Custom, Excise & Service Tax Tribunal
Bedmutha Industries Ltd vs Nasik on 7 February, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
APPEAL NO. E/86756/2018
(Arising out of Order-in-Appeal No. NSK/EXCUS/000/APPL/160/17-
18 dated 08.02.2018 passed by the Commissioner of GST & Central
Excise (Appeals), Nashik.)
M/s Bedmutha Industries Ltd. Appellant
Vs.
CCE & ST, Nashik Respondent
Appearance:
Shri T.C. Nair, Advocate for Appellant
Shri Sanjay Hasija, Superintendent (AR) for Respondent
CORAM:
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
Date of Hearing: 14.08.2018
Date of Decision: 07.02.2019
ORDER NO. A/85256/2019
Inadmissibility of CENVAT credit of Service Tax paid on various
inputs like pipeline fabrication work, EOU crane, electrical
installation, earthing connection, insulation of acid plant etc. is
assailed in this appeal along with interest and penalty imposed after
reversal of credits.
2. Brief facts of the appellant's case, as revealed from the appeal
memo and written note of submission, is that appellant is a
manufacturer of galvanized wire, HTGS wire, G.S. earth/GI stay wire
E/86756/2018
2
and is registered under Central Excise Act. It has been availing credit
of CENVAT on inputs, input services and capital goods in conformity
to CENVAT Credit Rules, 2004. E.A. Audit observed Rs. 30,34,534/-
as inadmissible credit on various input services. Appellant reversed
credit of Rs. 21,95,531/- without utilisation and without challenging
its admissibility. It disputed admissibility of credit of Rs. 8,39,003/-
availed on the above referred services and invocation of extended
period made through show-cause notice that was adjudicated and
finally reached the Tribunal stage.
3. In the memo of appeal and during the course of hearing of
appeal, the learned Counsel for the appellant Shri T.C. Nair has
submitted that pipeline fabrication work, EOU crane, electrical
installation, earthling connection, insulation of acid plant etc. were
done in relation to the manufacture of final products and those are
eligible for CENVAT credit in terms of Rule 2(l) of CENVAT Credit
Rules, 2004. In placing reliance on the judicial decision reported in
2009 (16) STR 154 (T) in the case of Aditya College of Competitive
Exam that was upheld by Hon'ble Andhra Pradesh High Court as
reported in 2016 (45) STR J57 (AP), he further argued that invocation
of extended period, without any conscious or deliberate suppression
of facts or mis-statement, is not sustainable when the same was
based on audit objection and since there is possibility of difference of
opinion among the assessee and the department relating to
interpretation of the provisions of Rule, extended period cannot be
invoked in view of decisions reported in 2007 (5) ELT 308 (T), 2009
E/86756/2018
3
(13) STR J96 (Bom), 2013 (29) STR 240 (T), 2014 (36) STR 1268 (T). He
also challenged the imposition of penalty and interest stating that
when unutilised credit balance was much more than the credit
reversed, such interest and penalty are not sustainable for which he
placed reliance on the decisions reported in 2016 (331) ELT 182 (A.P.),
2014 (310) ELT 509 (Mad.), 2012 (281) ELT 192 (Kar.), 2017 (52) STR
346 (T), 2017 (49) STR 351 (T), 2017 (49) STR 193 (T).
4. Learned AR Shri Sanjay Hasija for the department, though not
filed any cross objection, has vehemently argued with reference of
case laws reported in 2009 (238) ELT 3 (SC) in the case of Union of
India Vs. Rajasthan Spinning & Weaving Mills, 2011 (264) ELT 481
(SC) that penalty is imposable when conditions for penal liability spelt
out in Section 11AC of the Central Excise Act is met and duty paid
before issue of show-cause notice would not alter the situation. He
further supported the reasoning and rationality found in the order of
the Commissioner (Appeals) and sought no interference by this
Tribunal.
5. Heard from both the sides at length and perused the case
records vis a vis relied upon judicial decisions placed by the
adversaries. As found from the show-cause, notice out of 49 items on
which credit was denied, appellant had challenged legality of such
denial in respect of six services. Taking Exit Interview contended by
the Auditor on 27.06.2015 wherein it has been allegedly admitted by
the appellant that they had utilised those services in relation to civil
E/86756/2018
4
works and fabrication of support to capital goods and hence credit
was not admissible to them. Paragraph no. 5 of the show-cause
notice indicates that the said services had been utilised in laying of
foundation or making structures for support of capital goods as
appears from the work undertaken. Basing on these two points,
finding have been made in the Order-in-Original and Order-in-Appeal
that appellant had admitted about its knowledge concerning
inadmissibility of CENVAT credit and without the same being
unearthed in audit, appellant would have evaded tax. The very use of
word "appears" indicates that those Departmental Authorities have
suspected the conduct of appellant and taken the words of appellant,
if at all done at Exit Interview, as extra judicial confession to reach at
such a finding apparently because of the fact that appellant had
accepted the audit objection and reversed credit to the tune of Rs.
21,95,531/-, but going by the entire case record, it is very much clear
that on pipeline fabrication work, EOU crane, electrical installation,
earthing connection, insulation of acid plant etc. it had challenged the
audit objection and the legality of inadmissibility of those credits.
This being the factual position and having record to the fact that
CESTAT Larger Bench decision reported in 2018 (360) ELT 737 (Tri.-
LB) in the case of Manglam Cement Ltd. Vs. Commissioner of Central
Excise, Jaipur has given a finding that steel items used for fabrication
of support structure for smooth erection of machine including cement
had to be considered as "assessories of capital goods" and those items
are inputs and eligible to get benefit of CENVAT credit as they fall
within the scope and ambit of both Rules 2(a)(A) as well as 2(K) of
E/86756/2018
5
CENVAT Credit Rules, 2004, it can't be said that those credits are
inadmissible. Further as found from the nature of services electric
installation, preparation of earthing system for electricity and
insulation of acid container should be regard as "safety measure" for
protection of factory and its workers who are engaged in or in relation
to the manufacturing process, the same cannot be consider as civil
construction or support structure.
6. So far as audit is concern now coming to the statutory audit
procedure, the purpose of audit, as available in the Manual published
by the Institute of Chartered Accountants of India in respect of EA
audit and CERA audit under Chapter 17 is that the idea behind such
conduct of verification is to reasonably ensure that no amount, which
under the central excise law is chargeable as duty, escapes taxation
and the process of verification is always carried out in the presence of
assessee and in the process, the auditor is required to discuss the
matter with the assessee and advice him to follow correct procedure
in future. It is also referred in the said manual that after such
submission of audit report, in cases where the disputed amount have
not already been paid by the assessee at the spot, demand notices are
issued by the department for their recoveries. EA 2000 audit was
therefore held to be participative audit. Likewise CERA audit is
conducted by the Comptroller and Auditor General of India in respect
of receipt and expenditure of the Government of India. It also
discharges revenue audit which covers central excise, service tax and
customs laws during which time the assesses were examined by
E/86756/2018
6
CERA audit party to point out the deficiencies, leakage of revenue and
non recoveries of dues by the Central Excise Department. Therefore,
it cannot be said that only because audit party had found some credit
availed as inadmissible, suppression of fact is made out. Further it is
not established that appellant had any malafide intention to suppress
its duty liability from the department. Hence the order.
ORDER
7. The appeal is allowed and the order passed by the Commissioner (Appeals) in appeal No. NSK/EXCUS/000/APPL/160/ 17-18 dated 08.02.2018 is here by set aside.
(Pronounced in court on 07.02.2019) (Dr. Suvendu Kumar Pati) Member (Judicial) Prasad