Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs M/S. Chamundi Textiles (Silk Mills) Ltd on 4 March, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE COURT - II Appeal No: E/304/2010 & E/COD/33 to 35/2011 in E/460 to 462/2011 (Arising out of Order-in-Appeal No: 452/2009 dated 5.11.2009 passed by the Commissioner of Central Excise (Appeals), Mangalore.) 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? The Commissioner of Central Excise Mysore. Appellant Vs. M/s. Chamundi Textiles (Silk Mills) Ltd. Respondent
Appearance Shri Harish Kumar, SDR for the revenue.
Shri Anil Kumar.B, Advocate for the respondent.
CORAM SHRI P. KARTHIKEYAN, HONBLE MEMBER (TECHNICAL) Date of Hearing: 04.03.2011 Date of decision: 04.03.2011 MISC. ORDER No._______________________2011 FINAL ORDER No._______________________2011 Per Shri P. Karthikeyan (Oral) Revenue has filed these miscellaneous applications No.E/COD/33 to 35/2011 for condonation of delay in filing appeals Nos.E/460 to 462/2011. The impugned order was challenged by filing Appeal No.E/304/2010 dated 12.2.2010. As the Order-in-Appeal impugned in the appeal No.E/304/2010 had disposed four appeals filed by the assessee against Orders-in-Original, the Bench had directed the revenue to file these supplementary appeals. The delay involved in filing these appeals is condoned after hearing both sides.
2. Revenue has filed these appeals impugning Order-in-Appeal No.452/2009 dated 5.11.2009. The particulars of the Orders-in-Original and the material particulars of the Order-in-Appeal impugned are as follows:
Period of dispute Date of show cause notice Order-in-Original Amount of refund claimed Amount of refund allowed by Com. (A) December 2007 27.01.09 No.07/2009 (R) dt.25.2.09 Rs.2,10,890/-
Rs.2,03,437/-
January 2008 10.02.09 No.13/2009 (R) dt.26.3.09 Rs.41,558/-
Rs.31,476/-
February 2008 06.03.09 No.22/2009 (R) dt.24.4.09 Rs.1,88,199/-
Rs.1,87,512/-
March 2008 17.03.09 No.31/2009 (R) dt.29.04.09/6.5.09 Rs.1,44,442/-
Rs.1,44,442/-
3. The respondents are a 100% EOU engaged in the production and export of silk fabrics. Almost entire production of the respondents is exported. It avails various taxable services in the course of its business and pays Service Tax under various heads. As the respondents do not clear substantial part of its production in the domestic tariff area, they accumulated credit of Service Tax paid on various services and claimed refund of the same treating them as input services required for manufacture of the export goods. The Original Authority disallowed the claims filed on various grounds. Vide the impugned order, the Commissioner (A) allowed the appeals filed before him by the respondents except for sustaining denial of credits availed against debit advices in respect of Order-in-Original No.7, 13 and 22/2009. The Commissioner (A) found that the Original Authority had denied the claims filed by the respondents on the ground that the credit, refund of which was claimed, did not pertain to the goods exported during the period for which refund was claimed. He rendered the following finding on this ground taken by the Original Authority.
The Original Authority had rejected all these refund claims on the ground that the appellant had claimed the refund claim of cenvat credit which was actually received in the factory in the earlier months, whereas the refund claims were pertaining later months. On this I find that the appellant were 100% EOU and so exporting their whole products. Even if the goods were received in their factory earlier only, during that time also there were exports effected by the appellant. All the services / goods received by the appellant are used for the production of goods which were subsequently exported. This makes no difference on their eligibility. If this was not eligible for the particular month then also it was eligible for the preceding or succeeding months. This is a revenue neutral situation.
4. In the appeals before the Tribunal, the revenue has assailed the order of the Commissioner (A) on the ground that the respondent had claimed refund in respect of input services which had not been used in the goods actually exported and therefore, the respondents were not eligible for the refund claimed as per Rule 5 of Cenvat Credit Rules, 2004 (CCR) read with Notification No.5/2006-CE (NT) dated 14.3.2006. In support of this claim, reliance is placed on judgment rendered in the case of Ace Techniks Vs. CCE, Bangalore - 2009 (239) ELT 92 (Tri.-Bang.) where the Tribunal had held that in terms of Rule 5 of CCR, refund of credit of inputs / input services used in the export goods only could be allowed. It is also submitted that the impugned order did not give any finding on the following aspects based on which also the Original Authority had found certain amounts claimed as not admissible under Rule 5 of CCR.
(i) Credits taken on documents addressed to the assessees Head Office located at Bangalore in respect of which the assessee failed to prove that the services involved were attributable to their unit at Mysore.
(ii) Credits taken on documents which are not specified for allowing credit under Rule 9 of CCR.
(iii) Credits taken by the assessee in excess of amounts mentioned in the supporting documents.
The respondents had two units, one at Mysore and another one at Ramanagaram. Some of the documents against which credit was taken by the respondents were addressed to the Head Office. The Original Authority had correctly denied credit in respect of these documents.
5. The learned SDR justified the orders of Original Authority relying on the provisions of Notification No.5/2006 dated 14.3.2006. He relies on the following two conditions, 4 & 5 of the appendix to the above notification.
4.?The refund is allowed only in those circumstances where a manufacturer or provider of output service is not in a position to utilize the input credit or input service credit allowed under rule 3 of the said rules against goods exported during the quarter or month to which the claim relates (hereinafter referred to as the given period).
5.?The refund of unutilised input service credit will be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates i.e. Maximum refund ( Total CENVAT credit taken on input services during the given period W export turnover w Total turnover.
Illustration : If total credit taken on input services for a quarter = Rs. 100 Export turnover during the quarter = Rs. 250 Total turnover during the quarter = Rs. 500 Refund of input service credit under Rule 5 of the CENVAT Credit Rules, during the quarter ( 100*250/500 i.e. Rs. 50.
Explanation : For the purposes of condition no. 5, -
1. Export turnover shall mean the sum total of the value of final products and output services exported during the given period in respect of which the exporter claims the facility of refund under this rule.
2. Total turnover means the sum total of the value of, -
(a) all output services and exempted services provided, including value of services exported;
(b) all excisable and non excisable goods cleared, including the value of goods exported;
(c) The value of bought out goods sold, during the given period.
It is submitted that refund could be claimed of input service credit relatable to goods exported during the period for which the claim is made. As regards the respondents taking inadmissible credit, he reiterates the grounds in the appeals filed by the revenue. It is submitted that credit was not admissible against photocopies or documents addressed to its Bangalore office. He also reiterates the point that part of the credit in dispute did not pertain to services which were input services used for the manufacture of the export goods.
6. The learned counsel appearing for the respondents submits that the dispute stands settled in favour of the assessee in their own case, in CCE, Mysore Vs. Chamundi Silks Textiles Ltd. 2010 (20) STR 219 (Tri.-Bang.) dealing with similar dispute for an earlier period. The Tribunal had held that if the credit was admissible in a particular month, it would be admissible either in the preceding or succeeding months also. The assessee was eligible for refund since there was no dispute that its finished goods had been exported and input services had been used. It was immaterial that there was time lag between the payment of Service Tax on the input service and the claim for refund of the same. There was no finding in that case by the lower authorities that the refund claimed was not of accumulated of similar credit.
6.1 It is submitted that the assessee pays for the input services received after a couple of months when the invoices are received. Credit is taken after a lapse of time of receipt of the services. He relies on clarification issued by the CBEC vide Circular No.120/01/2010-ST dated 19.1.2010, where, in paragraph 3.3, it was clarified that an exporter could claim refund of credit of input services and credit of inputs applying the formula indicated at Sl. No.5 of the Appendix to the Notification. It is argued that as per this clarification, refund has to be given as per the ratio of export turnover to the total turnover in the period in respect of which the claim is made. As per the clarification, credit could be carried over to subsequent period and the refund will be regulated by the turnover particulars relatable to the period for which the claim is made. It is argued that the impugned order is therefore consistent with the clarification issued by the CBEC.
7. I have carefully considered the case records and the submissions made by both sides. The ground raised to assail the impugned order is that it had allowed refund of accumulated input service credit which did not pertain to the goods exported during the periods for which the claims were made. I find that this aspect has been clarified by CBEC in para 3.3 of Circular No.120/01/2010-ST dated 19.1.2010, which is reproduced below.
3.3?Quarterly refund claims [para 2(d) above] :
As regards the quarterly filing of refund claims and its applicability, since no bar is provided in the notification, there should not be any objection in allowing refund of credit of the past period in subsequent quarters. It is possible that during certain quarters, there may not be any exports and therefore the exporter does not file any claim. However, he receives inputs/input services during this period. To illustrate, an exporter may avail of Rs. 1 crore as input credit in the April-June quarter. However, no exports may be made in this quarter, so no refund is claimed. The input credit is thus carried over to the July-September quarter, when exports of Rs. 50 lakh and domestic clearances of Rs. 25 lakh are made. The exporter should be permitted a refund of Rs. 66 lakh (as his export turnover is 66% of the total turnover in the quarter) from the Cenvat credit of Rs. 1 crore availed in April-June quarter. The illustration prescribed under para 5 of the Appendix to the notification should be viewed in this light. However, in case of service providers exporting 100% of their services, such disputes should not arise and refund of Cenvat credit, irrespective of when he has taken the credit, should be granted if otherwise in order. Such exporters may be asked to file a declaration to the effect that they are exporting 100% of their services, and, only if it is noticed subsequently that the exporter had provided services domestically, the proportional refund to such extent can be demanded from him. There is no dispute that the claims are consistent with the clarification. I also find that in assessees own case this Tribunal had sustained a similar order of the Commissioner (A) and had followed the reasoning reflected in the above extract of the CBEC Circular.
8. As regards the admissibility to credit covered by photocopies of the documents and the documents which did not indicate the recipient of the service as the respondent, I hold that credit cannot be allowed against photocopies of documents which are not prescribed under Rule 9 of CCR. As regards the challenge to the admissibility of credit against documents raised on the office of the respondents at Bangalore, I hold that the assessee has to satisfy the authorities that the documents really related to the services received by the respondents. As regards the entitlement of credit against documents in the name of Passage Cargo Pvt. Ltd. on account of M/s. Chamundi Textiles Ltd., as well as certain services, I find that the dispute is covered in favour of the assessee by the Tribunals order noted surpa. The Ace Techniks (supra) was considered by the Tribunal and found to be in a case of claim for refund where the inputs were lying unutilized. The ratio did not apply to the case on hand.
9. The admissibility to credit in dispute for the reason that the documents are not addressed to the respondents is remanded to the Original Authority for examination afresh. The appeals filed by the revenue are disposed.
(Pronounced and dictated in open Court) (P. KARTHIKEYAN) Member (T) /rv/ 2