Custom, Excise & Service Tax Tribunal
Kansal Nerolac Paints Ltd vs Delhi-Iii on 21 March, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 55951 of 2013
[Arising out of Order-in-Original No. 115-118/SA/CCE/2012 dated 20.11.2012
passed by the Commissioner of Central Excise, Delhi-III, Gurgaon]
Kansal Nerolac Paints Ltd ......Appellant
Plot No. 36, Sector 7,
Fisidc Growth Centre, Bawal,
Rewari, Haryana
VERSUS
Commissioner of Central Excise, ......Respondent
Delhi-III Plot No. 36-37, Sector 32, Gurgaon, Haryana 122021 APPEARANCE:
Present for the Appellant: Ms. Krati Singh, Advocate Ms. Shreya Khunteta, Advocate Present for the Respondent: Sh. Pawan Kumar (Asst. Commr.), AR CORAM:
HON'BLE Sh. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60119/2024 DATE OF HEARING: 13.03.2024 DATE OF DECISION: 21.03.2024 PER : S. S. GARG The present appeal is directed against the impugned order dated 20.11.2012 passed by the Commissioner of Central Excise, Delhi-III, Gurgaon, whereby the learned Commissioner has denied the Cenvat Credit on various input services to the appellant under
2 E/55951/2013 Rule 14 of the Cenvat Credit Rules, 2004 (hereinafter referred to as the 'CCR') and also demanded the interest under Section 11AA of the Central Excise Act, 1944 (hereinafter referred to as the 'Act') and imposed penalty under Rule 15 of the CCR read with Section 11AC of the Act.
2. Briefly stated facts of the case are that the appellant is engaged in the manufacture of paints, emulsions and varnishes falling under Chapter Heading 32 and 38 of the Central Excise Tariff Act, 1985. During the period from January, 2006 to February, 2011, the head office of the appellant in Mumbai which was registered as Input Service Distributor ('ISD'), distributed the credit in respect of courier service, clearing and forwarding service, mandap keeper service, event management and cargo handling service to the appellant. The appellant was also availing Cenvat Credit of service tax paid on various input services such as rent a cab service, courier service, construction service, pest control service, drinking water service, testing service, clearing & forwarding agent service, event management service etc on the ground that the same were used in or in relation to manufacturing of such excisable products. Audit of the appellant's unit was conducted and during the audit, it was observed that the credit availed by the appellant in respect of various input services as mentioned above are ineligible as the said services do not fall within the purview of 'input services' as defied under Rule 2(l) of CCR. Consequently, various show cause notices for the relevant period were issued to the appellant proposing to deny 3 E/55951/2013 Cenvat Credit amounting Rs.1,36,15,142/- availed by the appellant in respect of the above mentioned services on the ground that the said services do not qualify as 'input services' under Rule 2(l) of the CCR. The appellant filed detailed reply to the show cause notices and after following the due process, the learned Commissioner vide the impugned order dropped the demand for recovery of Cenvat Credit in respect of water testing service, repairs and maintenance service (telephone), courier service (Bawal plant) and pest control service; however, the demand for balance Cenvat Credit amounting Rs.1,34,40,493/- was confirmed along with applicable interest and penalty. The learned Commissioner disallowed the credit and confirmed the demand on the ground that the said services were not used in manufacture or in relation to manufacture of the final products. Further, certain services were used by the head office of the appellant which is an ISD and not by the appellant's plant. The details of various input services on which the demand has been confirmed by the learned Commissioner are as follows:
Demand Amount (Rs) Period
C&F (H.O.) 1,11,95,172 January 2006 to March 2010
Taxi, rent a cab 8,59,281 220102010
January 2006 to February 2011
Courier (H.O) 4,21,900 January 2006 to March 2010
Catering 3,58,550 April 2009 to November 2010
Construction Service 2,74,759 January 2006 to February 2011
Event Management (H.O.) 1,01,133 January 2006 to March 2010
Cargo Handling (H.O.) 1,56,568 January 2006 to March 2010
Mandap Keeper 73,130 January 2006 to March 2010
Aggrieved by the said impugned order, the appellant has preferred the present appeal.
3. Heard both the parties and perused the records.
4 E/55951/2013 4.1 The learned Counsel for the appellant submits that the impugned order is bad in law and is liable to be set aside, as the same has been passed without properly appreciating the facts and the law and binding judicial precedents on the identical issue. 4.2 She further submits that the impugned services received by the appellant are 'input services' and the same have been used in relation to manufacture of final products and clearance of final products from/upto the place of removal. She further submits that the Cenvat Credit has been wrongly denied on the impugned services on account of lack of nexus between the service and the manufacture of final products.
4.3 She further submits that 'input service' has been defined under Rule 2(l) of the CCR and during the relevant period, the definition of 'input service' can be divided into two parts:
a) Services which are used by the manufacturer whether directly or indirectly, in relation to the manufacture of the final products and clearance of final products from/upto the place of removal;
b) Inclusive part of the definition which includes services used in relation to activities related to business and other services.
4.4 She also submits that the services, on which Cenvat credit has been availed during the relevant period, are used in relation to the manufacturing of the final products and clearance of final products from/upto the place of removal and hence, the said services are covered under the first part of the definition itself.
5 E/55951/2013 4.5 She further submits that the use of the phrase 'in relation to' widens the definition of the input services and the inclusive part of the definition specifically covers the activities relating to business i.e. any service in relation to business of manufacturing of final products would be covered within the ambit of the inclusive part of the definition.
4.6 The learned Counsel, thereafter, took each service separately to justify that the same qualify as 'input service'. Construction Services 4.7 As regards the denial of the Cenvat Credit on construction services, the learned Counsel submits that the learned Commissioner has denied the Cenvat Credit on construction services on the ground that the services received by the appellant are for the purpose of construction of immovable property which is neither a taxable service nor excisable goods. She further submits that the appellant availed the Cenvat Credit in respect of construction services used for construction of the manufacturing plant without which the core business cannot be conducted. The definition of 'input service' is wide enough to cover every input service used by the manufacturer directly or indirectly in relation to manufacture of final products. The construction service received by the appellant for construction of premises is directly or indirectly related in manufacture of final products. She also submits that there is no condition that credit for input services which result in the creation of an immovable property are not available. She also refers to the 'inclusive' part of the definition of 'input service' which 6 E/55951/2013 contains a list of services which specifically provides for the services used in relation to setting up, modernization, renovation of premises of provider of output service or any office relating to such premises. She also submits that the services used by the appellant in setting up of the factory are specifically included in the definition of 'input service' and thus, the credit is allowable. She also submits that construction services were excluded from the definition of 'input service' w.e.f. 01.04.2011, whereas in the present case, the credit in dispute is for the period from January 2006 to February 2011 and the credit in respect of construction services is allowable for the said period. In support of her submission, she relies on the following case laws:
a) M/s Rico Auto Industries Ltd. vs. Commissioner of CE, Delhi-III - 2023 (5) TMI 601 - CESTAT Chandigarh
b) Commissioner of CE, Delhi-III vs. M/s. Bellsonica Auto Components India P. Ltd. - 2015 (40) S.T.R. 41 (P & H)
c) Commissioner of Central GST, Gurgaon vs. M/s. DLF -
2023 (70) G.S.T.L 237 (P&H)
d) Carrier Airconditioning & Refrigeration Ltd vs. C.C.E., Delhi-IV - 2016 (41) S.T.R. 824 (Tri. - Chan.) Rent a cab service 4.8 The Cenvat Credit in respect of Rent-a-cab service has been denied on the ground that the said services are not used in relation to manufacture of final products and also, the cost for the same has been recovered from the employees. In this regard, she submits that rent-a-cab service has been availed to provide conveyance facilities 7 E/55951/2013 to the employees for visiting the offices of various authorities like Income Tax Department, Excise Department, VAT Department etc for official work for complying statutory requirements. For this purpose, hiring the cabs is necessary for smooth functioning of the business. Therefore, rent-a-cab service is an 'input service' as the same qualifies as 'activity relating to business' of the appellant. In support of her submission, she relies on the following case laws:
a) Commissioner of CE, Delhi-III vs. Maruti Suzuki India Ltd - 2017 (49) S.T.R. 261 (P & H)
b) Microsoft India (R&D) Pvt Ltd. vs. Commissioner of CE & ST, Bangalore - 2022 (56) G.S.T.L. 29 (Tri.- Bang)
c) Commissioner of C. Ex., Cus. & S.T., Vadodara vs. Transpek Industry Ltd. - 2018 (12) G.S.T.L. 29 (Guj.)
d) Commissioner of CE, Bangalore vs. Interplex Electronics India Pvt Ltd. - 2015 (39) S.T.R. 578 (Kar.)
e) Principal Commissioner vs. Essar Oil Ltd - 2016 (41) S.T.R. 389 (Guj.) 4.9 She also submits that the appellant has merely recovered 20% of the cost of transport facility from the employees and borne 80% of the cost of transport which forms part of the manufacturing cost. The appellant had reversed the credit along with interest pursuant to the 20% cost recovered from the employees. Therefore, the appellant is entitled to the credit of the 80% of the cost of transport borne by them.
8 E/55951/2013 Outdoor Catering Services (Canteen Services) 4.10 The Cenvat Credit on outdoor catering services (canteen services) has been denied on the ground that the same do not qualify as 'input service' as it has no relation to manufacturing of final products and further, the charges for the same are recovered from the employees. The learned Counsel submits that the appellant provides the canteen services to comply with the statutory requirement under Section 46 of the Factories Act, 1948 and without complying the same, the appellant cannot get permission to operate the factory. Therefore, outdoor catering services qualify as 'input services' as the same are connected with manufacturing activity and used indirectly in manufacture of final products by way of enhancing the productivity of the appellant and these services are integral for carrying out the business of the appellant and same qualify as an 'activity relating to business' of the appellant. In this regard, reliance is placed on the following judgments:
a) Commissioner of CE vs. Ultratech Cement - 2010 (20) STR 577 (Bom.) affirmed by the Supreme Court in Commissioner vs. Ultratech Cement Ltd. - 2014 (36) S.T.R. J70 (S.C.).
b) Microsoft India (R&D) Pvt. Ltd. vs. Commissioner of CE & ST, Bangalore - 2022 (56) G.S.T.L. 29 (Tri.- Bang)
c) Commissioner of Central Excise, Bangalore-III vs. Stanzen Toyotetsu India (P) Ltd. - 2011 (23) S.T.R. 444 (Kar.)
d) Commr. of C.Ex. & S.T., LTU, Bangalore vs. Ace Designers Ltd. - 2012 (26) S.T.R. 193 (Kar.) 9 E/55951/2013 She also submits that the appellant had merely recovered 30% of the bill amount paid to outdoor caterer and balance 70 % is the cost to the company which forms part of the manufacturing cost. The appellant had reversed the credit with interest pursuant to the 30% cost recovered from the employees. Therefore, the appellant is entitled to the credit of the 70% of the cost of outdoor catering borne by them.
Services used by the Head Office (ISD) 4.11 The learned Counsel submits that the learned Commissioner
has denied the Cenvat Credit in respect of courier service, mandap keeper service, event management, cargo handling and C&F services on the ground that the same have been used by the head office of the appellant and not in relation to manufacturing activities of the appellant. Therefore, the Cenvat Credit distributed by the ISD to the appellant is not admissible. In this regard, she submits that during the relevant period, there was no condition prescribed under Rule 7 of the CCR for distribution of the credit by an ISD pertaining to the services, which were attributable to the particular unit. The said condition was made effective from 01.04.2012 i.e. after the period involved in the instant case. In support of her submission, she relies on the following case-laws:
a) Commissioner of C. Ex., Bangalore-I vs. Ecof Industries Pvt. Ltd. - 2011 (271) E.L.T. 58 (Kar.)
b) ITC Limited vs. Commissioner of Central Excise, Bangalore-II - 2016 (46) S.T.R. 73 (Tri. - Bang.) [affirmed by the Karnataka High Court - 2021 (50) G.S.T.L. 339 (Kar.)] 10 E/55951/2013
c) Pricol Ltd. vs. Commissioner of GST & C.Ex., Coimbatore - 2019 (25) G.S.T.L. 215 (Tri. - Chennai)
d) Pfizer Ltd. CCE & ST (LTU), Mumbai - 2022 (66) G.S.T.L. 122 (Tri. - Mumbai) Courier Services 4.12 The learned Counsel submits that the learned Commissioner has denied the Cenvat Credit on courier services on the ground that the said services were used by the head office of the appellant and not used in relation to the manufacturing activities of the appellant's plant.
In this regard, she submits that the said services of courier were used for correspondence with other units of the appellant and for the purpose other than related to manufacturing activities and clearance of the products. Further, she submits that the definition of 'input service' during the relevant period specifically covers 'activities relating to business'. Therefore, the Cenvat Credit in respect of courier services is allowable. In support of her submission, she places reliance on the following case-laws:
a) Commissioner of Central Excise, Customs & Service Tax, Vapi vs. M/s Apar Industries Ltd. - 2011 (23) S.T.R. J194 (Guj.)
b) RMZ Infotech Pvt. Ltd. vs. Commr. of Central Tax, Bengaluru East - 2022 (64) G.S.T.L. 599 (Tri. -
Bang.)
c) Raymond UCO Denim Pvt Ltd. vs. Commissioner of C.Ex., Nagpur - 2020 (33) G.S.T.L. 207 (Tri. -
Mumbai)
11 E/55951/2013
Mandap Keeper Services
4.13 As regards mandap keeper services, the learned Counsel
submits that the service of mandap keeper was availed during the Annual General Meeting, new product launch, press meet etc and the said service is used for activities relating to business and thus qualifies as 'input service'. Further, she submits that conducting an Annual General Meeting is a statutory requirement and holding press meeting and launching new products are integral to the business of the appellant. Hence, the said activities are directly/indirectly connected to the manufacturing of the final products. In support of her submission, she places reliance on the following case-laws:
a) Commissioner of Central Excise, Delhi-III vs. Maruti Suzuki India Ltd. - 2017 (49) S.T.R. 261 (P & H)
b) Microsoft India (R&D) Pvt. Ltd. vs. Commissioner of CE & ST, Bangalore - 2022 (56) G.S.T.L. 29 (Tri.- Bang) Event Management Services 4.14 As regards event management services, the Cenvat Credit has been denied on the ground that the said services have no relation with the manufacturing activities of the appellant and the same cannot be attributable to the appellant. The learned Counsel justifies the expenses on event management services, which are used for promotion and launching of products in the event and are essential for promotion of products of the Company. She further submits that even if the services are used by the head office, the credit of the same is allowable. Further, during the relevant period, the credit could have
12 E/55951/2013 been distributed to any unit under Rule 7 of the CCR. The same has been held in the following decisions:
a) Axis Bank Ltd. vs. Commissioner of Service Tax Mumbai and vice versa - 2017 (3) G.S.T.L. 427 (Tri. Mumbai) [affirmed by the Bombay High Court - 2019 (369) E.L.T. 583 (Bom.)]
b) Microsoft India (R & D) Pvt. Ltd. (Supra)
c) Honda Motorcycle & Scooter (I) Pvt. Ltd. vs. Commr. of C. Ex., Delhi-III - 2016 (45) S.T.R. 397 (Tri. - Chan.) Clearing & Forwarding and Cargo Handling Services 4.15 As regards C&F services and Cargo Handling services, the Cenvat Credit has been availed pursuant to the ISD invoice issued by the head office of appellant. In the impugned order, the learned Commissioner denied the credit on the ground that the said services were used by the head office beyond the place of removal i.e. the factory gate of the appellant's unit. Also, the said services pertain to post manufacture activities and hence, the credit is not allowable. To rebut the finding of the learned Commissioner, the learned Counsel submits that place of removal is defined under Section 4(3)(c) of the Act, which inter alia means depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance factory from where the goods are removed.
In the instant case, services of C&F are used for the purpose of unloading, storing, accounting and thereafter dispatch of the goods to the specified dealers through approved transporters by the company.
13 E/55951/2013 Further, the goods are unloaded and stored at the godowns of the company by C&F Agent after clearance from factory, for further despatch to the distributors from the godowns through approved transporters as per direction of the company. She further submits that ultimate risk with respect to the damage of the goods in transit lies with the appellant and the appellant is only responsible to get the goods insured, which is clearly evident from purchase orders raised by various customers on the appellant. Copies of some of the purchase orders are annexed with the appeal paper-book. She also submits that the invoices of the transporters are directly settled by the company as per the agreed terms upon production of records and acknowledged invoices by C&F. Therefore, the services of C&F are limited till the godowns only, for which the service tax is charged by the C&F agent by raising the invoices on the company in accordance with the terms of the agreement.
4.16 The learned Counsel relies upon the Circular No. 97/8/2007-S.T. dated 23-08-2007 which further clarified that following conditions to be satisfied in situations where manufacturer can avail credit in respect of expenses incurred in relation to the sale of the excisable goods upto place of removal:
(i) The ownership of the goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his doorstep.
(ii) The seller bore the risk of loss of or damage to the goods during transit to the destination; and 14 E/55951/2013
(iii) The freight charges were an integral part of the goods 4.17 She further submits that in the present case, the appellant satisfied all these three conditions. The ownership and risk of the goods remains with the appellant till the delivery of goods at the customer's premises. This is also evident from the purchase orders.
This issue has also been settled in favour of the assessee in the following judgments:
a) Commissioner of Central Excise vs. M/s Manglam Cement Ltd. - 2018 (9) G.S.T.L. 17 (Raj.), maintained by the Supreme Court in Commissioner vs. Manglam Cement Ltd. - 2018 (16) G.S.T.L. J168 (S.C.)]
b) M/s JSW Steel Ltd vs. Commissioner of Central Excise, Customs and Service Tax, Belgaum (Vice- Versa) - 2021 (12) TMI 381 - CESTAT Bangalore
c) Commissioner of Central Excise, Jaipur vs. M/s Shree Cement Ltd. - 2017 (11) TMI 1408 - Rajasthan High Court
d) Ambuja Cements Ltd. vs. Union Of India - 2009 (236) E.L.T. 431 (P & H)
e) Sundaram Clayton Ltd. vs. Commissioner of CE, Chennai-II - 2016 (6) TMI 161 - CESTAT Chennai 4.18 Further, the learned Counsel submits that demand has been confirmed wrongly by invoking the extended period of limitation because in the impugned order, nothing has been brought out to show any positive act of suppression on part of the appellant and the appellant was under bonafide belief that they were rightfully availing the credit and they were regularly filing the returns and they were 15 E/55951/2013 subjected to audit conducted by the Department prior to the issuance of the show cause notices. Therefore, Department was already aware of the fact about availment of Cenvat Credit of tax paid on input services and moreover, the issue involves interpretation of the complex provisions. Therefore, extended period of limitation cannot be invoked as held in the following decisions:
a) Mahanagar Telephone Nigam Ltd. vs. Union of India and Ors. - 2023-TIOL-407-HC-DEL-ST
b) Commissioner of CE, Customs and Service Tax vs. M/s Reliance Industries Ltd. - 2023-TIOL-94-SC-CX 4.19 Further, she submits that the demand of interest and penalty is not sustainable because the demand of duty itself is not sustainable.
5. On the other hand, the learned DR for the Revenue reiterated the findings of the impugned order.
6. We have considered the submissions made by both the parties and also perused the various decisions relied upon by the appellant as well as the DR in support of their submissions. We find that in the present case, the demand has been confirmed on the ground that the appellant has wrongly availed the Cenvat Credit in respect of various input services, which do not fall within the definition of 'input service' as defined in Rule 2(l) of the CCR and further, the said services have no nexus with the manufacture of final products.
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7. Before we consider the nature of each service, we think, it would be appropriate to reproduce the definition of 'input service' during the relevant period, which is reproduced herein below:
"Before 01.04.2008 "input service" means any service, -
(i) used by a provider of output service for providing an output service, or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernisation, 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 upto 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 upto the place of removal"
From 01.04.2008 to 31.03.2011 "input service" means any service, -
(i) used by a provider of output service for providing an output service; or 17 E/55951/2013
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal and includes services used in relation to setting up, modernisation, 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 upto the place of removal, procurement of inputs, accounting, auditing. financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services; inward transportation of inputs or capital goods and outward transportation upto the place of removal"
Further, we find from the various decisions relied upon by the appellant that during the relevant period, the definition of 'input service' has been widely interpreted to include all the services which have been used directly or indirectly in or in relation to the business. We also find that the Department vide Notification No. 3/2011-CE dated 01.03.2011 amended the definition of 'input service' by introducing exclusion clauses, but the period of dispute in the present case is prior to the amendment in the definition of 'input service'.
8. Now, we will consider each and every service to find out whether the same falls under the definition of 'input service' and the appellant is entitled to Cenvat Credit of the same. 8.1 Construction Service : Cenvat Credit has been denied only on account of lack of nexus between the construction services and
18 E/55951/2013 manufacturing of the goods. In this regard, it is to be noted that the construction relates to the setting up of the factory which in turn, is directly used for manufacturing and is directly covers under the inclusive part of the definition of 'input service'. Moreover, during the relevant period, construction service was included in the definition of 'input service' and it is only after 01.04.2011 that it has been specifically excluded from it. It has been squarely covered by the ratio of the decisions relied upon by the appellant cited supra. Hence, by following the ratio of the said decisions, we hold that the construction service, during the relevant time, was within the definition of 'input service' and therefore, the appellant is entitled to Cenvat Credit of the same.
8.2 Rent a cab Service : In this regard, we find that Cenvat Credit has been denied only on the ground that this service is not used in relation to the manufacture of the product and the cost of the same has been recovered from the employees. Rent a cab service has been mainly used for official purposes and the same relates to the business of the appellant and is covered by the ratio of decisions cited supra. Here, we may note that a part of the cost of this service is recovered from the employees and as per the appellant, only 20% of it, is recovered from the employees and the same has been reversed along with interest and 80% is absorbed in the manufacturing cost. Accordingly, we hold that the appellant is entitled to avail 80% of the cost of this service and the Original Authority is directed to verify the quantum of Cenvat Credit reversed by the appellant as claimed by 19 E/55951/2013 them. On principle, we hold that the appellant is entitled to avail Cenvat Credit on this service as has been held so in the decisions relied upon by the appellant cited supra.
8.3 Outdoor Catering (Canteen) Service : Cenvat Credit has been denied on account of the fact that it is not related to the manufacture of the product and the same is recovered from the employees. In this regard, we find that it is a statutory requirement to provide this facility to the employees as required under the Factories Act and moreover, it enhances the productivity of the employees, which is indirectly related to the manufacture of the final products. This fact is also squarely covered by the decisions relied upon by the appellant cited supra in the favour of the appellant. As regards the submissions of the appellant that they have only recovered 30% of its cost from the employees and the same has been reversed along with interest, this fact of reversal needs to be verified by the Original Authority and for this purpose, the case is remanded back to the Adjudicating Authority to verify the same. 8.4 Services used by the Head Office (ISD) : Cenvat Credit in respect of courier service, mandap keeper service, event management, cargo handling and C&F service has been denied on the ground that the same is not in relation to manufacturing activities of the appellant and hence, the same is not admissible. This issue has also been considered by the various benches of this Tribunal and the Hon'ble Karnataka High Court. It is pertinent to refer to the decision of the Hon'ble Karnataka High Court in the case of CCE, Bangalore-I 20 E/55951/2013 vs Ecof Industries Pvt Ltd (supra), wherein the Hon'ble High Court after considering the definition of 'input service' has held in para 8 to para 10 as under:
"8. It is in this context, the definition of input service distributor makes it clear that a manufacturer or a producer of a final product or a provider of output service may have more than one unit and may be distributed in various parts of the country. It is in this background the definition of service distributor is defined as office of the manufacturer or producer of a final product or provider of output service which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be. Therefore, the law mandates that the manufacturer who wants to avail the benefit of this service tax if he has more than one unit he should also get registered himself as a service provider and then, he would be able to collect all the input service tax paid in all its units and accumulate them at its head office and distribute the said credit to its various units. At the time of distribution, the manner of distribution is provided in Rule 7 which reads as under :-
"Manner of Rule 7. distribution of credit by input service distributor. -- The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely :-
21 E/55951/2013
(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon, or
(b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed."
Therefore, only two limitations are put for the distribution of credit by an input service distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services.
9. In fact, the Board has issued a circular clarifying in this regard, which is extracted by the tribunal at para 7 which reads as under :-
"Para 7. Para 2.3 of the Master Circular referred to by the ld. Advocate reads as under :-
"2.3 An „Input service distributor‟ is an office or establishment of a manufacturer of excisable goods or provider of taxable service. It receives tax paid invoices/bills of input services procured (on which Cenvat credits can be taken) and distributes such credits to its units providing taxable services or manufacturing excisable goods. The distribution of credit is subject to the conditions that - (a) the credit distributed against an eligible document shall not exceed the amount of service tax paid thereon, and (b) credit of service tax attributable to services used in a unit either exclusively manufacturing exempted goods or exclusively providing exempted services shall not be distributed. An input service distributor is required (under Section 69 of the Act, read with Notification No. 26/2005-S.T.) to take a separate registration."
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10. Therefore, these are the only two limitations, which are imposed in Rule 7 preventing the manufacturer from utilizing the CENVAT credit, otherwise, he is entitled to the said credit. Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law. It is in this context, the manufacturer is expected to register himself as a input service distributor and thereafter, he is entitled to distribution of credit of such input in the manner prescribed under law. Therefore, the order passed by the tribunal is legal and valid and does not suffer from any legal infirmity and does not call for any interference and therefore it is dismissed."
Similarly, the Tribunal in the case of ITC Limited vs CCE, Bangalore-II (supra) after following the decision of the Hon'ble Karnataka High Court in Ecof Industries Pvt Ltd (supra)'s case, has held that the assessee is entitled to Cenvat Credit of service tax as distributed by the ISD. Therefore, this issue is also held in the favour of the appellant. Similarly, courier service, mandap keeper service and event management service have also been held to be 'input service' and rightly distributed by the ISD in the cases relied upon by the appellant cited supra. Hence, we hold that the appellant is entitled to Cenvat Credit with regard to these services. 8.5 C&F and Cargo Handling Service : As regards C&F and Cargo Handling Service, we find that the learned Commissioner in the impugned order has denied the Cenvat Credit on the main ground that said services were used by the head office beyond the place of removal i.e. the factory gate of the appellant's unit and secondly, the 23 E/55951/2013 said services pertain to post manufacture activities and therefore, Cenvat Credit is not permissible. In this regard, we may note that the definition of 'place of removal' as provided under Section 4(3)(c) of the Act inter alia includes depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory. Further, we find that C&F and Cargo services are used for the purpose of unloading, storing, accounting and thereafter dispatch of the goods to the specified dealers on 'FOR' basis. In this regard, the learned Counsel for the appellant also referred to certain invoices issued by the appellant to prove that all the goods were supplied 'FOR' upto the place of buyer's premises, entire risk is borne by the appellant and therefore, all the expenses incurred by the C&F agent, on which service tax is charged, will fall within the definition of 'input service'. We may also note that the decisions relied upon by the learned Counsel for the appellant are squarely applicable in the facts and circumstances of this case and we hold that the appellant is entitled to Cenvat Credit of service tax regarding C&F expenses.
9. Further, as regards invocation of extended period of limitation, we find that the Revenue has not brought anything on record to satisfy the ingredient for invoking the extended period of limitation as the appellant was subjected to regular audit and the Department was aware of the fact that the appellant is availing Cenvat Credit of tax paid on input service and therefore, substantial demand in this case is barred by limitation.
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10. In view of our discussion above and by following the ratios of the decisions cited supra, we are of the considered opinion that the impugned order is not sustainable in law and therefore, we set aside the same. We may also note that with regard to the services of 'Rent a cab service' and 'Outdoor catering service' the Original Authority will verify the quantum of reversal made by the appellant; and for this limited purpose, the matter is remanded back to the Original Authority.
11. In the result, the appeal is disposed of in above terms.
(Order pronounced in the court on 21.03.2024) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) RA_Saifi