Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs M/S Hindustan Coca Cola Beverages Pvt ... on 2 July, 2010
THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH, WTC BUILDING, FKCCI COMPLX, K.G. ROAD, BANGALORE Date of hearing: 02.07.2010 Date of decision: 02.07.2010 Central Excise Appeals No: 792, 855 & 856/2009 (Arising out of Orders-in-Appeal No19/2009(G) CE dated 11.05.2009, 20/2009(G) CE, 21/2009(G) CE dated 29.05.2009, passed by the Commissioner of Customs & Central Excise, (Appeals), Guntur) For approval and signature Honble Mr M.V. Ravindran, 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? No 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules 1982 for publication in any authoritative report or not? No 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 The Commissioner of Central Excise Guntur ..Appellants Vs M/s Hindustan Coca Cola Beverages Pvt Ltd., .Respondents
Present for the Assessee : Mr Jai Kumar , Adv Present for the Revenue : Mr D.P. Nagendra Kumar, JCDR Coram: Honble Mr M.V. Ravindran, Member (Judicial) ORDER No______________________ PER SHRI M.V. RAVINDRAN These three appeals are filed by the revenue against orders -in-appeal No 19/2009(G) CE dated 11.05.2009, 20/2009(G) CE and 21/2009(G) CE dated 29.05.2009.
2. The issue involved in these three appeals being the same, they are being disposed of by a common order.
3. Learned Commissioner (appeals) in all these three cases has set aside the orders-in-original which confirmed the demand of duty raised by the show cause notices for irregular availment of cenvat credit of the service tax paid on the following services
1) recruitment of staff services
2) banking services
3) repair and labour charges of the vehicles
4. The issue involved in this cases is whether the above services would fall under the definition of input services to be eligible for availing cenvat credit of the service tax paid.
5. Learned Commissioner (Appeals) while setting aside the order-in-original has recorded the following finding.
..I am of the firm view that, as long as the service availed by the manufacturer relates to his business and as long as the service is of a kind mentioned in the inclusive portion of the definition of input service under the Cenvat Credit Rules, 2004, there should be no doubt as to the eligibility of the appellants to the credit of service tax paid on such service. There is absolutely no necessity whatsoever that the input service should be used directly in the manufacturing activity. This was never the contemplation in the definition of the input service referred to. Hence, I have no hesitation in holding that the interpretation of the adjudicating authority has no legal basis and hence his order is liable to be set aside. Case laws apart, I have no hesitation whatsoever, that credit in question, is allowable and that the impugned order and interpretation of the adjudicating authority therein, needs to be set aside, in unequivocal terms. In consequence, I order as below.
6. Learned JCDR would reiterate the grounds of appeal filed by the revenue. I would like to reproduce the grounds of appeal.
The term input service under the Cenvat Credit Rules, 2004. Rule 2(I)(ii) is defined as follows:
(i) used by a provider of taxable service for providing an output service, or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, up to the place of removal and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal. The above definition is in two parts: the first part gives the basic definition of input service while the second is an inclusive one that specifically mentions certain services to be included within the ambit of input services. The basic definition limits the scope of input services to those whose use has a nexus directly or indirectly, in or in relation to, manufacture and clearance of final products. But, in the instant case the use of the service of recruitment agency services whose services were utilized in providing staff at different places other than the manufacturing plant at Atmakuru, services provided by M/s Sairam Enterprises for picking up DDs from the banks and services received from M/s Padmavathi Engineering Works towards repairs and maintenance of vehicles cannot be said to pertain to or be concerned, directly or indirectly with manufacture and clearance even after applying the concept of liberal interpretation. Hence, the credit on service of recruitment agency services whose services were utilized in providing staff at different places other than the manufacturing plant at Atmakuru, business auxiliary/support service provided by M/s Sairam Enterprises for picking up DDs from the banks and services received from M/s Padmavathi Engineering Works towards repairs and maintenance of vehicles is not admissible.
The second leg of the definition is an inclusive one. The inclusive definition is a well recognized device to enlarge the meaning of the word defined. It expands the meaning in the basic definition. The word includes is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include.
Further, is the definition Oven in Rule 2(l)(ii), the inclusive part of the definition expands the scope of input service as given in the basic definition by bringing within its ambit, services which would not normally get covered by. the main definition. A perusal of the services in the inclusive part of the definition indicates that they have no nexus with the manufacture, storage or sale of the final product. It is true that one would not, unless forced, even when the definition is in the form includes, carry the extension beyond borderline or doubtful cases. Even when an extended definition is used, it is necessary to draw a line to exclude categories obviously not intended to be included. A service no mentioned in the extended definition has to partake of the characteristics common to the other services specifically mentioned, in order to become an input service as per the extended definition. As seen from the list of input services motioned in the definition mentioned above, the common thread running through all the services specifically included in the extended definition is that each of these is linked to the manufacture, storage or sale of the final product. Service of recruitment agency services whose services were utilized in providing staff at different places other than the manufacturing plant at Atmakuru, business auxiliary/support services provided by M/s Sairam Enterprises for picking up DDs from the banks and services received from M/s Padmavathi Engineering Works towards repairs and maintenance of vehicles do not have a nexus with the manufacture, sale or of the final product and therefore such services cannot be considered to be input services even as per the extended definition. As such, credit on the impugned services is not admissible. Therefore, the decision of Commissioner (Appeals) is not legally tenable.
7. Learned counsel would submit that the Honble High Court of Mumbai in the assessees own sister concerns case in the case of Cocacola India Pvt Ltd., Vs CCE [2009(242) ELT 168 (Bom) has laid down the principle for eligibility to service tax credit on an input credit. He would draw my attention to paragraphs 38 & 39.
8. Considered the submissions made at length by both sides and perused the records. Learned Commissioner (Appeals) has allowed the cenvat credit relying upon various decisions of the Tribunal. At the same I find that the in the case of appellants sister concern Honble High Court of Mumbai has laid down the principle for eligibility for availment of cenvat credit of the service tax paid on input services. I may reproduce the said ratio:
38. Service tax therefore, paid on expenditure incurred by the assessee on advertisements sales promotion, market research will have to be allowed as input stage credit more particularly if the same forms a part of the price of final product of the assessee on which excise duty is paid. In other words, credit of input service must be allowed on expenditure incurred by the assessee which form a part of the assessable value of the final product. If the above is not done, as sought to be done by the department in the present case, it will defeat the very basis and genesis Cenvat i.e. value added tax.
39. The definition of input service which has been reproduced earlier, can be effectively divided into the following five categories, in so far as a manufacturer is concerned :
(i) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products
(ii) Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal
(iii) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,
(iv) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,
(v) Services used in relation to activities relating to business and outward transportation upto the place of removal.
Each limb of the definition of input service can be considered as an independent benefit or concession exemption. If an assessee can satisfy any one of the limbs of the above benefit, exemption or concession, then credit of the input service would be available. This would be so even if the assessee does not satisfy other limb/limbs of the above definition. To illustrate, input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal. This would follow from the observation of the Supreme Court in Kerala State Co-operative Marketing Federation Ltd. and Ors. v. Commissioner of Income-tax - 1998 (5) SCC 48, which is as under :
7. We may notice that the provision is introduced with a view to encouraging and promoting growth of co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a co-operative society is exempt from tax what has to be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption. It can be seen from the above reproduced ratio that the issue in hand before me is squarely covered by the decision of the Honble High Court of Bombay. It is undisputed that the assessee have received the said services and discharged the service tax paid on the above services to their service provider. I do not find any merit in the appeal filed by the revenue and accordingly all these three appeals are rejected.
(Pronounced and dictated in open Court) (M.V. RAVINDRAN) Member (Judicial) /pnr/