Custom, Excise & Service Tax Tribunal
Adani Energy Ltd vs Service Tax - Ahmedabad on 15 March, 2022
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO.3
Service Tax Appeal No.259 of 2009
(Arising out of OIO-STC-26-O&A-COMMR-AHD-2008 dated 31/03/2009 passed by
Commissioner of Service Tax-SERVICE TAX - AHMEDABAD)
Adani Energy Ltd ........Appellant
7th & 8th Floor, Heritage Building,
B/H, Visnagar Bank, Near Usmanpura Cross Road,
AHMEDABAD, GUJARAT
VERSUS
C.S.T.-Service Tax - Ahmedabad .......Respondent
7 Th Floor, Central Excise Bhawan, Nr. Polytechnic CENTRAL EXCISE BHAVAN, AMBAWADI, AHMEDABAD, GUJARAT-380015 APPEARANCE:
Shri Hardik Modh, Advocate for the Appellant Shri J A Patel, Superintendent (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. P. ANJANI KUMAR Final Order No. A/ 10250 /2022 DATE OF HEARING: 16.11.2021 DATE OF DECISION: 15.03.2022 RAMESH NAIR The appeal is directed against Order-in-Original No. STC/26/O&A/Commr/AHD/2008 dated 31.03.2009 passed by the Commissioner of Service tax, Ahmedabad, whereby the Learned Commissioner upheld the disallowance of Cenvat Credit of Rs. 64,99,642/- allegedly wrongly availed during the period April 2006 to March 2007, recovery in cash of Service tax credit of Rs. 21,99,492/- wrongly utilized during the period April 2006 to October 2006 and recovery of Rs. 7,22,203/- short paid in the month March 2007 along with interest under Section 75 of the Act. He also imposed penalty under Section 76 of the Finance Act and under Rule 15(3) of Cenvat Credit Rules 2004.
1.1 The fact of the case is that the appellant during the relevant period engaged in three activities: (i) they transported the natural gas through pipeline to Customers of Gujarat State Petroleum Corporation Ltd. (GSPCL)
2|Page ST/259/2009 viz, M/s Arvind Mills, M/s. Arvind Intex etc. and paid service tax on the same under the category of "transportation of goods through pipeline". (ii) They Manufactured CNG from Natural Gas procured from GSPCL and paid appropriate Central Excise duty of the same (iii) Purchased the PNG from GSPCL which was transmitted through pipeline and thereby sold it to its customers(Trading Activity). The appellant are availing Cenvat Credit on Input service provided by the GSPCL which was used in above activities. On scrutiny of ST-3, Show cause notice was issued proposing denial of Cenvat credit attributed to other than output service and recovery of short payment of Service tax for the month of March 2007. The adjudicating authority confirmed the demand and imposed penalty. Aggrieved by the impugned order, the appellant is before this Tribunal.
02. Shri Hardik Modh, Learned Counsel appearing on behalf of the appellant submits that the Cenvat Credit of input service used in manufacture of CNG have been allowed. Rule 3(4) of Cenvat Credit Rules provides that Cenvat Credit availed in terms of Rule 3(1) can be used for payment of Central Excise Duty or Service tax on any output service.
Appellant received natural gas through the pipeline of GSPL which was compressed in their various gas stations and thereafter, manufactured CNG was sold to different customers on payment of Central Excise Duty. Hence, input service availed from GSPL by way of transportation of gas through pipeline which has been used in manufacture of CNG, is eligible for Cenvat Credit.
2.1 He submits that Appellant are also eligible of Cenvat Credit on input service used for trading of goods. The decision of Kundan Car Pvt. Ltd. Vs CCE, 2016 (43) S.T.R. 630 (Tri.-Mumbai) allowed the common input service used in taxable service and trading of goods. In the present case common input service viz. transfer of gas through pipeline from GSPL has been used for proving taxable service, manufacturing activity and trading activity, Therefor ratio laid down in the above decisions regarding eligibility of Cenvat Credit on common input services used for trading of goods is required to be followed in the present case. Trading activity was neither exempted goods nor exempted service during the disputed period 2006-07. Rule 2(e) of Cenvat Credit Rules, 2004 was amended w.e.f. 01.04.2011 by Notification No. 3/2011-CE(NT) dtd. 01.03.2011 whereby trading activity was specifically included in definition of exempted service. Therefore, trading activity was not exempted service prior to 01.04.2011. In these circumstance, Rule 6 of
3|Page ST/259/2009 Cenvat Credit Rules is not applicable and therefore, the appellant arealso not required to reverse the Cenvat Credit of Service tax paid on input service used for trading activities.
2.2 As regard the short payment of Service tax of Rs. 7,22,203/- for month of March 2007, appellant submits that there was excess balance of Rs. 3,92,970/- in their Cenvat Credit at the end of month of March 2007 and therefore, impugned order holding that Appellant had paid Rs. 7,22,203/- short in the month of March 2007 is erroneous and incorrect. The question of short payment of Service tax has arisen due to denial of Cenvat Credit of Service tax and finding of short payment of service tax will not be sustained if it is held that Appellant had rightly availed the Cenvat Credit.
03. On the other hand, Shri J.A. Patel, Learned Superintendent (AR) appearing for the Revenue reiterates the findings of the impugned order and argued that the input service is to be looked at in context of the output service. So, the activities carried out by the appellant other than providing service to M/s Arvind Mills and others cannot be said to be output service in relation to which input service credit is admissible.
04. We have considered the submissions made by both the sides and perused the records. The Cenvat credit on input services was denied on the ground that the input services were also used in PNG Sale i.e. trading activity. Since the input services were not used for providing of output services, the Cenvat credit used in such activity was denied. We observe that during the relevant period Appellant carried out three activities: (i) Providing Services of transportation of natural gas through pipeline on which service tax is paid (ii) Manufactured CNG gas from natural gas received from M/s Gujarat State Petroleum Corporation Ltd. and paid appropriate central excise duty on the same (iii) Purchased PNG from M/s Gujrat State Petroleum Corporation Ltd and sold it to its customers i.e trading activity on which no service tax is paid. We find that as regard the trading activity specific amendment was made in the Cenvat Credit Rules, w.e.f. 1.4.2011 as per Notification No. 3/2011-C.E. (N.T.), dated 01.03.2011 wherein, the trading activity was incorporated in the definition of exempted services accordingly Rule (6) became applicable but it is only from 1.4.2011, prior to that there was no provision for either denial of credit or for reversal of the same. In this case, since the dispute is for the period of April 2006 to March 2007, the denial of Cenvat Credit not correct and legal. Clearly the
4|Page ST/259/2009 position was clarified by the Government by insertion of Explanation only with effect from 1-4-2011 that the trading activity will be Exempted Services which cannot be given retrospective effect. This issue has been considered by Tribunal in various judgments. In case of Kundan Cars Pvt. Ltd. (supra) tribunal after considering various judgments on this issue, has passed following order :
5. I have carefully considered the submissions made by both the sides. The fact of the case is not under dispute that the appellant is engaged in providing taxable services such as „Business Auxiliary Services‟ and „Servicing of Motor Vehicles‟ on which the Service Tax is paid and at the same time the appellant is engaged in the tradingactivity of the cars on which no Service Tax is paid. The charge of the Revenue is that they are availing Cenvat credit in respect of common services which are used for taxable services as well as for tradingactivity. I find that the very identical issue has been considered by this Tribunal in the cases of Badrika Motors Pvt. Ltd. (supra) and Shariff Motors (supra). In the case of Badrika Motors Pvt. Ltd. (supra) the Cenvat credit was denied on the GTA service on the ground that the GTA service has no nexus with the taxable service such as „Authorized Service Station‟ and „Business Auxiliary Service‟. This Tribunal has held that no arithmetical correlation is required between the input and output services and accordingly the credit was allowed. In the case of Shariff Motors (supra) similar facts were involved that the assessee had availed the Cenvat credit in respect of GTA service which is used for transportation of motor cycles from factory to show room which were sold as such and credit was utilized for payment of Service Tax under authorized service station. The Division Bench has allowed the credit on GTA service. This decision has been upheld by the Hon‟ble Andhra Pradesh High Court. The operative order‟s portion is reproduced below :
"The Andhra Pradesh High Court Bench comprising Hon‟ble Mr. Chief Justice Kalyan Jyoti Sengupta and Hon‟ble Mr. Justice Sanjay Kumar on 19-12-2013 dismissed the Central Excise Appeal No. 91 of 2010 filed by Commissioner of Customs, Central Excise & Service Tax, Tirupati against the CESTAT Final Order No. 565/2009, dated 12-3-2009 as reported in 2010 (18) S.T.R. 64 (Tri. - Bang.) (Commissioner v. Shariff Motors). While dismissing the appeal, the High Court passed the following order :
"This appeal is preferred against the judgment and order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore, dated 12-3-2009 and sought to be admitted on the following suggested question of law :
"Whether CESTAT is correct in holding that the GTA service utilized by the assessee as recipient, is input service for providing the output service i.e., "authorized service station"."
The aforesaid question amply suggests that there is no element of law involved on the factual aspect. The learned Tribunal has dealt with this aspect in the manner as follows :
„In our view, unless the vehicles are received and sold, there would not be any servicing of the same. Moreover, the definition of the input service is broad enough to cover the input service availed by the Respondents and also the output service rendered by them‟.
5|Page ST/259/2009 We are of the view that the learned Tribunal has given correct interpretation and this is one possible interpretation and we cannot substitute by another one. Thus, we do not find any element of law involved for admission of this appeal. Accordingly, the appeal is dismissed. No order as to costs."
In view of the settled position of law as discussed above, we find no merit in the impugned order in so far it confirms the Cenvat demand against the appellant.
4.1 As far as short payment of service tax of Rs. 7,22,203/ in the month of March 2007 and Service tax Credit of Rs. 21,99,492/- wrongly utilized in excess of availability during the period April 2006 to October 2006 is concerned, the Learned Counsel has submitted that the said liability can only be sustained if it is held that the Appellant are not entitled to avail the credit on inputs services in dispute. Since the Cenvat demand in the present case is not sustainable as discussed above, the said input service credit was correctly utilized for payment of service tax during the impugned period and any short payment of service tax shall stand adjusted against the available credit including the credit in this case.
05. In view of our discussion made here in above, we allow the appeal with consequential reliefs, if any, in accordance with law.
(Pronounced in the open court on 15.03.2022) (RAMESH NAIR) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) Mehul