Custom, Excise & Service Tax Tribunal
Cadbury India Td vs C.C.E., Indore on 26 November, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
DIVISION BENCH
Court No.4
Appeal No.E/2429/2011-SM(BR)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would 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?
4.
Whether order is to be circulated to the Department Authorities?
Date of hearing: 18.9.2013
Dated of pronouncement: 26/11/2013
Cadbury India Td. Appellant
Vs.
C.C.E., Indore Respondent
(Arising out of OIA No.IND/Cex/APP/212/2011 dated 31.5.2011 passed by the Commissioner of Customs & Central Excise, Indore Appearance:
Present for the Appellant: Shri Dileep Poolakkot, Advocate Present for the Respondent: Shri M.S. Negi, DR Coram: Honble Mr. Manmohan Singh, Technical Member FINAL ORDER NO.58336/2013 PER: MANMOHAN SINGH This appeal is filed by appellants against Order-in-Appeal No. IND/App/212/2011 dated 31.05.2011 wherein Order-in-Original No. V(18) 15-84/Adj/2008/8477 dated 30-/8/2010 has been set aside and appeal of the revenue has been accepted.
2. Facts are briefly stated below:-
The Assessee are engaged in the manufacture of Cocoa & Cocoa & Cocoa products and Water Products falling under Chapter No. 18 and 19 of the First Schedule to the Central Excise Tariff Act, 1985. During the audit of the records of the assessee, it was observed that, the assessee had availed CENVAT credit on telephone Service and Courier services availed by them, which were not the input service as per the definition of the input service provided under Rule 2(1) (ii) of the Cenvat Credit Rules 2004. A Show Cause Notice dated 14.11.2008 was issued.
3. The Adjudicating Authority after due deliberation, decided the above show cause notice vide Order-in-Original No. 43 to 45/CEX/Demand/AC/2010 dated 15.11.2010 thereby the denial of CENVAT Credit proposed in the show cause notice was dropped. On a review order passed by the department, appeal against Order-in-Original was filed before Commissioner (Appeal) on the ground that:
The Appellant referred the definition of input services defined in Rule 2(1) of Cenvat Credit Rules 2004.
4. The first leg of the definition clearly says that any service to be qualified as input service, should be used either, by a provider of taxable service for providing an output service or by a manufacturer, whether directly or indirectly in or in relation to the manufacture of final products ad clearance of final products from the place of removal. The second part of the first leg which deals with manufacturer stipulates that input service should be that which is used directly or indirectly (a) in or in relation to the manufacture of the final products and (b) for clearance of final products from the place of removal. The basic criteria to be examined for qualifying any service to be an input service, is that the first leg of the definition should be satisfied. For an output service provider services which are used for providing such output service will constitute input service, whereas for a manufacturer services which are either used in or in relation to the manufacture of the final products or which are used for clearance of final products from the place of removal, constitute input services.
5. In the second leg of the definition, apart from the services which meet the above criteria, some specific servic4es have been included which may or may not meet the criteria prescribed in the first leg of the definition. This is the so called inclusive part of the definition which specifies the services to be treated as input service irrespective of the criteria stipulated in the first leg of the definition. These are:-
i. 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.
ii. Advertisement or sales promotion, iii. Market research, iv. Storage up to the place of removal, v. Procurement of inputs.
vi. Activities relating to business, such as (a) accounting. (b) auditing. (c) financing. (d) recruitment and quality control. (e) coaching and training. (f) computer net working. (g) credit rating. (h) share registry. (i) security. (j) inward transportation of inputs or capital goods, and (k) outward transportation up to the place or removal.
6. The conclusion that comes out of the above discussion is that for a service to be categorized as input service, it should either satisfy the condition in the first leg of the definition or should specifically fall under any of the service prescribed in the second leg of the definition. Furthermore, in the inclusive part of the definition, if anything is to be called as activities relating to business it should be one of the eleven categories specifically provided there under or at least it should be an activity of similar nature.
7. Any indirect service used by the manufacturer which are essential for the production of finished product would fall within the purview of the definition of input service can only be accepted if such services are used in or in relation to the manufacture of such final product. In the instant case the service tax paid on courier Service cannot be accepted as input service as the said service is not an essential activity required for the production of finished goods Moreover, the usage of a courier Service cannot be exclusively for manufacturing activity, unless and until supported by a concrete evidence that the courier Services involved in the present case were exclusively used for various manufacturing activities, such as supervision, giving and taking, of orders, consultation and advice work etc. as claimed by the assessee.
8. Revenue also referred to lack of evidence to show that courier Services was availed exclusively to facilitate manufacture of the final products.
9. Commissioner (Appeals) after due examination of the matter decided that the services of telephone and courier can not be covered in the definition of inputs or input services to be eligible for input service credit. He further termed these activities as not related to business as these activities have been allowed in the definition in a restrictive manner. The term such as been clarified in number of decisions as equivalent meaning to for example. All these services elaborated in the inclusive definition have nexus with the manufacturing activity but the service of telephone and courier has no nexus with manufacturing activity. He also referred to Honble CESTAT, decision in the case of M/s GKN Sinter Metals Ltd. V/s CCE Aurangabad 2009 (16) S.T.R. 615 (Tribunal Mumbai) wherein it was held that garden maintenance service had no nexus, even remotely, to the manufacture of clearance of excisable goods. He also referred the judgment of the CESTAT in the case of Commissioner of Central Excise, Chennai Versus Subdaram Brake Linings Ltd. reported in 2010 (019) STR 0172 (Tri.- Chennai), wherein the Tribunal held that, Assessee has claimed credit of service tax paid on outdoor catering service claiming the same to be input service used in or in relation to various manufactured excisable goods. Cenvat Credit not permissible on mere inclusion of value of an item in assessable value of final product. Food items supplier not inputs for finished goods. Credit permissible only when service used in or in relation to manufacture of finished excisable goods and impugned service not satisfying such test.
Cenvat Credit not permissible unless tests laid down by Supreme Court in said decision (Maruti Suzuki Ltd. Vs. Commissioner 2009 (240) ELT 0641 (S.C.) fulfilled. Use of input service must be integrally connected with manufacture of final product for credit entitlement. Input service must have nexus with process of manufacture. One of relevant tests would be, can the final product emerge without the use of input service. (Paras.14, 19) Law permits credit of duty/tax in respect of inputs/input services only when used in or in relation to manufacture of excisable goods. Credit not provided based on inclusion of value of input/input service in value of finished excisable goods. CAS-4 requires the cost of subsidy towards subsidized food as several other fringe benefits to be included in cost of productions cannot be consideration for allowing credit of service tax paid on outdoor catering service unless such service found to be used in or in relation to manufacture of respective finished excisable goods manufactured by respondents. (Para 17, 18, 19, 21)
10. Appellants have came in appeal against Commissioner (Appeals)s order. They mainly relied upon Bombay High Court Judgment in the case of CCE Nagpur Vs. Ultratech Cement [reported in 2010-TIOL-745-HC-MUM-ST]. They relied upon para 27 of the judgement. They also referred to Supreme Court Judgement in the case of Maruti Suzuki Ltd. [2009-TIOL-SC-CX] in (para 30).
11. They also referred to CBEC Circular No. 97 dated 23.8.2007 wherein it was clarified that mobile phone service was admissible provided the same was used in providing output service. Supreme Court held that CBEC had taken a broad interpretation to cover all services which were used in relation to the business of manufacturing the final products.
12. They also referred to Honble Tribunals judgments.
(a) Keltech Energies Ltd. V/s CCE, Mangalore [2008 (10) STR 280 (Tri.- Bang.)],
(b) CCE Vs. Steelcast Ltd [2009 (13) STR 696 (Tri.-Ahmd.)]
13. Regarding courier service, they referred to CCE Vapi Vs. Apar Industries LTd. [2010 (20) STR 624 (Tri.-Ahmd.)] With regard to courier services, the Commissioner (Appeals) ought to have appreciated that in CCE, Vapi Vs. Apar Industries Ltd. [210 (20) STR 624 (Tri.-Ahmd.], it was held that courier services used for placing orders, filing quotation for procurement as well as marketing, dispatch instructions, issuing cheques for procurement, sending stock transfer documents to depots, receiving dispatch instructions from marketing/depots/head office, etc., were held to be input services.
14. Heard both sides.
15. I have gone through the fact on records, contents of order-in-Original, grounds of review order and Order-in-Appeal including judgments and Boards circular on the issue.
16. I find that main issue for determination is whether input service credit availed on the service of landline telephone service and courier service is available or not.
17. Matter is no more res integra. Following Supreme Court decision in M/s Maruti Suzuki Ltd. and Bombay High Court in Ultra Cement, Honble Tribunal has consistingly held that input service credit is available on landline telephone service as it is used for business purpose. Similarly it has been held that mobile telephone service is also entitled for credit. CBEC circular (supra) is also relevant. Accordingly it is held that input service credit is available on telephone services utilized for business purpose.
18. Regarding credit on courier service, it has been examined in detail by the co-ordinate bench of Ahmedabad Bench where scope of courier service was defined. It was held that:
With regard to courier services, the Commissioner (Appeals) ought to have appreciated that in CCE, Vapi Vs. Apar Industries Ltd. [210 (20) STR 624 (Tri.-Ahmd.], it was held that courier services used for placing orders, filing quotation for procurement as well as marketing, dispatch instructions, issuing cheques for procurement, sending stock transfer documents to depots, receiving dispatch instructions from marketing/depots/head office, etc., were held to be input services.
Same has been followed in Cadila Healthcare Ltd. Vs. CCE Ahmedabad [2010 (17) STR 134 (Tri.-Ahmd.)].
19. In CCE Vs. Universal Cables Ltd. 2007 (5) STR 142 (Tri.-New Delhi) it is held by Tribunal that Cenvat Credit paid on courier service utilized for dispatching their final product was also eligible for credit.
20. Thus it is found that as per scope prescribed above, input service credit is available in courier service.
In view of above, appeal is allowed.
(Pronounced in the open Court on 26/11/2013)
(MANMOHAN SINGH) TECHNICAL MEMBER
K. Gupta
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