedural lapse on the part of the appellant, Cenvat credit taken on the invoices issued by registered input service distributor is correct and legal, hence the judgments cited by the Ld. A.R. are not relevant in the facts of the present case. In view of our above discussions, we are of the considered view that appellant has correctly availed the Cenvat credit on the strength of invoices issued by input service distributors and we do not find any fault. We therefore set aside the impugned order and allow the appeal of the appellant.
3.1 The issue involved in the present case is absolutely identical to the issue involved in our above referred judgment in the appellants own case. We therefore, following our above order dated 9/7/2015, set aside the impugned orders and allow the appeals of the appellant.
(Order pronounce in court on __________) P.K. Jain Member (Technical) Ramesh Nair Member (Judicial) sk 33