Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Nash Industries on 31 May, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/20458/2014, E/20459/2014, E/20460/2014, E/20461/2014, E/20462/2014, E/20463/2014, E/20464/2014, E/20465/2014-SM E/AE/20560/2014, E/AE/22561/2014, E/AE/22562/2014, E/AE/22564/2014, E/AE/22565/2014, E/AE/22552/2014, E/AE/22553/2014, E/AE/22551/2014-SM [Arising out of Order-in-Appeal No. 621 to 638/2013 dated 06.11.2013 passed by the Commissioner of Central Excise, Bangalore] For approval and signature: HON'BLE SHRI S.S. GARG, 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? Yes 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 Commissioner of Central Excise, Service Tax And Customs, Bangalore-II PB 5400, CR Building, Queens Road, Bangalore 560 001 Appellant(s) Versus Nash Industries No.236-237, 28th Main Road, 3rd Phase, Peenya Industrial Area, Bangalore 560 038 Karnataka Karnataka Respondent(s)
Appearance:
Shri Shri Akbar Basha, CA Hiregange & Associates, #1010, 1st Floor (Above Corporation Bank), 26th Main, 4th T Block, Jayanagar, Bangalore 560 041 For the Appellant Shri Pakshi Rajan, AR For the Respondent Date of Hearing: 27/05/2016 Date of Decision:31/05/2016 CORAM:
HON'BLE SHRI S.S. GARG, JUDICIAL MEMBER Final Order Nos. 20368 - 20375/ 2016 Per: S.S. GARG The Revenue has filed eight appeals against the impugned Order-in-Appeal Nos. 621 to 638/2013 dated 06.11.2013 vide which the learned Commissioner (Appeals) has dismissed the appeals of the department and allowed the appeals of the assessees. Against the said impugned order the department has filed the following appeals, the details of which are shown in the table below along with the cross objections filed by the assessee and also the application for additional evidence filed by the Revenue in all the eight appeals. Sl. No. Appeal No. & Additional Evidence No. Order- in -Appeal No. Period Refund amount involved (Rs.) 1 E/20458/14 E/AE/20560/14 621-638/13 dt. 06.11.13 Jan 11 to March 11 18,03,500/-
2 E/20459/14 E/AE/22561/14 621-638/13 dt. 06.11.13 Jan 10 to March 10 16,34,315/-
3 E/20460/2014 E/AE/22562/14 621-638/13 dt. 06.11.13 July 08 to Sept. 08 11,43,164/-
4 E/20461/14 E/AE/22564/14 621-638/13 dt. 06.11.13 July 09 to Sept. 09 13,01,965/-
5 E/20462/14 E/AE/22565/14 621-638/13 dt. 06.11.13 Oct. 09 to Dec. 09 11,68,393/ 6 E/20463/14 E/AE/22552/14 621-638/13 dt. 06.11.13 Apr. 10 to June 10 16,05,118/-
7 E/20464/14 E/AE/22553/14 621-638/13 dt. 06.11.13 July 10 to Sept. 10 20,05,045/-
8 E/20465/14 E/AE/22551/14 621-638/13 dt. 06.11.13 Oct. 10 to Dec. 10 21,83,233/-
Since the impugned order is one and the issues in all the appeals are identical with different periods. Therefore I proceed to decide all the eight appeals by this common order.
2. Briefly the facts of the case are that respondent M/s. Nash Industries are engaged in the manufacture of Sheet Metal Pressed Components falling under Chapter Heading 85 of the Central Excise Tariff Act, 1985. They are availing cenvat credit on inputs and input services under Cenvat Credit Rules 2004. The respondents filed refund claims of unutilized cenvat credit under Rule 5 of the Cenvat Credit Rules 2004 in respect of inputs and input services such as Business Auxiliary Service, Chartered Accountant service, C&F Service, Courier Service, GTA, Repair and Maintenance Service, Renting of immovable property service, Technical Testing and Analysis Service, Telephone service, Transport of Goods by Air, Online Information and Database access service, Manpower Recruitment and Supply Service, Rent a Cab service etc. The respondent has also sought refund of unutilized cenvat credit on account of clearance to other 100% EOU on inter unit transfer on the ground that the same is covered under Rule 5 of the Cenvat Credit Rules 2004. The adjudicating authority has partially allowed the refund with regard to certain services but declined to grant refund in respect of clearances made to 100% EOU on inter unit transfer and the same was held as not export. The adjudicating authority only allowed refund with regard to actual physical export. Further the adjudicating authority has disallowed the refund of cenvat credit in respect of certain input services on the ground that there is no nexus between the input services and the final product exported. Thereafter both the parties filed appeals before the learned Commissioner (Appeals). The department filed the appeals mainly on the ground that the credit of service tax is not related to manufacture of final products, on the kind of business activities and therefore does not appear to conform to the definition of input service as given under Rule 2(l) of Cenvat Credit Rules 2004 and further the use of the services in or in relation to manufacture alone determines its qualification to be an input service under Cenvat Credit Rules 2004. On the other hand the assessee filed the appeals mainly on the ground that the department appeal has ignored the essential aspect that the Rule 5 of the Cenvat Credit Rules should be read harmoniously with the definition and scope of input services. Further the refunds for these input services have been sanctioned in number of decided cases. The learned Commissioner (Appeals) after hearing both the parties passed a detailed order examining the connection between input services and the business activities of the assessee and thereafter the appeals of the department were rejected and the appeal of the assessee was allowed. Aggrieved by the same the present appeals have been filed by the Revenue mainly on the ground that there is no nexus between the input services and the manufacture of final product which is exported. Further the Revenue after filing of the appeal has moved an application for additional grounds in respect of the appeals filed earlier seeking to add the grounds that the Commissioner (Appeals) vide the impugned order has relied upon various authority/judicial decisions wherein it has been held that the clearances to an EOU is to be treated as export and refund of unutilized credit is to be allowed but as per the department this is not a valid ground for allowing refund of unutilized cenvat credit. Further the department has submitted that the definition of export as given in the Customs Act means taking out of India to a place outside India and therefore deemed exports are not the exports and the department has distinguished the judgments relied upon by the Commissioner for granting relief to the assessee.
3. On the other hand the learned counsel for the respondent contested the application seeking inclusion of additional grounds in the already filed appeal on the ground that the additional ground which is now sought to be included in grounds of appeal has not been allowed by the Commissioner who reviewed the order authorizing the Deputy Commissioner to file the present appeal and now the Revenue cannot include this ground without proper authorization or review order. He further submitted that the clearances made by the respondent to EOU should be considered as export for the purpose of refund and for this he relied upon the following decisions:
a) M/s. Gujarat Fashions [2014 (301) ELT 411 (Tri.-Ahmd.)]
b) Amitex Silk Mills P Ltd. [2007 (216) ELT 589 upheld by SC 2010 (254) ELT A98 (SC)
c) Final Order No. 21747-21749/2014
d) Apotex Research P Ltd. & other Vs. CST 2014-TIOL-1836-CESTAT-Bang
e) Shilpa Copper Wire Industries [2011 (269) ELT 17 (Guj.)]
4. I have heard the learned counsel for both the parites and perused the records. The issues which are to be decided by me are the following:-
(1) Whether the input credit availed on various services by the respondent would fall under the definition of input services/input as per the definition existing prior to 01.04.2011 and whether there is a nexus between input services and the final product exported?
(2) Whether the respondent is eligible for refund of unutilized cenvat credit in respect of clearances made to other 100% EOU on inter unit transfer?
In order to examine the contention of the appellant-department it is necessary to examine the definition of input service. The definition of input service prior to 01.04.2011 was as follows:
Rule 2(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 up to the place of removal; (the words from the place of removal have been replaced by up to the place of removal w.e.f. 1.4.2008).
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 up to 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 up to the place of removal. If we examined the above stated definition of input service we will find that it has a very wide scope as held by the Honble Bombay High Court in the case of Coca Cola Vs. CCE, Pune-III and further while allowing the cenvat credit with regard to input services involved in these appeals, the learned Commissioner has relied upon various decisions of the Courts and the Tribunals and has also mentioned about the nexus. In this regard para 6.5 of the impugned order is reproduced herein:
6.5. The next issue is nexus of various input services and the manufacturing activity/business of the appellant is as follows:
Sl. No. Nature of Service Nexus Relied upon decision 1 Business Auxiliary Services Charges paid for processing the goods related to production by Job workers Service in question to be treated as service in relation to business and hence covered by definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004-credit admissible-Rule 2(l) ibid. Covered by case law Coca Cola India Pvt. Ltd. Vs. CCE 2009 (242) ELT 168 (HC) 2 Chartered Accountant Services Professional charges paid for Statutory Audit and certification charges Specifically covered under the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004. This is a valid input service and covered by the following decision: Commr. of C.Ex. Meerut-II V. Hindustan Coca-Cola Beverages Ltd. 2011 (27) ELT 314 (Tri.-Del.)
3. Chartered Engineering Service Chartered Engineering Service towards safety and environment matters and employees training with respect to quality, production The said input service is an essential input service.
Covered by case law Dell International Services India Private Limited V. CCE Bangalore 2010 (17) STR 540 (Tri.-Bang.) 4 Clearing and Forwarding Services This is clearance charges meant for clearing imported raw material, components, consumables etc required for production Specifically covered under the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004. This is a valid input service and covered by the following decision:
Adani Pharmachem (P) Ltd Vs. CCE 2009 (238) ELT 179 (Tri.) 5 Courier Services Receiving and dispatching documents related to production and sales The said input service qualified as an essential input service, the absence of which might adversely impact the quality and efficiency of the provision of output service in terms of definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 and covered by the following decisions:
CCE Vs. Delloitte Services India Pvt. Ltd. 2008 (11) STR 266 (Tri.) Dell International Services India P Ltd. Vs. CCE 2010 (17) STR 540 (Tri.-Bang) 6 Insurance Business Services (General Insurance) Transit Insurance charges paid on raw material, components, consumables etc, imported which is required for production The said input service is an essential input service covered by case law CCE Vs Millipore India Pvt Ltd 2012 (26) STR 514 (kar) 7 GTA Inward transportation of input and other inputs for factory This is a valid input service by definition and also covered by the following decision; CCE, Raipur Vs. Devi Iron & Power Ltd. 2013 (287) ELT 0494 (Tri. Del.) 8 Management, Maintenance or Repair Services for goods, equipments or properties Charges incurred for maintenance and repair of machinery & other equipments This is a valid input service by definition and also covered by the following decision: CCE Vs Lupin Ltd 2012 (28) STR 291 (Tri.) 9 Rent on Immovable Property Rental charges paid for the factory premises The said input service qualifies as an essential input service in terms of definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 and covered by the following decision:
Jeans Knit P Ltd Vs CC 2011 (21) STR 460 (Tri-Bang) 10 Security Agency Services Deployment of security at the factory premises This is a valid input service by definition of input services and also the decisions of Honble Tribunal in the case of Commr of CEx Hyderabad-IV V Delloitte Tax Services India Pvt Ltd 2008 (11) STR 266 (Tri.-Bang) 11 Online Information and Data Base Access Services Charges paid for accessing purchase orders, schedules and other related information from customers The said input service is an essential input service. Covered by the case law Dell International Services India Private Limited V CCE Bangalore 2010 (17) STR 549 (Tri.-Bang.) 12 Technical Inspection and Certification Services Professional charges towards inspection, operational & systems audit The said input service is an essential input service. Covered by the case law Dell International Services India P Ltd Vs CCE 2010 (17) STR 540 (Tri-Bang) 13 Telephone Services Telephone & mobile charges incurred towards communication of production and related staff who are involved in the activity of production, so as to enable to carry out the production activity This is a valid input service by definition and also covered by the following decision: CCE Vs Delloitte Services India Pvt. Ltd. 2008 (11) STR 266 (Tri.) 14 Technical Testing and Analysis Services Testing charges incurred for material and measuring instrument This is a valid input service by definition and also covered by the following decision: CCE Vs. Cadila Healthcare Ltd. 2013 (30) STR 0003 (Guj.) 15 Rent-a-Cab Scheme Operators Services The Company procures transport/cab facilities from vendors for the customers to visit the factory for product inspection and confirmation of orders This is a valid input service by definition and also covered by the ratio of High Court of Karnataka judgment in the case of Comr. Of C Ex Bangalore III V Stanzen Toyotetsu India (P) Ltd. 2011 (23) STR 444 (Kar.) 16 Manpower Recruitment & Supply Agencys Services They engage labourers supplied by the manpower contractors in the production activity for which the manpower contractors will be charging service tax Specifically covered under the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 covered by the following decisions: Utopia India Pvt Ltd Vs Commissioner of Service Tax, Bangalore 2011 (23) STR 25 (Tri.-Bang.) 17 Transport of Goods by Air Services Air Freight Charges incurred for raw material inputs/consumables received for production, as well as outward air freight for sending components to customers This is a valid input service by definition and also covered by the following decision: CCE Vs Dellitte Services India Pvt. Ltd. 2008 (11) STR 266 (Tri.) 18 Membership of Clubs They receive various updates related to their manufacturing technology. It helps us to improve their business and new prospects The said input service is not an essential input service for output service exported. Refund disallowed.
Therefore in view of the well reasoned finding of the Commissioner (Appeals) I am of the considered opinion that the findings given by the Commissioner (Appeals) are sustainable and there is no infirmity in it and the same is upheld.
5. Now coming to the second issue whether the appellant is eligible for refund of unutilized cenvat credit in respect of clearances made to 100% EOU on inter unit transfer, the respondents contention is that the refund sanctioning order while applying the formula for computation of eligible refund is considering the net credit eligible for refund and applying formula on the same. But as per the formula given in Rule 5 of the Cenvat Credit Rules 2004, eligible refund should be based on the total credit availed and not on credits which are eligible for refund said to be having nexus with manufacture of final products. Further the substantial amount of refund was rejected by applying the formula wherein the supply to EOU was not considered as export. This issue has been settled by the decision of the Honble CESTAT in CCE Vs. Shilpa Copper Wire Industries 2008 (226) ELT 228 (Tri.-Ahmd.) which was upheld by the Gujarat High Court reported in 2011 (269) ELT 17 (Guj.) and thereafter the Apex Court has also dismissed the Revenues appeal against the decision of the Gujarat High Court. He further relied upon the decision of Commissioner of Central Excise and Customs Vs. Anita Synthetics Pvt. Ltd. [2014 (306) E.L.T. 133 (Guj.)] wherein the same issue was involved and the Honble Gujarat High Court in para 5 has observed as under:
5. However, in the facts and circumstances of the case and when on facts of the present case, the issue involved is squarely covered by the decision of this Court, which is reported to be confirmed by Honble the Supreme Court and the aforesaid is not as such disputed by the learned Counsel appearing on behalf of the appellant, instead of remanding the matter to CESTAT, we have considered the issue on merits and whether the decision in the case of Shilpa Copper Wire Industries (supra) would be applicable to the present case or not. In the case of Shilpa Copper Wire Industries (supra), this Court has specifically held that clearance made by one 100% EOU to another 100% EOU, which are deemed exports are to be treated as physical exports for the purpose of entitling refund of unutilized Cenvat credit contemplated under the provisions of Rules 5 of the Cenvat Credit Rules, 2004. Similar is the question proposed in the present appeal. Under the circumstances, as such, the issue raised in the present appeal is squarely covered by the decision of the Honble Supreme Court in the case of Srikumar Agencies (supra). 5.1. Further respondents own case vide Final Order No. 21747-21749/2014 this Tribunal has allowed the refund claim filed by the respondent. Further the Honble Supreme Court in the case of Virlon Textile Mills Ltd. Vs. CCE, Mumbai reported in 2007 (211) ELT 353 (S.C) has held that deemed export are equivalent to physical export. The Honble High court of Gujarat in the case of CCE Vs. NBM Industries reported in 2013 (29) STR 208 (Guj.) has held that refund could not be denied on the ground that it was case of deemed export. Since the Apex Court as well as the High Courts have specifically held that deemed exports are equivalent to physical export and therefore keeping in view the precedents of the High Court and the Supreme Court, I hold that clearances to an EOU is to be treated as export and refund of unutilized credit is allowed to the respondent-assessee.
6. As far as application seeking additional grounds by the Revenue is concerned I allow the same on the ground that it is only an additional ground which is sought to be added in the existing grounds of appeal.
7. In view of the foregoing the appeals filed by the department are rejected and cross objections filed by the respondent-assessee are allowed with consequential relief, if any.
(Order pronounced in Open Court on )
(S.S.GARG)
JUDICIAL MEMBER
iss