Custom, Excise & Service Tax Tribunal
M/S Cargill India Pvt Ltd vs Commissioner Of Central Excise ... on 15 July, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
BANGALORE
Appeal(s) Involved
E/2739/2011-SM
[Arising out of Order-in-Appeal No. 236/2012 dated 23/08/2012 passed by Commissioner of Central Excise (Appeals) Bangalore-I]
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
M/s Cargill India Pvt Ltd.,
99, Hope Farm,
Hoody-Whitefield Road,
Bangalore
Appellant(s)
Versus
Commissioner of Central Excise ,Customs and Service Tax
POST BOX NO 5400...CR BUILDINGS,
BANGALORE, - 560001
Respondent(s)
Appearance:
Ms Preetha, Adv For the Appellant Mr. Pakshi Rajan, A.R. For the Respondent Date of Hearing: 06/05/2016 Date of Decision:
CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order No. 20563 / 2016 Per : S.S GARG The present appeal is directed against the order of the Commissioner dated 23.08.2012 vide which the Commissioner(Appeals) has rejected the appeal of the appellant.
2. Briefly the facts of the present case are that the appellant is engaged in the manufacture of various types of flavours classified under Chapter Heading No 3302 of the 1st Schedule to CETA 1985. M/s Duckworth Flavours India Pvt Ltd got merged with M/s Cargill India Pvt Ltd on 22.09.2008 with retrospective effect from 01.04.2007 and thereafter they got centralized registration under service tax at their Corporate Office in Gurgaon, Haryana. Prior to the merger of M/s Duckworth Flavours India Pvt Ltd with M/s Cargill India Pvt Ltd., M/s Cargill India Pvt Ltd was rendering certain services to Duckworth India Pvt Ltd and was charging service tax on the said services. Debit notes were issued by M/s Cargill India Pvt Ltd to M/s Duckworth India Pvt Ltd for charging such service charges as well as service tax. After the merger, the appellants were availing Management Consultant Services from its group companies abroad and were making payment of service tax on such services under section 66A of the Finance Act. Further, appellants were also paying freight to various Goods Transport Agencies for inward as well as outward transportation of goods from its factory in Bangalore and the service tax was paid by the appellant through e-payments and they were taking CENVAT of service tax paid on these services. In view of these facts, a show-cause notice was issued to the appellant for claiming CENVAT credit of service tax amounting to Rs 12,19,140/- on the strength of debit notes and to the extent of Rs 5,12,010/- on the strength of e-payment challans issued by their Head-office. A show-cause notice was issued on the ground that these documents on the basis of which the appellant has taken credit are not proper documents for availing CENVAT credit as per Rule 9 of the CENVAT Credit Rules. The show-cause notice was culminated into order-in-original wherein the adjudicating authority confirmed the demand along with interest and penalties. Thereafter an appeal was filed before Commissioner (Appeals) who upheld the order-in-original vide his order dated 23.08.2010. Hence the present appeal.
3. Learned counsel for the appellant submitted that the impugned order disallowing CENVAT credit of service tax of e-payment challan and debit note is erroneous in law and is not sustainable. He further submitted that the impugned order has been passed without considering the submissions of the appellant that M/s Duckworth Flavours India Pvt Ltd got merged with M/s Cargill India Pvt Ltd in September 2008 with retrospective effect from 01.04.2007. As a result of it, for the entire period covered by show-cause notice, both the service provider and the service receiver were one and the same entity and the service tax was not payable at all in the first place. He further submitted that the show-cause notice proposed to deny CENVAT credit only on the ground that the debit notes and e-payments challan in the name of Head Office are not proper documents to avail CENVAT Credit, The eligibility of services as valid input services was never challenged in the show-cause notice. Consequently the finding of the Commissioner that the services are not valid input services has travelled beyond the scope of show-cause notice and therefore the impugned order deserves to be set aside. He further submitted that the impugned order denying credit of service tax paid on management consultant services and GTA services on the ground of lack of nexus is wrong and beyond the scope of show-cause notice as well as beyond the well settled principles of law. He also submitted that in fact, management consultant services were received by the appellant from its parent company located out of India which did not have any office in India and therefore the appellant paid service tax under Section 66A of the Finance Act and availed CENVAT credit on the basis of e-payment challan which is a valid document under Rule 9(1) of CENVAT Credit Rules 2004 for availing CENVAT credit. The learned counsel further submitted that GTA services were used for both inward as well as outward transportation of inputs and finished products as the terms of sale by the appellant was on FOR basis. On the other hand the learned A.R. reiterated the findings of Commissioner (Appeals).
4. On perusal of the records, I find that the only issue to be decided by me in this appeal is whether CENVAT credit denied to the appellant on the basis of debit notes and e-payment challans is legally justified or not. A show-cause notice was issued to the appellant proposing to deny CENVAT Credit availed on the debit notes and e-payment challans on the ground that they are not the valid documents to avail CENVAT credit as per the provisions of CENVAT Credit Rules 2004. The eligibility of services as valid input services was never challenged in the show-cause notice and the findings of the Commissioner (Appeals) to that extent is not justified and unsustainable in law. Further I find that the appellant and M/s Duckworth Flavours India Pvt Ltd merged into a single entity by way of order of Honble Delhi High Court with retrospective effect from 01.04.2007 and during the period in question, the two entities did not have separate legal existence in the eyes of law and any service provided would be considered as service to self and no service tax liability would arise. In support of this submission, the learned counsel relied upon the decision of Commissioner of Service Tax Delhi Vs ITC Hotels Ltd [2012(27)STR-145 (Tri-Del)]. In the aforesaid case, the Tribunal relied upon the judgement of the Honble Supreme Court in the case of Marshall Sons & Co (India) Ltd Vs Income Tax Officer [AIR-1997-SC-173] wherein the Honble Supreme Court in para 14 has observed as under:
"Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide viz. January l, 1982. It is true that while sanctioning the scheme it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in this facts and circumstances of the case. If the Court specifies a date, there is little doubt that such date would be the date of amalgamation of transfer. But where the Court does not prescribe any specific date but merely sanctions the scheme presented to it - as has happened in this case - It should follow that the date of amalgamation/date of transfer is the date specified in the scheme as "the transfer date". It cannot be otherwise. It must be-remembered that before applying to the Court under Section 39(1) a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take some time; indeed, they are bound to take some time because several steps provided by Section 391 to 3944 and the relevant Rules have to be followed and complied with. During the period the proceedings are pending before the Court, both the amalgamating units, i.e. the Transferor company and the Transferee company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the transferor company (subsidiary company) shall be deemed to have carried on the business for and on behalf of the transferee company (holding company) with all attendant consequences. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it could not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the Scheme. We are, therefore, of the opinion that the notices issued by the Income Tax Officer (impugned in the writ petition) were not warranted in law. The business carried on by the transferor company (subsidiary company) should be deemed to have been carried on for and on behalf of the transferee company. This is the necessary and the logical consequence of the Court sanctioning the scheme of amalgamation as presented to it. The order of the Court, sanctioning the scheme, the filing of the certified copies of the orders of the Court before the Registrar of Companies, the allotment of shares etc. may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be January l, 1982. This is also the ratio of the decision of the Privy Council in Raghubar Dayal v . Bank of Upper India Ltd. - AIR 1919 PC 9."
Further, in view of the judgement cited (supra), the requirement to discharge service tax on the said transaction does not arise in the first place. But having discharged service tax, the CENVAT credit cannot be denied on the ground that the documents do not contain requisite details. Furthe, I am of the considered opinion, that debit notes and e-payment challans are valid documents for claiming CENVAT credit on input services as per Sub-rule (1)(e) of Rule 9 which clearly specifies that CENVAT credit can be availed on challan evidencing payment of service tax by the service recipient as a person liable to pay service tax. Further, I also hold that out of the CENVAT credit pf Rs 5,12,010, appellant paid Rs 4,24,878/- to its group company situated outside India for management consultancy services. Appellant is entitled to take CENVAT credit under reverse charge mechanism under Section 66 A. The appellant paid service tax of Rs 87,132/- on GTA services under reverse charge mechanism as per the Finance Act 1994 used for both inward as well as outward transportation of inputs and finished products, but the appellant failed to produce documents showing how much of it was for inward transportation of inputs and how much for outward transportation of finished products. In the absence of sufficient documents in this regard, I disallow the CENVAT credit of Rs 87,132/- paid on GTA services. It is pertinent to note that the learned Commissioner (Appeals) vide orders-in-original No. 41 & 42/2013 dated 07.02.2013 has allowed the availment of CENVAT Credit by the appellant on the strength of e-payment challans for the subsequent period from December 2009 to August 2010.
4. Therefore keeping in view the aforesaid facts, I partly allow the appeal of the appellant and hold that the appellants have rightly taken CENVAT credit of Rs 12,19,140/- on the basis of debit notes and Rs 4,24,878/- on the basis of e-payment challans and disallow CENVAT credit taken on GTA services of Rs 87,132/- The question of penalty does not arise as the appellants have not concealed any material facts from the Respondent. By the impugned order, appellants have been imposed penalty on the ground of suppression of facts whereas according to my opinion, the issue involved in the show-cause notice was that of interpretation of law and it is a settled law that no penalty can be imposed in questions involving interpretation of law and moreover, the appellants were under bonafide belief that they are entitled to take CENVAT credit on the basis of debit notes and e-payment challans. In the result appeal is partly allowed as above.
(Order pronounced in open court on )
S.S GARG
JUDICIAL MEMBER
pnr
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