Custom, Excise & Service Tax Tribunal
M/S. Chemplast Sanmar Ltd vs Cce, Salem on 18 December, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos. E/482, 483 and 484/2008
(Arising out of Order-in-Appeal Nos. 90, 91 & 92/2008-CE (SLM) dated 30.7.2008 passed by the Commissioner of Central Excise (Appeals), Salem)
M/s. Chemplast Sanmar Ltd. Appellants
Vs.
CCE, Salem Respondent
Appearance Shri V.S. Manoj, Advocate for the Appellants Shri V.V. Hariharan, Jt. CDR for the Respondent CORAM Honble Dr. Chittaranjan Satapathy, Technical Member Date of Hearing: 18.12.2009 Date of Decision: 18.12.2009 Final Order Nos. ____________ I have heard both sides. As all the three appeals relate to the same issue, these appeals are taken up for hearing and disposal together.
2. The appellants are engaged in the manufacture of caustic soda and chloromethane. They have been disallowed service tax credit in respect of the impugned services on the ground that the credit was availed by them on the basis of ineligible documents namely debit notes issued by their service providers.
3. Shri V.S. Manoj, learned counsel, has shown some representative debit notes annexed to the appeal papers. These debit notes show that service tax and education cess have been debited for the commission paid by the appellants to their consignment agents. The learned counsel argues that as per Section 67 of the Finance Act, 1994, the gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes etc. He states that when the taxable value itself includes payment by issue of credit notes or debit notes, the credit of the tax itself cannot be denied holding the debit notes to be ineligible documents. He cites the decision of the Tribunal in the case of Pharmalab Process Equipments Pvt. Ltd. Vs. CCE, Ahmedabad 2009 (16) STR 94 under which it has been held that the debit notes issued by the service provider contained details of service tax payable, description of taxable service, value of taxable service and registration number of service provider and name and address of service provider which are the details required as per Rule 9(2) of CENVAT Credit Rules, 2004. In view of such finding the matter in that case was remanded to the original authority for verifying if the documents contained the necessary details and to allow benefit of service tax credit on such verification. Learned counsel prays for passing a similar order of remand in these cases also.
4. Heard the learned Jt. CDR Shri V.V. Hariharan.
5. While hearing both sides, it appears that the appellants are claiming service tax credit in respect of consignment agents services and selling agents services. I also find that while the authorities below have examined the case with reference to admissibility of debit notes as valid documents, there does not appear to have been any examination done as to whether the impugned services in respect of which credit is being sought can be considered as input service. While passing Stay Order No. 1021/2009 dated 7.12.2009 in the case of Indian Furniture Products Ltd. Vs. CCE, Chennai in Appeal No.E/510/2009, it was noted by the Division Bench of the Tribunal as follows:-
Moreover, Section 37(2) of the Central Excise Act, 1944, allows the Central Government, inter alia to make rules for the following:-
xvi(a) provide for the credit of duty paid or deemed to have been paid on the goods used in, or in relation to, the manufacture of excisable goods;
xvi(aa) provide for credit of service tax leviable under Chapter V of the Finance Act, 1994 (32 of 1994) paid or payable on taxable services used in, or in relation to, the manufacture of excisable goods; It is clear from the above provisions that the Central Government has power to make rules to provide for credit of duty paid on goods and credit of service tax paid on services used in or in relation to the manufacture of excisable goods. Similar powers are available under Section 94 of the Finance Act, 1994 to make Rules to provide for credit in respect of goods and services used for providing taxable service. There is no power with the Government to make rules to provide for credit in respect of service tax paid on input services which is used neither in or in relation to manufacture of excisable goods nor for providing taxable output service.
6. Prima facie, it appears that the consignment agents services and the selling agents services are not in the nature of input services which are used in or in relation to the manufacture of excisable goods. Hence, the definition of input service under the CENVAT Credit Rules which includes activities relating to business cannot be interpreted to include an activity which is a post-manufacturing activity. It is also settled law that rules framed by the Central Govt. have to conform to the rule making powers contained in the statute, in this case under Section 37(2) of the Central Excise Act, 1944. It was held by the Honble Rajasthan High Court in the case of Lucid Colloids Limited Vs. Union of India 2006 (200) ELT 377 (Raj.) in the context of Rule 8(3) of the Central Excise Rules, 2002 as follows:-
12. Therefore, to the extent rule provides other than the rate of interest as an alternative mode of levy of interest per day not connected with the amount of duty in default is beyond enabling power of the Parent Act. The Rule 8(3) to the extent it provides after providing the rate of interest chargeable on delayed payment of duty, an alternative mode to provide higher ceiling limit is clearly in violation of Section 11AB and cannot be sustained.
13. Since the alternative mode is severable from the other part of the provision without affecting its efficacy, it does not require that the entire rule is to be struck down.
14. We, therefore, hold that Rule 8(3) to the extent it provides levy of interest at the rate of Rs.1,000/- which is higher as alternative to charge of interest @2% on the amount of Duty means to be understood as 24% per annum on the amount of Duty in default is ultra vires to Section 11AB of the Act and cannot be sustained and is held inoperative.
7. The Tribunal has also consistently taken the view that the rules cannot be interpreted to exceed the mandate given under the main statute as may be seen from the following decisions:-
(i) Carter Hydraulic Power Pvt. Ltd. Vs. CCE 2008 (229) ELT 603
(ii) Eltex Super Castings Ltd. Vs. CCE 2006 (206) ELT 230
(iii) Chemspec Chemicals Pvt. Ltd. Vs. CCE 2008 (222) ELT 374
(iv) Condor Power Products P. Ltd. Vs. CCE 2007 (210) ELT 137
8. Though these decisions were rendered in the context of Rule 8 vis-`-vis enabling power under Section 11AB of the Act, the ratio of these decisions is relevant for interpreting CENVAT Credit Rules framed under the enabling powers under Section 37(2) of the Act. The enabling provision under the Act only allows for providing credit of service tax paid or payable on taxable services used in, or in relation to, manufacture of excisable goods. The services which are used by the manufacturer subsequent to completion of the manufacturing and for sale of the goods cannot, therefore, be considered as input service in or in relation to manufacture.
9. The learned counsel has raised a pertinent question that in these cases the appellants were only put on notice regarding the eligibility of debit note as a valid document for taking credit and not on the question of the impugned taxable service being ineligible input service. 10. Keeping in view the foregoing, I set aside impugned orders. The cases are remanded to the original authority for examining the matter afresh and for passing fresh orders. He shall not only examine the validity of the impugned debit notes in terms of the Tribunals decision in the case of Pharmalab Process Equipments Pvt. Ltd. (supra) but shall also examine as to whether the impugned services can be considered to be eligible input services under the CENVAT Credit Rules read with enabling powers contained under Section 37(2) of the Act. Since the appellants were not put on notice in regard to the second aspect i.e. whether the impugned services are eligible input services or not, the original authority shall put the appellants on notice in this regard and give them adequate opportunity of hearing before passing fresh orders on the issue.
11. All the three appeals are allowed by way of remand in the above terms.
(Operative portion of the order was pronounced in open court on completion of hearing) (Dr. Chittaranjan Satapathy) Technical Member Rex ??
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