Custom, Excise & Service Tax Tribunal
Cce, Ludhiana vs M/S Nahar Fibre on 25 November, 2008
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL NEW DELHI PRINCIPAL BENCH COURT NO. 1 Service Tax Appeal No. 184 of 2008-SM (Arising out of Order-in-Appeal No. 393/CE/Appl/Ldh/2007 dated 14.12.2007 passed by the Commissioner of Customs & Central Excise (Appeals), Jalandhar). DATE OF HEARING : 25.11.2008 DATE OF DECISION : 25.11.2008 FOR APPROVAL AND SIGNATURE : HONBLE MS. JYOTI BALASUNDARAM, VICE-PRESIDENT 1. Whether Press Reporters may be allowed to see the order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982 ?. 2. Whether it should 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 Departmental Authorities? CCE, Ludhiana . Appellant (Rep by Sh. R.K. Saini, DR) versus M/s Nahar Fibre . Respondent
(Rep. by Sh. Balbir Singh, Adv.) CORAM : HONBLE MS. JYOTI BALASUNDARAM, VICE- PRESIDENT ORDER NO._______________________________ PER JYOTI BALASUNDARAM :
The brief facts of the case are that, the respondents herein were registered in the category of Transport of goods by Road Service (GTA Service in short) as person liable to pay Service Tax under Section 68 of the Finance Act, 1994. On scrutiny of ST-3 Returns filed for the half year ending March, 2005 and September, 2005, it was observed that they had paid Service Tax of Rs. 2,39,041/- from Cenvat credit account maintained for central excise purpose for payment of duty on final products. The assessee was working under two capacities one Manufacturer and the other Service Tax assessee [Demand Service Tax assessee under Section 68(2)]. The inputs/input services/capital goods, which are used for manufacture of final product, were held as inputs/input services/ capital goods for providing outward services in view of the definition thereof under Rule 2 of the Cenvat Credit Rules, 2004. The Department was, therefore, of the view that the Service Tax paid by the assessee on GTA Service from the Cenvat credit account was not proper and, therefore, a show cause notice dated 16.03.2006 was issued for the recovery of the Service Tax wrongly paid from the Cenvat credit account maintained for central excise purpose together with interest. The notice also proposes imposition of penalty. Similarly, M/s Nahar Fibres, a 100% EOU, had utilized the Cenvat credit amounting to Rs. 3,59,239/- during the period from March, 2005 to September, 2005 and show cause notice was also issued on 16.03.2006 proposing similar action as proposed in the notice for recovery of Rs. 2,39,041/-. Both notices were adjudicated against the assessee; assessee came up in appeal against the confirmation of both demands which were set aside by the Commissioner (Appeals) by the impugned order relying upon the Tribunals earlier Order No. 695/07 in their own case as reported as 2007 (7) STR 26. Hence this appeal by the Revenue against the setting aside of both the demands.
2. I have heard both sides and find that the only ground raised in the appeal is that, the Tribunals decision reported in 2007 (7) STR 26 (supra) has been challenged by the Revenue before the Honble Punjab & Haryana High Court. However, this by itself is not sufficient to hold that the Commissioner (Appeals) has committed any error in following the precedent on the identical issue of the same assessee. In the impugned order, the Commissioner (Appeals) has reproduced the relevant portion from the Tribunals judgment, which is reproduced as under for the better understanding of the issue and the dispute :
2. The respondents are engaged in the activity of manufacture as well as they are output service providers. In the impugned order, the Commissioner (Appeals) held that the respondents are entitled for Cenvat credit of manufacturing activity for utilization towards payment of Service Tax. The Revenue is challenging these findings on the following grounds :
(i) The Cenvat Credit Rules, 2004 provide that the output service provider is eligible to take credit of service tax paid on input/capital goods used in providing service. In this case the actual service provider is the transporter and the party is treated as the service provider for the limited purpose of discharging the Service Tax liability under Section 68(2) of the Finance Act, 1994. As such, the party not being the service provider is not entitled to avail credit, which can be availed by the actual service provider only.
(ii) The party is having a dual role. They are manufacturer as well as the service provider by virtue of the deeming provisions of Section 68(2) of the Act read with Rule 2(d) of the Service Tax Rules, 1994. Though Cenvat Credit Rules, 2004 are applicable to both the categories but the definitions of inputs, capital goods and input service are different, for each of them. The output service provider is eligible to take credit of service tax paid on input/capital goods used in providing service and that the goods which are inputs/capital, goods for the manufacturer are not input/capital goods for the service provider and vice versa. As such, the Cenvat credit of manufacturing amount cannot he used for discharging service tax liability on deemed service provider.
3. I find that as per Cenvat Credit Rules 2004 output service means any taxable service provided by the provider of service to a customer, client and a person liable to pay Service Tax and provider and taxable service include a person liable for paying Service Tax. Further, I find that as per CBEC Excise Manual of supplementary instructions where certain restrictions were imposed for payment of Cenvat credit. Para 24.2 is reproduced below :
Utilisation of credit The Cenvat credit may be utilised for payment of :-
(a) any duty of excise on any final products; or
(b) an amount equal to Cenvat credit taken on inputs if such inputs are removed as such or after being partially processed; or
(c) an amount equal to the Cenvat credit taken on capital goods if such capital goods are removed as such; or
(d) an amount under sub-rule (2) of Rule 16 of Central excise Rules. 2002; or
(e) service tax on any output service.
24.2 Restrictions on utilization of credit.
There are certain restrictions on utilization of Cenvat credit of different rules. The credit of AED (TTA), NCCD, Additional Duty of Excise on Tea Education Cess and additional duty of excise levied under clause 85 of Finance Act, 2005 can only be utilized only for the payment of such duties. Vide section 88 of Finance (No. 2) Act, 2004, it has been provided that the credit of AED (GSI) paid on or after 1-4-2000 shall be allowed to be utilized for the payment of any other duty. However, prior to this, the duty credit of AED(GSI) if taken can be utilized only for the payment of AED (GSI) as per relevant provisions applicable at that time. Finance Bill, 2005 has made certain changes in clause 88 of Finance (No. 2) Act, 2004 to provide for recovery of AED (GSI) paid before 1st April 2000, and wrongly availed for payment of Cenvat duty and interest thereon. The scheme also provides for payment of aforesaid amount in 36 equated monthly instalments (for further details, clause 124 of Finance Bill, 2005 may be referred to), it has however, been provided that the credit of the Education Cess on excisable goods and the Educations Cess on taxable services can be utilized either for payment of the Education Cess on excisable goods or for the payment of the Education Cess on taxable services.
The credit or additional duty leviable under sub-section (5) of Section 3 of Customs tariff Act, 1975 cannot be utilized for payment of service tax on any output service. Further, the credit of any other duty cannot be utilized for the payment of duty levied under clause 85 of Finance Bill 2005 (refer Notification No. 13/2005-CE(NT) dated 1-3-2005).
There is no restriction on utilization of credit of duties other than mentioned above.
4. As per the Cenvat Credit Rules and as per the Manual, there is no restriction for utilization of Cenvat credit by the manufacturing unit towards payment of Service Tax as service tax provider. In these circumstances, I find no infirmity in the impugned order, the appeal is dismissed.
3. In the light of the above decision of the Tribunal, I hold that there is no warrant to interfere with the present impugned order and accordingly uphold the same and reject the appeal.
(Dictated and pronounced in the open Court on the 25th day of November, 2008) (JYOTI BALASUNDARAM) VICE-PRESIDENT Golay