Custom, Excise & Service Tax Tribunal
M/S. J.S. Khalsa Steels (P) Ltd vs Cce, Chandigarh on 1 July, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST BLOCK NO. 2, R.K. PURAM, NEW DELHI EXCISE APPEAL NO. 2462 OF 2007-SM [Arising out of Order-in-Appeal No. 178-179/CE/CHD/2007 dated 14.6.07 passed by the Commissioner (Appeals), Central Excise, Chandigarh] For approval and signature: Honble Mr. P.K. Das, Member (Judicial) 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 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 Departmental authorities? M/s. J.S. Khalsa Steels (P) Ltd., Appellants Vs. CCE, Chandigarh Respondent
Appearance:
Shri Vikrant Kakaria, Advocate for the appellants;
Shri S. Gautam, DR for the Revenue Coram:
Honble Mr. P.K. Das, Member (Judicial), Date of hearing/decision: 1st July, 2009 FINAL ORDER NO._________________ dated __________ Per P.K. Das:
Relevant facts of the case, in brief, are that the appellants are engaged in the manufacture of iron and steel ingots falling under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. They are also registered with the Central Excise authorities for payment of service tax on transportation of goods by road. The appellants availed Cenvat credit on inputs, capital goods and input services. During the period 1.3.2005 to 31.12.2005 they cleared the inputs as such and reversed the credit in terms of Rule 3(5) of Cenvat Credit Rules, 2004. A show cause notice dated 15.10.2006 was issued proposing to reverse the credit on input service on the transportation of goods by road amounting to Rs. 83,575/- in respect of clearance of inputs as such. The original authority confirmed the demand of Rs. 82,575/- and imposed penalty of equal amount along with interest. The Commissioner (Appeals) upheld the adjudication order.
2. Learned Advocate on behalf of the appellants submits that Rule 3(5) of Rules provides reversal of credit on input or capital goods. He submits that the Commissioner (Appeals) proceeded on the basis of Rule 3(1) of the Rules which relates to taking of credit and has no relevant with the reversal of credit. He also submits that capital goods, input and input service are different components and are defined separately under Rule 2 of the Rules. He relied upon the decision of the Tribunal in the case of Chitrakoot Steel & Power Pvt. Ltd. vs. CCE, Chennai, reported in 2008 (10) STR 118 (Tri.-Chennai).
3. Learned D.R. on behalf of the Revenue reiterates the findings of the Commissioner (Appeals). He submits that clause (ix) of Rule 3(1) provides taking of credit of service tax leviable under Section 66 of the Finance Act. He also submits that Rule 3(5) of the Rules provides that the assessee shall pay an amount equal to the credit availed in respect of such input or capital goods. It is his contention that when the inputs were removed as such they are liable to reverse the entire credit taken under Rule 3(1) of the Rules which includes credit on input and input service. He further submits that by reading Rule 3(5) of Rules the reversal of credit would include both the components, namely input and input service. So demand of service tax credit and imposition are penalty are justified.
4. Relevant portion of various provisions of Cenvat Credit Rules, 2004 are reproduced below:-
RULE 3. CENVAT credit. (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
xxx xxx xxx xxx xxx xxx xxx (ix) the service tax leviable under section 66 of the Finance Act; Xxx xxx xxx xxx xxx xxx xxx Paid on
(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, xxx xxx xxx xxx xxx xxx xxx (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9:
5. On perusal of the above provisions, it is clear that Rule 3(1) of the Rules provides that a manufacturer or producer of final product or provider of taxable service shall be allowed to take credit on various duties including service tax paid on any input or capital goods received in the factory and any input service received by the manufacturer of final product. It is seen that capital goods, input and input service were defined separately under clause (a), and (l) of Rule 2 of the Rules. Thus there is no dispute that input, capital goods and input services are separate components under Cenvat Credit Rules, 2004. In this context Rule 3(5) directs for manufacturer while removing input or capital goods to pay an amount equal to the credit availed in respect of such input or capital goods. There is no indication for payment of credit in respect of input service. In my view, as there is no provision for payment of credit availed in respect of input service credit by removing the input as such, there is no scope to demand the input service credit. I also noticed that Rule 3(1) of the Rules is only for taking of the credit. The contention of the learned D.R. has no force.
6. The Tribunal in the case of Chitrakoo Steel & Power Pvt. Ltd. (supra held that there is no such provision of reversal of credit of service tax availed in relation to input or capital goods from the factory. Relevant portion of the decision of the Tribunal is reproduced below:-
On a careful study or the statutory provisions, it is seen that when the credit-availed inputs or capital goods are removed from the factory of the assessee, sub-rule (5) of Rule 3 of the Cenvat Credit Rules, 2004 provides for recovery of equal amount of credit. There is no such provision to reverse credit of service tax availed in relation to such inputs or capital goods when removed from the factory. Moreover, Rule 14 of the Cenvat Credit Rules, 2004 provides for recovery of Cenvat credit availed or utilized wrongly. In the instant case, the appellant had taken the credit correctly in terms of the statutory provisions. No provision exists in the Finance Act, 1994, which would render utilization of such credit erroneous for the reason that some of the inputs, transport of which yielded GTA service tax credit are returned as not suitable. The credit availed is anyway used to pay duty on the finished goods. In the circumstances, I find that the impugned order sustaining the demand of service tax and education cess to be not sustainable and accordingly vacate the same.
7. In view of the above discussion, impugned order is set aside. Appeal is allowed with consequential relief.
(Dictated & pronounced in the Open Court.) (P.K. DAS) MEMBER (JUDICIAL) RK 6