Custom, Excise & Service Tax Tribunal
Fosroc Chemicals India Pvt Ltd vs Commissioner Of Central ... on 26 October, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/26512/2013-SM, E/26513/2013-SM [Arising out of Order-in-Appeal No. 34-2013 dated 21/02/2013 passed by Commissioner(Appeals), LTU BANGALORE ] [Arising out of Order-in-Appeal No. 60-2013 dated 07/03/2013 passed by Commissioner, (Appeals), LTU BANGALORE ] For approval and signature: HON'BLE SMT ARCHANA WADHWA, JUDICIAL MEMBER 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 the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 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 Fosroc Chemicals India Pvt Ltd #38, 12th Cross, Iiifloor, psrid Cbi Road, Ganganagar Noth, BANGALORE - 560032 KARNATAKA Appellant(s) Versus Commissioner of Central Excise,Customs and Service Tax BANGALORE-LTU 100 FT RING ROAD JSS TOWERS, BANASHANKARI-III STAGE, BANGALORE, - 560085 KARNATAKA Respondent(s)
Appearance:
Mr. S.RAMASUBRAMANIAN, C.A. MSSV & CO.
63/2,2ND FLOOR, (ABOVE CANARA BANK)RAILWAY PARALLAL ROAD,KUMARA PARK WEST, BANGALORE - 560020 KARNATAKA For the Appellant Mr. AJAY SAXENA, A.R. For the Respondent Date of Hearing: 26/10/2015 Date of Decision:
CORAM:
HON'BLE SMT ARCHANA WADHWA, JUDICIAL MEMBER Final Order No. 22095-22096 / 2015 Per : ARCHANA WADHWA
Both the appeals are being disposed of by a common order as the facts and circumstances of the case are identical. The appellant is engaged in the business of manufacture of construction chemicals and has three factories located at Kuluvanahalli, Ankleshwar and Rudrapur. They have registered themselves as Input Service Distributor (ISD) in their office located at Bangalore. The ISD is availing the CENVAT Credit of service tax paid on various services received by them which are being used in all the three units. Whereas the units located at Kuluvanahalli and Ankleshwar are paying duty of excise on their final product, the unit at Rudrapur is enjoying the exemption in terms of area based exemption Notification No. 50/2003. The ISD has distributed CENVAT credit so availed to their two units located at Kuluvanahalli and Ankleshwar.
2. As a result of the audit conducted in their factory, it was found that the services which have been used at their Rudrapur Unit, either partially or exclusively have also been considered by the appellant as cenvatable and CENVAT credit availed in respect of the same stands distributed by them to their other two units which are paying duty. As such, it was pointed out that the Management Consultancy Services attributable exclusively to the Rudrapur Unit is not entitled for CENVAT credit and the same also cannot be distributed to their other Plants. The appellant immediately reversed the credit of Rs 14,21,082/- involved in Appeal No. 26513/2013. As regards the second Appeal No. 26152/2013, it is seen that the issue relates to the proportionate reversal of the CENVAT credit relatable to the Rudrapur Unit inasmuch as the credit was availed on the common input services.
3. The lower authorities by referring to the provisions of Rule-7 of the CENVAT Credit Rules 2004, entertained a view that the ISD cannot avail the credit in respect of services either used exclusively in Rudrapur unit or partially in the said unit and cannot distribute the same to their other two units. Accordingly proceedings were initiated against them proposing to deny the credit and to impose penalty. The said proceedings culminated into the impugned orders passed by the lower authorities confirming the demands of CENVAT credit along with confirmation of interest and imposition of penalties.
4. After hearing both sides duly represented by Shri S. Ramasubramanian, C.A. for the appellant and Shri Ajay Saxena, A.R. for the Revenue, I find that there is no dispute on the factual position. Admittedly the appellant ISD has availed credit in respect of services which were either exclusively used in the Rudrapur or were partially used there. Further, Rudrapur is an exempted unit in terms of area based exemption notification. The provisions of CENVAT Credit Rules governing distribution of CENVAT Credit of an ISD are contained in Rule 7 of CENVAT Credit Rules 2004, and are being reproduced below for better appreciation.
RULE 7.?Manner of distribution of credit by input service distributor. The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely :
(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon;
(b) credit of service tax attributable to service [used by one or more units] exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed;
5. In terms of Rule, 7(b) credit of service tax is not available where the services are used in a unit which is exclusively engaged in the manufacture of exempted goods. The contention of the learned advocate appearing for the appellant is that wherever services were exclusively used in Rudrapur unit, they have reversed the credit by accepting the Revenues stand. However, where the credit has been taken on common services, a part of which has also been used in a unit engaged in the manufacture of exempted goods, ISD is entitled to take the credit of whole of service tax and to distribute to their other units. As such, he submits that though the amount of around Rs 14,00,000/-involved in one of the appeals has been reversed by them, there is no justification for confirmation of demand of duty of Rs 4.46 lakhs approximately, on proportionate basis involved in the second appeal.
6. However, I find no force in the above plea of the appellant. In terms of Rule 7(b), the service tax attributable to service used in a unit exclusively engaged in the manufacture of exempted goods is not available. The expression exclusively appearing in the said Rule relates to the unit and not to the service tax. The unit has to be exclusively engaged in the manufacture of exempted goods meaning thereby that if service tax stands utilized in a unit which is manufacturing exempted as also dutiable goods, the said Rule will have no application. The expression exclusively is not associated with the word service tax as suggested by the learned advocate. It is well settled law of interpretation that where the words of a particular provision is unambiguous, no extraneous words can be introduced or taken out or can be allowed to switch places. As such, the expression exclusively cannot be associated with the service tax availed by a unit manufacturing exempted goods. As such, I find no justification in the appellants contention.
Inasmuch as the said Rule debars taking of credit attributable to service tax used in a unit exclusively engaged in the manufacture of exempted goods and inasmuch as the Rudrapur unit is admittedly engaged in the manufacture of only exempted goods, I am of the view that the credit of service tax in respect of services used in the said Rudrapur unit is not available to the appellants ISD. The order of the lower authorities to that extent, disallowing proportionate credit is upheld.
7. As regards the penalty, learned Chartered Accountant Shri Ramasubramanian has drawn my attention to the provisions of Rule 15 of CENVAT Credit Rules under which penalty stands imposed. The period involved in the present appeals is April 2006 to April 2010. The penalties stand imposed in terms of Rule 15(3) of the CENVAT Credit Rules. By drawing my attention to the said Rule, learned advocate submits that prior to 17.2.2010, the Rule read as under:-
Confiscation and penalty. (1) If any person, takes CENVAT credit in respect of input or capital goods wrongly or in contravention of any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or two thousand rupees, whichever is greater.
(2)In a case, where the CENVAT credit in respect of input or capital goods has been taken or utilised wrongly on account of fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Excise Act, or the rules made thereunder with intention to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act.
(3) If any person takes CENVAT credit in respect of input services, wrongly or in contravention of any of the provisions of these rules in respect of any input service, then, such person, shall be liable to a penalty which may extend to an amount not exceeding two thousand rupees. (4) In a case, where the CENVAT credit in respect of input services has been taken or utilised wrongly by reason of fraud, collusion, wilful mis-statement, suppression of facts, or contravention of any of the provisions of the Finance Act, or of the rules made thereunder with intention to evade payment of service tax, then the provider of output service shall also be liable to pay penalty in terms of the provisions of section 78 of the Finance Act.
(5) Any order under sub-rule (1), sub-rule (2), sub-rule(3), or sub-rule (4) shall be issued by the Central Excise Officer following the principles of natural justice. He submits that the said rules were amended with effect from 27.2.2010 and amended provisions read as under:-
Confiscation and penalty. (1) If any person, takes or utilises CENVAT credit in respect of input or capital goods or input services, wrongly or in contravention of any of the provisions of these rules, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty [in terms of clause (a) or clause (b) of sub-section (1) of section 11AC of the Excise Act or sub-section (1) section 76 of the Finance Act (32 of 1994), as the case may be] (2) In a case, where the CENVAT credit in respect of input or?(2) capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made thereunder with intent to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of [clause (c), clause (d) or clause (e) of sub-section (1) of section 11AC of the Excise Act.] (3) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made thereunder with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay [penalty in terms of the provisions of section (1) of Any Section 78] of the Finance Act.
(4) Any order under sub-rule (1), sub-rule (2) or sub-rule (3) shall be issued by the Central Excise Officer following the principles of natural justice.] He submits that a comparison of both the Rules would show that Rule 15(1) (2) apply only in respect of inputs and capital goods and it was Rule 15(3) which was invokable in the case of wrong availment of CENVAT Credit of service tax. The said Rule provided maximum penalty of Rs 2000/-. However, after the amendment, provisions of Rule 15(3) included the wrong availment of service tax in respect of input services. However, the assessee was to be imposed penalty only when the credit was availed wrongly by way of fraud collision or in willful misstatement of suppression of facts. He submits that in the 1st case, the provisions of earlier Rule 15(3) which would apply, which provide for penalty for Rs 2,000/- only and in the other case it is the amended provisions of Rule 15(3) which would apply, and submits that even the said amended provisions would not be invokable in their case inasmuch as the entire credit was availed on the basis of documents and by reflecting the same in the statutory records, there was no malafide intention on their part so as to invoke the amended Rule 15(3).
8. On a careful consideration of the above submission of the learned advocate, I find that in Appeal No. 26512/2013, the entire period is prior to the amendment of Rule 15(3). If that be so, the penal provisions invokable against an assessee would be unamended Rule 15(3) which provided for penalty of Rs 2,000/-. The said Rule simpliciter provided for penalty, on wrong availment of credit without there being any nexus with the malafide intention. Inasmuch as the appellants have availed wrong CENVAT Credit, I reduce the penalty to Rs 2000/-.
9. In the second appeal, the amended provisions of Rule 15(3) would be applicable which provided for imposition of penalty in case of malafide intention of the assessee. Admittedly, the appellants have availed the credit by reflecting the same in all the statutory records and the issue is also disputed issue of legal interpretation, I find no justifiable reason to impose penalty upon the assessee. Accordingly the penalty imposed in Appeal No. 26513/2013 is set aside.
Both the appeals are disposed of in above terms.
(Order pronounced in open court on )
ARCHANA WADHWA
JUDICIAL MEMBER
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