Custom, Excise & Service Tax Tribunal
M/S. India Trimmings Pvt. Ltd vs Cce, Coimbatore on 16 November, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH, CHENNAI Appeal No. E/41887/2014 (Arising out of Order in Appeal No. 94/2014 dated 22.07.2014, passed by the Commissioner of Central Excise (Appeals), Coimbatore) M/s. India Trimmings Pvt. Ltd. Appellant Versus CCE, Coimbatore Respondent
Appearance Ms. Naveena D., Adv., For the Appellant Shri K.P. Muralidharan, AC (AR) For the Respondent/Assessee CORAM Honble Shri P.K. CHOUDHARY, Judicial Member FINAL ORDER No.: 41701 / 2015 Date of Hearing: 16.11.2015 Date of pronouncement:
The appellant filed this appeal against the Order of the Commissioner (Appeals) dated 24.07.2014.
2. The brief facts of the case are that M/s. India Trimmings Pvt. Ltd., 100% EOU rented new premises and at 3/142 Kovai Main Road, Annur (unit-II) and at Kumarapalayam Road, Kariyampalayam Village, Annur (unit-III), for their two units and incorporated all the three units as location of factory in their Green Card No. 1870/MEPZ dated 13.03.2009, issued by the Jt. Development Commissioner, MEPZ, Chennai and obtained in-bond manufacturing sanction order and license for Private Bonded Warehouse by the Dy. Commissioner of C.Excise vide C.No. VIII/48/24/2005-CUS dated 14.11.2005 and VIII/40/01/2008-CUS dated 08.04.2008 in respect of premises situated at No. 3/142 Kovai Road, opposite to KG Girl School and at No. 266/1-B, Kariyampalaym Village, Annur, respectively. The adjudicating authority held that the appellants were not eligible to avail the credit on input services for the premises at Unit-II and Unit-III and confirmed the demand along with interest and imposed equal amount of penalty on the appellants, for the period December,2007 to March, 2012. Aggrieved by this order, the appellants preferred appeal before the Commissioner (Appeals), who has upheld the order of the adjudicating authority. Hence, the present appeal.
3. The Ld. Counsel for the appellants, Ms. D. Naveena, Advocate, reiterated the grounds of appeal and submitted that the appellant company is 100% EOU and they were facing shortage of space in their existing Unit and therefore, they rented out two new premises for Unit-II and Unit-III and declared all three units as location of factory in their Green Card No. 1870/MEPZ dated 13.03.2009, valid upto 12.03.2014, issued by the Jt. Development Commissioner, MEPZ, Chennai and also obtained in-bond manufacturing sanction order and license for Private Bonded Warehouse by the Dy. Commissioner of C. Excise dated 14.11.2005 and 08.04.2008. She submits that materials are procured at Unit-I and removed to Unit-II and Unit-III for processing under Annexure-II, a prescribed document for removal of goods from 100% EOU. The goods processed at Unit-II and Unit-III are finally manufactured at Unit-I and exported therefrom. There is no clearance from Unit-II and Unit III. Therefore, the rent paid for the premises at Unit-II and Unit-II is input service consumed for the manufacture of goods from Unit-I. Input services are squarely covered by the definition of Rule 2(1) of the Cenvat Credit Rules, 2004 and credit should be allowed. She relied on the following case laws:-
1. National Engineering Industries Ltd. Vs. CCE, Jaipur 2012-TIOL-2053-CESTAT-DEL
2. M/s. Oracle Granito Ltd. Vs. CCE, Ahmedabad 2013-TIOL-822-CESTAT-AHM
3. CST, Delhi-III Vs. M/s. Eltek SGS Pvt. Ltd.
2013-TIOL-1868-CESTAT-Del.
4. HCL Comnet Systems & Services Ltd. Vs. CCE & ST Noida. - 2015 (39) STR 998 (Tti.-Del.)
4. The Ld. AR for the Revenue, Shri K.P. Muralidharan, AC, reiterated the findings of the Commissioner (Appeals) and submitted that it has been clearly established that the appellants have not received the services for their manufacturing premises as their services were received in relation to other premises where no manufacturing activities or clearance of excisable goods have been undertaken. Hence, it is evident that the service was neither received nor used in relation to manufacture of final products. The input service must have nexus with the process of manufacture.
5. Heard both sides. The relevant facts that arise for consideration are that the appellants are 100% EOU and are manufacturers of Ornamental Trimmings, Tassels, Tie backs etc. They are also having two more units viz., Unit-II and Unit-III. The appellants have taken credit of service tax paid under Renting of Immovable Property services on rental charges pertaining to the premises of Unit-II and Unit-III. Separate Central Excise registration has been obtained for the premises. I also find that the appellants have incorporated all the three units as location of factory in their Green Card No. 1870/MEPZ dated 13.03.2009. The raw materials are procured at Unit-I and removed to both the units for processing under Annexure-II, a prescribed document for removal of goods from 100% EOU. The goods processed at Unit-II and Unit-III are finally manufactured at Unit-I and exported to other countries. No clearance of the final products was undertaken from Unit-II and Unit-III and they have been filing Nil ER-2 returns. They have filed photocopy of the Green Card certificate, and also obtained in-bond manufacturing Sanction order and licence for Private Bonded Warehouse. It is not disputed that the premises have been taken on rent by the appellant for the purpose of process of intermediary goods before the manufacturing of final products at Unit-I. It is also not disputed that the service provider has discharged the service tax under the category of Renting of immovable property service. I find strong force in the contention raised by the Ld. Counsel that identical issue has been decided by the Tribunal in the case of CST, Delhi-III Vs. M/s. Eltek SGS Pvt. Ltd.(supra). I also find that in the OIO, it was held by the adjudicating authority that the appellant assessee was not entitled for the availment of cenvat credit on renting of immovable properties received and consumed by other Units and the same did not fall within the definition of input services under Rule 2 (1) of CVR, 2004. The adjudicating authority has denied the benefit only on the ground that the rented premises Unit-II and Unit-III were located at different places than that of the registered premises. The appellants have produced copies of the documents in support of their contention that the manufacturing activities were being undertaken at Unit-I.
6. Unit I, Unit-II and Unit-III share same legal entity, production processes and interlinked. Raw materials have been sent to Unit-II and Unit-III by Unit-I but for production of intermediate products and the intermediate products are received back by Unit-I for the manufacture of final products. Unit-II and Unit-III are exclusively producing the goods only for Unit-I. Without processing at Unit-II and Unit-III, final products cannot be manufactured at Unit-I. Therefore, renting of immovable property service is having direct nexus in the manufacture of goods at Unit-I. Rule 2 (1) of CCR, 2004, clearly mentions that service utilized in or in relation to manufacture of final products is eligible as input services. Hence, the benefit of cenvat credit on input services cannot be denied to the appellants. In view of the foregoing, I find that the appellant has made out the case in their favour and the impugned order is liable to be set aside and I do so. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Pronounced in open court on ____________) (P.K. CHOUDHARY) Judicial Member BB 1