Custom, Excise & Service Tax Tribunal
(V.E. Commercial Vehicles Ltd.) vs Cce, Indore on 7 October, 2016
IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:22.09.2016
Date of Decision:07/10/2016
Excise Appeals Nos.251, 250, 387 and 388/2010-EX(DB)
(Arising out of Order-in-Original No.33/COMMR/CEX/IND/2009 dated 11.11.2009/ 12.11.2009 in Appeals No.251 and 250/2010 and Order-in-Original No.40/COMMR/CEX/IND/09 dated 2.12.2009 in Appeal No.387 and 388 of 2010-EX(DB) passed by the Commissioner of Central Excise, Indore)
Shri Nitin Nagda, Sr. Manager,
M/s.Eicher Motors
(V.E. Commercial Vehicles Ltd.) Appellants
Vs.
CCE, Indore Respondent
Appearance:
Rep. by Shri B.L. Narsimhan, Advocate for the appellants.
Rep. by Shri Yogesh Aggarwal, AR for the respondent.
Coram: Honble Shri S.K. Mohanty, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order Nos.54062-54065/2016 Per.B. Ravichandran:
These four appeals deal with the same subject of eligibility of the appellants for credit of duty paid on various input services availed by them during the period December, 2007 to May, 2009. The issue is decided in two orders dated 12.11.2009 and 2.12.2009.
2. The brief facts of the case are that the appellants are engaged in the manufacture of motor vehicle chassis liable to central excise duty. The appellants are clearing the motor vehicles chassis to the job worker on payment of central excise duty as applicable. The job worker manufactures body on the chassis and clears the same on payment of central excise duty as applicable. The appellants were availing various input services in or in relation to the manufacture of final products. The present dispute relates to eligibility of the appellants for credit on these input services. Proceedings were initiated against the appellant to deny and recover cenvat credit on various services availed by them. These services are:
(i) Advertisement Agency Services
(ii) Banking & Financial Services
(iii) Banking Auxiliary & Business Promotion Services
(iv) Commercial Training & Coaching Services and Training and development Services
(v) Canteen Services
(vi) Courier Services
(vii) Customs House Agent Service & Inward freight services
(viii) Consultancy Services
(ix) Commission Agent Services
(x) Event Management Services
(xi) Foreign Consultancy Services
(xii) Insurance Services
(xiii) Mandeep Keeper Services
(xiv) Market Research Services
(xv) Real estate Services (xvi) Repair & Maintenance (xvii) Security Services (xviii) Telephone, Tours & Travel Services
3. The Original Authority in the impugned orders disallowed the credit on various services except service tax paid on consultancy charges and foreign consultancy charges. The main reason quoted in the impugned orders is that these services are not used in or in relation to the manufacture of final products by the appellants. The Original Authority also imposed penalties on the manufacturing appellant/assessee and the Senior Manager of the assessee.
4. Ld. Counsel appearing on behalf of the appellants submitted that the eligibility of various credits to the appellants has been the subject matter of various decisions by the Tribunal and the High Courts. By now, it is well settled that the services listed above are having direct nexus with their activity of manufacturing excisable goods and their activity and business of manufacturing and marketing of excisable goods and as such, these are correctly claimed as credits.
5. Submissions made by the ld. Counsel can be summarized as below:-
(a) The inputs services in dispute are used in or in relation to the manufacture of final products. Therefore, these are covered by the means part of the definition of input services.
(b) Even otherwise, these input services qualify as input services in relation to activity relating to business.
(c) These services are used by the appellants in relation to the manufacture of final products. The expenditure incurred shall wholly and exclusively is for the purpose of their manufacturing and marketing business. As such, the credit on these services cannot be denied.
(d) The scope of each one of the input service in dispute has been explained by the appellant along with their connection to the manufacture and marketing of the excisable goods. Large number of case laws were also cited in support of the claim in respect of each one of the input service.
6. Ld.AR contested the appeals stating that the Original Authority has examined the matter in detail and denied the credit accordingly. He reiterated the findings of the Original Authority in the impugned orders and submitted that these appeals are liable to be rejected.
7. We have heard both the sides and perused the appeal records.
8. We find that the eligibility of the appellants to avail the credit on these input services has come up earlier before this Tribunal. Vide Final Order No.52437/2016 dated 29.06.2016, in appellants own case, the Tribunal examined eligibility of various input services and observed as below:-
6. The appellant is a manufacturer of chassis of the vehicle which they clear to their job worker who builds the body on the chassis. As a result of this activity the complete vehicle comes into existence at the job workers premises who clears such vehicle on payment of duty. The vehicle cleared by the job worker factory is transferred to the depot of the appellant from where the sale of vehicle is effected to independent buyers. The following services have been denied the benefit of cenvat credit in the impugned order for the reason that these services have been used in relation to complete vehicles whereas the appellant is a manufacturer only of chassis.
i) Advertisement Agency Services
ii) Market Research
iii) Telephone Tours & Travel Services
iv) Business Auxiliary & Business Promotion Services
v) Commission Agent Service
vi) Event Management Services
vii) Commercial Training and Coaching Services
viii) Banking & Financial Services
ix) Security Service
x) Mandap Keeper Service
7. We find that in the case of Coca Cola India Pvt. Ltd. (supra) the Honble High Court of Bombay has considered and allowed the service tax credit for various services like advertisement, sales promotion, market research etc. availed by the manufacturer of concentrate for soft drinks. In that case Coca Cola India who manufacture concentrate was allowed to utilise the credit on various services which were used for marketing of the soft drinks which was ultimately manufactured and cleared by the bottlers. The Honble High Court took the view that all such activities relating to business are covered under input service provided there is relation between manufacture of concentrate and such activity. The Honble High Court held as follows:
Credit is availed on the tax paid on the input service which is advertisement and not on the contents of the advertisement. Thus it is not necessary that the contents of the advertisement must be that of the final product manufactured by the person advertising, as long as the manufacturer can demonstrate that the advertisement services availed have an effect of or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture of the final product. .. Once the cost incurred by the service has to be added to the cost and is so assessed, it is a recognition by Revenue of the advertisement services having a connection with the manufacture of the final product.
On the admissibility of advertisement services, the appellant has also relied on the following case laws:
* CCE vs. HCL Technologies Ltd. -2016 (42) STR 48 (Tri. Del.) * Greaves Cotton Ltd. vs. CCE, Chennai-II & IV-2015 (37) STR 395 (Tri. Chennai) * Agriculture Products Market Committee vs. CCE, Vadodara-II 2013 (30) STR 558 (Tri. Ahmd.) The above decisions squarely cover the credit availed on advertisement agency service even though such advertisements are for the complete vehicles, and not only for chassis.
Now we turn to the various services in the above cluster.
(i) Credit of tax paid on market research agency service, has been specifically allowed also in the following cases in addition to the Coca Cola case (supra):
* UG Sugar & Industries Ltd. vs. CCE 2016-TIOL-1255-CESTAT-ALL * Gujarat Reclaim & Rubber Products Ltd. 2013 TIOL-509-CESTAT-Mad.
(ii) The service tax paid on telephone, tours & travel services stand disallowed in the impugned order also for the reason that such services have been availed in the regional office and have also been provided to the employees of the appellant in Regional offices, guest house and depots. We find that in addition to the decision in the Coca Cola India case, such services have also been held to be valid input services in the following decisions:
* Multiflex Laxmi Print Ltd. vs. CCE 2016-TIOL-1544-CESTAT-MUM * Semco Electric Pvt. Ltd. vs. CCE, Pune-I- 2013 (30) STR 572 (Tri. Mumbai) * Telenet Systems Pvt. Ltd. v. CCE, Belapur 2012 (277) ELT 209 (Tri. Mumbai).
(iii) Business Auxiliary & Business Promotion Services have been claimed as input service. We find that such services have been used for dealers meet, financier meet, sales force training and employee seminar etc. We find that such services have been specifically allowed as input services in the following decisions:
* Maruti Suzuki India Ltd. vs. CCE 2015-TIOL-1889-CESTAT-DEL * Shree Cement Ltd. vs. CCE- 2014 (36) STR 1107 (Tri. Del.) * J.P. Morgan Services (I) Pvt. Ltd. vs. CCE -2016 (42) STR 196 (Tri. Mum.)
(iv) Commission agent service for sales of the complete vehicle have been specifically allowed in the case of Carrier Airconditioning & Refrigeration ltd. vs. CCE 2016 (41) STR 1004 (Tri.Del.)
(v) Event Management services which were used for road show, product launch etc. have been held to be allowed input services in the following cases:
* Precision Wires India Ltd. vs. CCE 2011-TIOL-1541-CESTAT-AHM * IBM India Pvt. Ltd. vs. CCE 2014 (35) STR 384 (Tri. Bang.)
(vi) Commercial Coating and Training services for employees stands specifically allowed in the case of Toyota Kirloskar Motor Pvt. Ltd. -2015-TIOL-2716-CESTAT-MAD.
(v) Banking and Financial Services which have been paid for BRC charges, CBC handling charges etc. have been disallowed in the impugned order as post manufacturing activity. But we find that such charges stands allowed in the cases MPI Machines Ltd. vs. CCE, Indore -2013 (31) STR 103 (Tri. Del.) and Meghmani Dyes & Intermediates Ltd. vs. CCE, Ahmedabad 2013 (32) STR 671 (Tri. Ahmd.).
`(vi) Security Agency Service used at regional offices also stands specifically allowed in the case of National Engineering Industries Ltd. vs. CCE, Jaipur 2013 (30) STR 511 (Tri. Del.).
(vii) Mandap Keeper Service which was used in connection with annual day meet for celebration have been disallowed, considering it as welfare activity not related to manufacture. We find that similar services have been specifically allowed in the case of Toyota Kirloskar Motor Pvt. Ltd. vs. CCE, LTU Bangalore 2011 (24) STR 645 (Kar.).
8. The following services stand disallowed for the reason that they are not in relation to the manufacturing activity.
* Life Insurance Service * Courier Services * Repair & Maintenance Service * Real Estate Service * Canteen Service
(i) We find that life insurance service on premium paid for employees have been held as allowable in the case of Reliance Industries Ltd. vs. CCE&ST, Mumbai 2015 (38) STR 217 (Tri. Mumbai).
(ii) Courier services used for getting DEPB, DEEC, EPCG Schemes permissions etc. have been allowed in Meghmani Organics Ltd. vs. CCE, Ahmedabad 2012 (26) STR 555 (Tri.).
(iii) Repair & maintenance service used for photocopying, fax, ACs, water coolers etc. at regional offices have also been held to be allowable in Parason Machinery (I) Pvt. Ltd. vs. CCE, Aurangabad 2012 (277) ELT 215 (Tri. Mum.)
(iv) Real Estate Service used for procurement of premises on rental basis for regional offices have also been allowed in the case of Carrier Airconditioning & Refrigeration Ltd. vs. CCE 2016 (41) STR 824 (Tri. Chan.)
(v) Canteen Service availed at regional offices has been held a;s allowable in CCE vs. L&T Valves Ltd.- 2016-TIOL-750-HC-MAD-ST.
9. As discussed above, we find that all the services for which credit have been claimed under Rule 2(l) of the Cenvat Credit Rules, 2004 already stand allowed in various decisions. Hence, these issues are no longer res-integra. Respectfully, following the above decisions, we set-aside the impugned order and allow the appeal.
9. In view of the above findings by the Tribunal in the appellants own case, we find that the denial of credit on these services is not justifiable. Further, as noted above, the Honble Bombay High Court in Coca Cola India Pvt.Ltd. - 2009 (242) ELT 168 (Bombay) broadly laid down the principles for allowing credit on input services. The observation of the Honble High Court in para-37, 38 and 39 reproduced below are relevant:-
37.?A consumption tax derives its name from the fact that tax burden is ultimately borne by the final consumer and business does not bear the burden of the tax, since the business are allowed to take credit of tax paid on inputs supplied/received by them. If therefore Cenvat is denied to the input service received by the assessee as in the present case, they will become burden to the assessee, which is against the very grain or principle of VAT being a consumption tax.
38.?Service tax therefore, paid on expenditure incurred by the assessee on advertisements sales promotion, market research will have to be allowed as input stage credit more particularly if the same forms a part of the price of final product of the assessee on which excise duty is paid. In other words, credit of input service must be allowed on expenditure incurred by the assessee which form a part of the assessable value of the final product. If the above is not done, as sought to be done by the department in the present case, it will defeat the very basis and genesis Cenvat i.e. value added tax.
39.?The definition of input service which has been reproduced earlier, can be effectively divided into the following five categories, in so far as a manufacturer is concerned :
(i) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products
(ii) Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal
(iii) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,
(iv) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,
(v) Services used in relation to activities relating to business and outward transportation upto the place of removal.
Each limb of the definition of input service can be considered as an independent benefit or concession exemption. If an assessee can satisfy any one of the limbs of the above benefit, exemption or concession, then credit of the input service would be available. This would be so even if the assessee does not satisfy other limb/limbs of the above definition. To illustrate, input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal. This would follow from the observation of the Supreme Court in Kerala State Co-operative Marketing Federation Ltd. and Ors. v. Commissioner of Income-tax - 1998 (5) SCC 48, which is as under :
7.?We may notice that the provision is introduced with a view to encouraging and promoting growth of co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a co-operative society is exempt from tax what has to be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption. ??????????????[Emphasis supplied]
10. Appreciating the general principles laid down by the Honble Bombay High Court, we find that the denial of credit in any of these above categories of input services is not justifiable.
11. A specific mention has to be made regarding the dispute relating to the eligibility of the appellant for credit on Business Support Service availed by them. A substantial amount of cenvat credit is linked to this particular service. The appellants have received services from various convoy agents for delivering the full manufactured commercial vehicles to their various dealers /distributors and earned commission for such activity. The credit on such services was denied by the Revenue on the ground that the appellants are manufacturing in their unit chassis of vehicles, whereas what they are selling is complete vehicle, which is manufactured in the factory of job worker. The various services obtained by the appellant are in relation to the promotion and marketing of vehicles, which the appellants are not manufacturing. In this connection, ld. Counsel for the appellants submitted that full manufactured vehicle for the job worker premises are cleared by the job worker on payment of duty, which is in terms of the value decided by the appellant on the final manufactured product. The logistic support provided by the service provider is for transportation of the chassis manufactured by the appellants from the factory to the premises of the body builders; for transportation of the vehicles from the premises of the body builders to the depot of the appellant and for transportation of the vehicles from depot to the premises of the customers, as the case may be. The said service providers have raised invoices on the appellants for the said support services along with any service tax payable thereon. The appellants have paid service tax to the respective service providers. These facts were not disputed. We note that in the present case, the appellants are not claiming tax credit on the transportation charges. The service tax paid is on the Business Support Service of logistics provided. We note that the Honble Punjab & Haryana High Court in the case of Ambuja Cements Ltd. 2009 (14) STR 3 ( P&H) held that when freight charges are integral part of the excisable goods, in case of FOR destination price, hence, when the ownership of the goods and the property in goods has not been transferred to the seller till delivery of the goods in acceptable conditions to the buyers. Further, in Audi Automobiles - 2010 (249) ELT 124 (Tribunal-Delhi), the Tribunal held that when the appellants are fabricating and mounting the bodies of buses and trucks on the chassis manufactured by M/s. Eicher Motors Limited /Tata Motors Ltd., it was held that Rule 10 A provides for method of valuation for the purpose of deciding excise duty in respect of the goods manufactured by the job worker and the provisions clearly defines the term job worker. In the present case, the appellants are manufacturing chassis for motor vehicles and clearing the same to the job worker for fabrication of full motor vehicles after body building. Thereafter the fully built motor vehicles are cleared to the depot of the appellants and the value is adopted in terms of Rule 10 A of the Central Excise Valuation Rules, 2000. The said Rule recognizes both the principal manufacturer and the job worker in respect of excisable goods. In the present case, the transaction value of the fully built motor vehicles were determined by the principal manufacturer and the duty liability has been discharged at the job workers end on the said basis. Further, Business Support Service is with reference to movement of chassis and with reference to fully built motor vehicles upto the depot form part of the transaction value. In these circumstances, we find no reason to deny the credit on such input service availed by the appellant as a principal manufacturer. Admittedly, service tax on such services have been remitted by the appellant and the final products value are in terms of the Rule 10 A of the Valuation Rules. However, no credits shall be eligible for the services rendered beyond the place of removal (depot) as these Business Support Services are basically for movement of excisable goods as submitted by the appellants.
12. Considering the above discussions and findings, we hold that the impugned orders for denial of cenvat credit on various input services are not legally sustainable. Accordingly, these orders are set aside and the appeals are allowed.
[Order pronounced on 7.10.2016.] (S.K. Mohanty ) Member (Judicial) ( B. Ravichandran ) Member (Technical) Ckp.
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