Custom, Excise & Service Tax Tribunal
M/S Grindwell Norton Ltd vs C.S.T. & S.T.-Vadodara-I on 4 January, 2018
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench at Ahmedabad Appeal No.E/11756/2015-SM [Arising out of OIA No.VAD-EXCUS-001-APP-180-2015-16 dated 10.07.2015 passed by the Commissioner (Appeals), Central Excise, Customs & Service Tax, Vadodara] M/s Grindwell Norton Ltd. Appellant Vs C.S.T. & S.T.-Vadodara-I Respondent
Represented by:
For Appellant: Mr. Saurabh Dixit & Mr. J. B. Desai (Advocate) For Respondent: Mr. S.N. Gohil (A.R.) CORAM:
HONBLE DR. D.M. MISRA, MEMBER (JUDICIAL) Date of Hearing:06.09.2017 Date of Decision: 04.01.2018 Final Order No. A/ 10021 /2018 Per: Dr. D.M. Misra This is an appeal filed against order-in-appeal No. VAD-EXCUS-001-APP-180/2015 passed by Commissioner (Appeals) Central Excise, Customs and Service Tax- Vadodara. Briefly stated the facts of the case are that the appellant had availed cenvat credit amounting to Rs. 15,99,633/- during the period October 2012 to March 2013 on various input services namely, Manpower Services, CHA Services, Erection and Commissioning Services, Gardening Services, House Keeping Services, IT Services for SAP implementing etc prior to commencement of Commercial Production of their finished goods. Alleging that the said input service have been used in setting up of their new factory hence after 01.04.2011, under amended definition of input service, credit is inadmissible, SCN was issue on 01.01.2015 for recovery of the said credit with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. Aggrieved by the said order, the appellant filed appeal before the Ld. Commissioner (Appeals), who in turn, rejected their appeal. Hence, the present appeal.
2. Ld. Advocate, Shri Dixit, for the appellant submits that the appellant had not claimed service tax paid on various services relating to construction of the factory or civil structures or technical services such as architect services etc. in relation to construction of the factory. The Cenvat credit was availed in relation to other input services specifically included in the scope of input services before and after amendment to the definition of input services under Rule 2(l) of the Cenvat Credit Rules, 2002. It is his contention that w.e.f. 01.04.2011 only construction related services used for setting up of factory has been excluded from the scope of the said definition. In support, he has referred to the decision of this Tribunal in the case of Idea Cellular Ltd. vs CCE, Mumbai-II 2016-TIOL-1198-CESTAT-Mum and Orient Cement Ltd. vs CCE & ST, Hyderabad-I 2017 (51) STR 459 (Tri.-Hyd.) Further referring to the TRU clarification dated 28.02.2011 on the amended Rule 2(l) of the Cenvat Credit Rules, the Ld. Advocate has submitted that the amendment was necessitated to impart clarity and achieve congruence between goods and services so that services related to any goods excluded from the scope of the definition of inputs are also excluded from the definition of input services. He has vehemently argued that applying the principle laid down in the aforesaid judgments and the clarification issued by the Board, it is clear that setting up is limited only to construction activity per se and not to erection, commissioning, repair, renovation, maintenance, other technical services including manpower supply; SAP implementation etc. Further, referring to various judicial pronouncements on the disputed services, the Ld. Advocate submitted that in various judgments of this Tribunal, the said services are held to be eligible to cenvat credit. Further, he has submitted that the issue related to interpretation of relevant Provisions and there was no intention whatsoever to evade payment of duty by availing inadmissible credit, therefore, extended period of limitation cannot be held applicable to the facts of the present case.
3. Per contra, Ld. AR for the Revenue, on the other hand has submitted that word setting up means the assembly and arrangement of the tools and apparatus required for the performance of an operation; this interpretation has been consciously deleted by the Government from the scope of input services w.e.f. 01.04.2011. It is his contention that in the amended Rule 2(l) of the Cenvat Credit Rules, the expression activities related to business has also been deleted. He has further submitted in the amended Rule, it is made clear that services used in relation to modernization, renovation or repairs of a factory premises of provider of output services or an office relating to such factory or premises are eligible to credit. In support he has referred to the judgment of this Tribunal in the case of Liugong Indian Pvt. Ltd. vs Commissioner 2015 (38) STR 96 (Tri. Del) and also referred to the judgment of Honble Bombay High Court in Coca Cola (India) Pvt. Ltd. vs CCE Pune 2009 (242) ELT 168 (Bom.. Further, he has submitted that it is a settled rule of interpretation that while interpreting a word/ expression in a fiscal statute meaning must be given to each word of the statute and it cannot be ignored on the basis that the same does not appear to be logical. Therefore, what has been consciously deleted by the legislature should deemed to have been disallowed from the effective date. In support, the Ld. AR referred to the judgment of the Honble Karnataka High Court in the case of Suraj Enterprises vs Authority for clarification & Advance Ruling, Bangalore 2010 (262) ELT 119 (Kar.). Further, he has submitted since the availment of inadmissible credit came to the notice only during the course of audit, therefore, invoking of larger period of limitation is justified.
4. Heard both the sides and perused the records.
5. The dispute relates to eligibility of cenvat credit on RCM Transport, Legal Service, RCM Manpower, CHA Service, Environment consultancy, Erection/ Commissioning, Gardening service, Hiring charges, HouseKeeping service, Inspection service, Installation service, Labour charges, Monitoring charges, professional charges, rental services, repair/ maintenance, SAP Computer System, Security service, Utility charges etc., services which are used by the appellant during the course of setting up of the factory i.e. before commencement of the commercial production. Undisputedly, the appellants are engaged in the manufacture of excisable goods and they have set up a new unit and obtained central excise registration on 18.05.2011. They have started availing cenvat credit after commencement of the Commercial production in October 2012. The Departments objection is that since the aforesaid services were used in setting up of the factory, therefore, under the amended definition of input service w.e.f. 01.04.2011 service tax paid on such services not admissible to credit as the expression setting up and activities relating to business have been deleted from the said definition. The appellants argument, on the other hand, is that since all these aforesaid input services per se are eligible to credit before and after the amendment to the definition of input services, even if used for setting up of the factory, would be admissible to credit. It is their argument that to make the provision more clear and bringing parity on the provisions related to goods and service tax, only construction services and other related services like works contract service, architect service etc., used for construction/ settingup of new factory have been disallowed after the amendment to the said definition.
To appreciate the rival contentions the definition of input service before and after amendment is reproduced below:
Before 01.4.2011:
2(l)?Input Services means any service, -
(i) used by a provider of taxable 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 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 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; After amendment w.e.f. 01.04.2011:
2(l) Input service means any service,
(i) used by a provider of taxable 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 upto the place of removal, and includes services used in relation to 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;
but excludes,-
(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) services provided by way of renting of a motor vehicle], in so far as they relate to a motor vehicle which is not a capital goods; or (BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by-
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person ; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or
(c) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;
6. A plain reading of the amended provision reveals that the expression setting up and activities relating to business have been deleted from the scope of the meaning of input service.The scope of the definition of input service has been interpreted by the Honble Bombay High Court in Coca Cola (India) Pvt. Ltd.vs CCE Pune 2009 (242) ELT 168 (Bom.), their Lordships observed as follows:
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.
7. In the aforesaid judgment their Lordships have divided the definition of input service into five limbs and observed that if anyone of the limbs is satisfied, the assessee is entitled to avail cenvat credit. Applying the aforesaid principle to the facts of the present case, there cannot be any doubt that the case of the appellant would fall under the third limb i.e. services used in relation to setting up modernization, renovation or repairs of factory or office relating to such factory, as it is not the claim of the appellant that the disputed services were used by the appellant-manufacturer directly or indirectly in or in relation to the manufacture of final product or in relation to clearance of final products from the place of removal. Therefore, in the amended definition, once the expression setting up has been deleted from the scope of input service, all services used for modernization, renovation or repairs of a factory or office relating to such factory would continue to be admissible even after specific exclusion that have been provided in the amended definition of input services relating to works contract service/ construction services. This view has been expressed by this Tribunal in the case of Ion Exchange (I) Ltd. Vs. CCE,Surat-II vide Order No.A/13513/2017 dt. 08.11.2017. Therefore, the claim of the advocate that only construction services used in setting up of factory has been excluded in the amended definition of input service and all other input services,even though used in the setting up of a factory, would continue to be admissible, in my opinion cannot be sustained.In these circumstances, I do not find any valid reason to hold thatcenvat credit availed on various services used for setting up of industry other than construction services would be admissible to credit.However, I find force in the contention of the Ld. Advocate for the appellant on the issue of limitation. There is no doubt that the issue involved in the present case is a pure question of interpretation of law and the appellant had availed credit only on the aforesaid input services and not on construction services; after disclosing all the facts in their books of accounts. Besides, they have submitted all relevant documents for the purpose of Audit of their Unit on 18.12.2013 and the Audit was conducted in Jan 2014, hence there is no suppression of facts nor mis-declaration,accordingly, issuing of demand notice invoking extended period of limitation is unsustainable in the facts and circumstances of the present case. In the result, the impugned order is set aside on limitation and the appeal is allowed with consequential relief, if any, as per law.
(pronounced in the open court on __04.01.2018) (Dr. D.M. Misra) Member (Judicial) Neha 9 | Page E/11756/2015-SM