Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Financial Technologies (India) Ltd on 16 January, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. E/767/09-Mum (Arising out of Order-in-Original No. 02/2009 dated 31.3.2009 passed by Commissioner of Central Excise, Mumbai-IV) Commissioner of Central Excise, Mumbai-IV Appellant Vs. Financial Technologies (India) Ltd. Respondent
Appearance:
Shri V.K. Agrawal, Additional Commissioner (AR), for appellant Shri S.S. Gupta, C.A., for respondent CORAM:
Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing: 16.1.2018 Date of Decision: 16.1.2018 ORDER NO Per: Anil Choudhary The issue in this appeal is whether can cenvat credit of service tax paid on the services in relation to issue and receipts of Foreign Currency Convertible Bond (FCCB) in Singapore, a place outside India, be used for paying central excise duty on the goods manufactured in India and further issue is whether the entire cenvat credit taken can be used even when no separate account has been maintained in respect of receipt and consumption of common input service used in the manufacture of dutiable final product or in providing output taxable services and such input services are also used for manufacture of exempted final products or for providing exempted services.
2. The brief facts are that the respondent (now known as M/s 63 Moons technologies Pvt Ltd is engaged in the business of manufacture of packaged and non-packaged/customized computer software from the said premises. The respondent also provides the services of Maintenance and Support of such software sold from such premises. The respondent is also registered with the central excise authorities at the premises of 202-203, 2nd Floor, Trade Avenue, Suren Road, Chakala, Andheri (E) from where export of packaged software is carried out.
2.1 The respondent has a centralised registration for the payment of service tax on services provided as well as services received from the foreign service providers. The respondent is also registered as an Input service distributor (ISD) at its head office located at Malkani Chambers, 1st Floor, Off Nehru Road, Vile Parle E for the purposes of distributing the credit of input services received by the ISD to its manufacturing and service providing locations.
2.2 The respondent had issued Foreign Currency Convertible Bonds (FCCB) in November 2006 for which various services were availed by it from foreign services providers. The respondent had paid the service tax on such services received from non-resident service providers under reverse charge. The cenvat credit of such service tax paid on the above input services was availed by the location registered as Input service distributor and distributed to the manufacturing location.
2.3 The department conducted the investigation and has observed that the respondent is engaged in manufacture of dutiable (packaged software) and Exempted Goods (Customized Software) and services. The said fact is mentioned in para 4 (a) of the SCN. The income on account of the aforesaid activities during the period of dispute is as follows:
Sr No Nature Tax paid 2006-07 (Income ) 2007-08 (Income) 1 Dutiable (packaged software) Excise Duty 43,90,18,326 /-
63,13,26,396/-2
Exempted Goods ( Customized Software) No Tax paid 23,92,38,900 /-
23,80,90,786 / -3
Services Service Tax 18,79,66,804 /-
43,13,66,523 /-
Total 86,62,24,031 /-
130,07,83,705 / 2.4 The respondent received the show cause notice no. F.No. V-(Adj)(Misc) 30-25/2008/241 dated 02-05-2008 whereby the cenvat credit availed of the service tax paid on the services received in relation to the FCCB issue is sought to be denied primarily on the ground that the No-correlation has been provided nor any documentary proof has been produced to establish that the said services are used in the manufacturing process of packaged goods manufactured and cleared from the factory and have not been exclusively used in the manufacturing of exempted goods or exempted services.
2.5 The respondent submitted the reply and attended PH in respect of the said SCN was held on 19-02-2009 wherein the respondent submitted the record of summary of utilization of proceeds of FCCB. The said SCN was adjudicated vide impugned order-in-original wherein the adjudicating authority has held that the respondent have correctly availed the cenvat credit as the services received from the foreign service providers in also used for the activity of manufacture of dutiable products.
3. Being aggrieved, the Revenue is in appeal which is more or less the repetition of the allegations made in the show cause notice. It is further stated by learned AR that the services were used outside India and cannot be said to be used directly or indirectly in relation to manufacture of dutiable final products i.e. packaged software thus lacks correlation. The adjudicating authority has erred in ignoring charge in the show cause notice which was the issue was not about maintaining separate account but about not maintaining proper records for receipt and consumption of input service in the manufacture of dutiable final product packaged software as required under the provisions of Rule 9(6) of the Cenvat Credit Rules, 2004. On the basis of the offering prospectus/circular of the respondent which mentions the company intends to use the net proceeds of this offering (FCCB) for the implementation of the groups business plans relating to development centres at Mumbai and Goa, including the purchase of land for captive use and construction of facilities, for overseas direct investments in new joint ventures and/or wholly owned subsidiaries, for capital expenditure for technology upgrade and any other use permitted under the applicable laws and regulations. The learned Commissioner has wrongly concluded that the activity of issuing FCCB for which taxable services under the head banking and other financial services was received, is squarely covered under the definition of input service and was relating to financing the business in India. Thus the learned Commissioner has erred by generalizing the issue instead of deciding it with reference to the particular noticee/respondent.
4. In reply, the learned counsel for the respondent states the definition of input service specifically allows a credit of input service whether used for financing activities of the respondent. As the services received in relation to the FCCB are also for the financing of the manufacturing activities and business of the respondent, the credit of the same should be allowed to the respondent. Respondent rely on the following Case Laws in support of the said contention:
I ULTRATECH CEMENT LTD. 2010 (260) E.L.T. 369 (Bom.) II FIAMM MINDA AUTOMOTIVE LTD. 2016 (43) S.T.R. 549 (Tri. - Del.) Iii HINDUJA GLOBAL SOLUTIONS LTD. 2016 (42) S.T.R. 932 (Tri. - Bang.) 4.1 The Commissioner in para 4.7 of the Order-In-Original has held that the Input Services have been used by the respondent in relation to their manufacturing business in India. The adjudicating authority has taken note of the utilization of the proceeds of the FCCS in the manufacture of dutiable products and is also satisfied with respect to the consumption of the input services on which cenvat credit has been claimed in the activities of manufacture. Such findings has not been controverted by the Revenue in their Grounds of Appeal. No evidence have been provided by the revenue to prove that the said input services were not used for the manufacturing business activities in India. The order has been passed taking into consideration of the evidences produced to substantiate the receipt and consumption of input services. Thus the department appeal needs to be set aside.
4.2 The ld. Commissioner in para 4.2 has further held that it is an undisputed fact that FCCB have been issued for the expansion of their manufacturing business and providing service in India. The revenue in their grounds of appeal had not adduced any evidence to prove the contrary, therefore, the basis of filing the Revenue appeal is not correct. Thus, the credit is admissible to the respondent and the departments appeal needs to be set aside. The respondent has submitted the utilization statement at the time of Personal Hearing to prove the utilization of the FCCB proceeds.
4.3 The Rule 6(5) of the Cenvat Credit Rules, 2004 covers the input services of banking and other financial services and specifically allows the credit of input services, even if they are partly used for the provision of taxable activities. The ld. Commissioner in para 4.20 of the impugned O-I-O has categorically held that the services have not been exclusively used for exempted activities. Thus, on the basis of the provisions of Rule 6(5) of Cenvat Credit Rules, 2004 read with clarifications issued vide Circular No. 137/203/2007-CX.4, the credit is eligible to the respondent.
4.4 The department has filed the appeal solely on the ground that the appellant have not shown the evidence or documents to prove that the services which were received outside India have been used for the business activities in India. It is submitted that the Cenvat Credit Rules do not contemplates one to one correlation between the inputs/ input services and the provision of taxable activities. Therefore, the credit cannot be denied in the absence of any one to one correlation. The respondent rely on the following judgments wherein it has been held that the credit cannot be denied on the ground that 1-1 correlation has not been provided by the respondent:
i DAI ICHI KARKARIA LTD. 1999 (112) E.L.T. 353 (S.C.) Ii SHIVALIK AGRO POLY PRODUCTS 2001 (130) E.L.T. 736 (Tri. - Del.) Iii SAMTEL (INDIA) LTD. 2002 (148) E.L.T. 468 (Tri. - Del.) iv MAHINDRA AND MAHINDRA LTD. 2001 (127) E.L.T. 247 (Tri. - Mum.) v JINDAL STAINLESS LTD. 2015 (329) E.L.T. 302 (Tri. - Del.) vi AMUL CRANKSHAFT PVT. LTD. 2016 (341) E.L.T. 433 (Tri. - Ahmd.) vii MOTHERSON SUMI ELECTRIC WIRES 2012 (278) E.L.T. 177 (Kar.) 4.5 Without prejudice to the above, the Jurisdiction to issue SCN is that the input service distributor. The para 2 of the SCN admits that the credit is availed on the ISD invoices. Therefore, the determination of the eligibility as well as correctness of the credit has to be seen at the end of the ISD and not at the end of the respondents unit who has availed the credit. The respondent relies on the following judgments:
GODFREY PHILIPS INDIA LTD. 2009 (14) S.T.R. 375 (Tri. - Ahmd.) UNITED PHOSPHORUS LTD. 2013 (30) S.T.R. 509 (Tri. - Ahmd.) CASTROL INDIA LIMITED 2013. (30) S.T.R. 214 (Tri. - Ahmd.) 4.6 The Credit can be distributed by ISD to any unit during the relevant period. The rule 7 of the Cenvat Credit Rules did not specify any restriction with respect to distribution of credit. Thus, the credit could have been distributed by the ISD to any particular unit. The respondent relies on the following judgments:
ECOF INDUSTRIES PVT. LTD. 2012 (277) E.L.T. 317 (Kar.) ECOF INDUSTRIES PVT. LTD. 2010 (17) S.T.R. 515 (Tri. - Bang.) In view of the above judgments, the ISD of the respondent was entitled to distribute entire credit to the respondents unit and therefore, the credit has been correctly availed. The respondent prays for setting aside the department appeal.
5. Having considered the rival contentions and the facts on record, we had directed the learned counsel for the respondent earlier on 11.1.2018 when this matter was heard in part, to produce breakup of turnover during the period under dispute i.e. 2006-07 and 2007-08. In response thereto, the respondent has filed the breakup of their turnover during the relevant financial year which has been quoted hereinabove. From the perusal of the turnover, it is evident that the major part of the turnover is with respect to manufacture and clearance of dutiable packaged software which is almost 50% of the total turnover. Thereafter the balance turnover is with respect to exempted goods customised software and for services. In this view of the matter, we are satisfied that the respondent has utilised the cenvat credit taken in their business activities in India and a major part of it is with regard to manufacture and clearance of dutiable output/services. In this view of the matter, we uphold the findings of the learned Commissioner and see no reason to interfere.
6. Accordingly this appeal by Revenue is dismissed. Respondent-assessee is entitled to consequential benefit in accordance with law.
(Pronounced in open court) (C.J. Mathew) Member (Technical) (Anil Choudhary) Member (Judicial) tvu 1 2 E/767/09