Custom, Excise & Service Tax Tribunal
M/S. Sunbeam Generators Pvt. Ltd vs Cce & St, Pondicherry on 12 July, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNALSOUTH ZONAL BENCH
CHENNAI
E/40214/2015
[Arising out of Order-in-Appeal No. 3/2014 (P) dated 07.11.2014 passed by the Commissioner of Central Excise (Appeals-II), Chennai).
M/s. Sunbeam Generators Pvt. Ltd. : Appellant
Versus
CCE & ST, Pondicherry : Respondent
Appearance:
Ms. S. Sridevi, Advocate, For the Appellant Shri L. Paneerselvam, AC (AR) For the Respondent CORAM :
Honble Shri P.K. Choudhary, Judicial Member Date of Hearing : 22.06.2016 Date of Pronouncement : 12.07.2016 FINAL ORDER No. 41084 / 2016 The present appeal is filed by the appellant-assessee against OIO No.3/2014 (P) dt. 7.11.2014. The period of dispute is April 2011 to March 2012. In the said order, the ld. Commissioner (Appeals) has dealt with the eligibility of CENVAT credit on the following services
(a) Insurance on Plant & Machinery Rs. 29,598/-
(which was allowed)
(b) Courier Services - Rs. 7,958/-
(c) Royalty Charges - Rs.1,03,904/-
(d) Credit taken on ISD invoices - Rs. 24,194/-
The penalty of Rs.15,000/- was imposed under Rule 15 (1) of the CCR, besides imposition of interest. The issue for consideration in this appeal is to whether the services, (b) (c) & (d), are eligible for cenvat credit which are dealt with one by one.
Courier Service :
2. The Commissioner (Appeals) in para 11 (b) stated that courier service is a post-manufacturing activity used for the dispatch of documents, samples/finished goods and the appellants have themselves stated that it was used for sending various business documents thereby indicating that it is not used in the place of manufacture; that the Courier Service is used beyond the place of manufacture and hence is not having any nexus with the manufacturing activity, which in my view calls for interference as the courier service has been availed by them for receiving and sending factory related documents like-COA, Invoices etc. through the couriers, which are inevitable for the manufacture and clearance of final products. The period of dispute is post April 2011 and it is relevant to state that the words "procurement of inputs, accounting, auditing, financing" were a pact of definition of "input service". Without courier, it is not possible for the invoices to be despatched from one place to another. The denial of credit on the courier service is therefore erroneous and is accordingly set aside.
Royalty Charges:
3. With regard to eligibility of credit on Royalty charges, the Commissioner (Appeals) has observed that the subject services were utilized by the Appellants for the finished goods after completion of their manufacture. The said services were not used for sales promotion as contended by the Appellants. Hence they have no direct or indirect nexus with the manufacture of their final products. This view of the Commissioner (Appeals) is also erroneous, for the reason that no manufacturer would pay Royalty to some other person if it did not promote their business/sales. The reliance placed by the Commissioner (Appeals) on the judgement of Supreme Court in Maruti Suzuki Ltd. Vs CCE Delhi [2009 (240) ELT 641 (SC)] is no longer good law in view of the recent judgement of the Larger Bench of the Supreme Court in the case of Ramala Sahkari Chini Mills Ltd. Vs CCE Meerut-I - 2016 (334) ELT 3 (SC). The LB has held that the word "include" in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. It is also relevant to state that the Tribunal, Kolkata in Century Ply Boards (I) Ltd. Vs CCE Kol-VII [2013 (31) STR 58 (Tri.-Kolkata)] has under similar circumstances, held that the cenvat credit on the input services on the amount paid towards Royalty charges as eligible for credit and is used by the manufacturer is in or in relation to the manufacture of the final products.
Credit on ISD invoices:
4. With regard to the third aspect i.e. credit taken on ISD invoices, the Commissioner (Appeals) has denied the credit by stating that the Courier and Telephone service used at the marketing office at Chennai are remote from the factory located at Puducherry and do not imply a nexus in manufacturing activity, and holding that credit on ISD invoices is not available, is unsustainable for the reason that the appellant had availed credit with respect to courier and telephone, which was further distributed to the factory for availment of credit under proper documents. It should not be forgotten that the marketing office is responsible for facilitating growth, sales and marketing strategy of the products manufactured in their factory. The marketing office work towards the objectives such as revenue generation, cost reduction or risk mitigation of the units engaged in the manufacture and clearance of the final products. Rule 7 of CCR 2004, as it stood, during the period in dispute are as follows :
(a) The credit distributed cannot exceed the service tax paid; and
(b) Credit attributable to an unit engaged in the manufacture of exempted products shall not be distributed. Other than the above, no other conditions have been imposed for distribution of credit by an ISD.
There is no finding nor an allegation that these conditions stand violated and accordingly, the credit taken by them is in order. The contrary view taken in the impugned order is set aside. Accordingly, penalty and interest are also set aside. Appeal is allowed with consequential relief, if any.
(Order Pronounced in the open Court on 12.07.2016) (P.K. CHOUDHARY) JUDICIAL MEMBER BB 1