Custom, Excise & Service Tax Tribunal
Bhavnagar vs Ambuja Cements Limited on 18 October, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
AHMEDABAD
REGIONAL BENCH, COURT NO. 3
EXCISE APPEAL NO. 13154 OF 2018
[Arising out of OIA-BHV-EXCUS-000-APP-285-2018-19 dated 20/09/2018 passed by
Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax-
RAJKOT( Appeal)]
CCE & ST-BHAVNAGAR Appellant
Plot No.6776/B-1...Siddhi Sadan, Narayan Upadhyay Marg,
Beside Gandhi Clinic, Near Parimial Chowk,
Bhavnagar,
Gujarat-364001
Vs.
AMBUJA CEMENTS LIMITED Respondent
Unit Gajambuja Cement, Ambujanagar Taluka Kodinar, Gir Somnath, Gujarat Appearance:
Shri Rajesh K Agarwal, Superintendent (AR) for the Appellant Shri Jigar Shah and Shri Amber Kumrawat, Advocates for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER ( JUDICIAL ) HON'BLE MR. C. L. MAHAR, MEMBER ( TECHNICAL ) FINAL ORDER NO. 12405/2024 Date of Hearing : 12.07.2024 Date of Decision : 18.10.2024 RAMESH NAIR M/s Ambuja Cements Limited (Unit: Gajambuja Cement), Ambuja Nagar, Taluka Kodinar, District Junagadh, Gujarat, (hereinafter referred to as "the Respondent) are engaged in the manufacturing of Cement & Cement Clinker falling under Central Excise Chapter 25 of the First Schedule to the Central Excise Tariff Act, 1985 and holds Central Excise registration for the same. They are availing CENVAT Credit of C. Ex. Duty/ Service Tax paid on inputs, capital goods and input services under Rule 3 of Cenvat Credit Rules, 2004. During the relevant period, Ambuja Cement Limited was having two manufacturing units in Kodinar District viz. (a) Ambuja nagar Unit for manufacturing of excisable goods & rendering services; and (b) Gajambuja Page |2 E/13154/2018-DB Unit for manufacturing excisable goods & rendering services. The Mul-
Dwarka jetty was developed by Ambuja Cement Ltd under the licence of Gujarat Maritime Board and was having independent Service Tax Registration of a single premise for providing port related services. Thus, Ambuja Cement Ltd. was having three units in the vicinity and each of them was registered as an independent entity. The Department during audit scrutinized ER-1 of the Respondent for the month of December 2008. During the said scrutiny, it was noticed that the Respondent had wrongly availed and utilized the following Cenvat Credit of Service Tax aggregating to Rs.
97,01,857/-, which were apparently not related to the manufacture and clearance of their final products.-
Sr. Nature of the services Amount of the Cenvat Credit taken (In Rs.)
No. received Service Tax Edu. Cess S & H Edu.
Cess
1 Service received at Mul- 8834082/- 176679/- 85363/-
Dwarka Jetty
2 Clearing and Forwarding 428469/- 8568/- 4284/-
Services
3 Maintenance and repair 87946/- 1758/- 876/-
services
4 Man Power Supply 71682/- 1434/- 716/-
TOTAL 9422179/- 188439/- 91239/-
The aforesaid audit objection culminated into issuance of Show Cause Notice dated 23.09.2009 wherein the Department proposed to recover the said amount of Rs. 97,01,857/- of Cenvat Credit of Service Tax paid on the said services availed and utilized wrongly for the period of December 2008, under Rule 14 of CCR 2004 read with Section 11A of the Central Excise Act 1944 along with interest and penalty. The case of the department in the show cause notice is that the Respondent had availed and utilized credit of service tax paid in respect of the services summarized in the above table even though the said services were not falling within the purview of the "input services as defined under Rule 2(l) of CCR, 2004 in as much as:
Page |3 E/13154/2018-DB Services at Mul-Dwarka Jetty were not received and used by the Respondent. In fact, such services were received and used by an independent manufacturing unit i.e. M/s. Gajambuja Cement. The said Mul-Dwarka Jetty is primarily used for outward clearance of Cement and Export of Cement. The said services were received and used at the place, beyond the place of removal and after completion of activities of manufacturing in their factory and clearance from the factory gate. Thus, the Respondent had wrongly taken Cenvat Credit of such services which were not at all received and used by them in their factory premises but have taken Cenvat Credit of services received and used by another unit / service provider.
Clearing and Forwarding Agent Services were used for loading, unloading and other related services for outward transportation of finished goods i.e. Cement, thereby the Respondent had received and used the said services at a place beyond the place of removal and after completion of activities of manufacturing at and clearances of final product from the factory gate i.e. place of removal.
Services of Maintenance and Repair services and Manpower Supply Service had no nexus with manufacture and clearance of excisable goods directly or indirectly. Also, those services were received by the Respondent at different mines situated outside the factory premises ie at the places/premises other than the factory premises of the Respondent.
The aforesaid Show Cause Notice was adjudicated upon by the Ld. Commissioner vide Order-in-Original No. 31/ JOINT COMMISSIONER (SK)/ LTU- A/ST/2016-17 dated 14/15.02.2017 wherein the Ld. Commissioner allowed CENVAT credit for the services of Man Power supply. However, he confirmed rest of the proposals made in the show cause notice and ruled against the Respondent.
Being aggrieved, the Respondent filed appeal before the Commissioner (Appeals), LTU, Mumbai, however the same was transferred to the Commissioner (Appeal), Rajkot. The Ld. Commissioner vide Order-in-Appeal No. BHV-EXCUS-000-APP-285-2018-19 dated 20.09.2018 (hereinafter Page |4 E/13154/2018-DB referred to as "the Impugned Order") ruled in favor of the Respondent with the following observation:
The ground taken by the lower Adjudicating authority that Jetty was not authorized to distribute the credit due to its non-registration of ISD is incorrect. Thus, the Respondent was eligible for Cenvat credit of Input Services received at the Jetty on the basis of ISD invoices issued by the Jetty.
The lower Adjudicating Authority failed to record any findings as to the effect that how 'Place of Removal' was factory premises and not point of sale in terms of settled legal position. Thus, the Respondent qualifies for "input service" and was entitled for Cenvat credit of C&F Agent services used at Railway yard.
The lower Adjudicating authority in is Order-in-Original allowed Cenvat credit to the Respondent for services related to Man Power supply and hence, it is no longer disputed.
Being aggrieved by the impugned order dated 20.09.2018 the demand has been dropped in favour of the respondent. The revenue has filed the present appeal on the grounds as mentioned in the appeal memo.
2. Shri Rajesh K Agarwal learned Superintendent (AR) appearing on behalf of the revenue submits that the Cenvat Credit was taken in respect of the services which were availed at the Mul-Dwarka Jetty of the respondent Company which is beyond the place of factory. He further submits that from the Jetty the respondent was supposed to issue ISD invoice and only on that basis credit could have been availed by the respondent therefore the Cenvat Credit was wrongly availed. He further submits that C & F agent service being received out of the factory the same cannot be treated as input service.
3. Shri Jigar Shah learned counsel appearing on behalf of the respondent made the following submissions:
Page |5 E/13154/2018-DB A. Respondent has rightly availed the CENVAT credit of services used at Mul-Dwarka Jetty.
A. 1. The Respondent, at the outset submits that the issue involved in the present case has already been settled in favor of the Respondent. In this regard, reference can be made to decision of Hon'ble Karnataka High Court in the case of CCE &ST V. Hinduja Global Solutions Ltd., 2022 (4) TMI 71 wherein the Hon'ble High Court while dealing with the issue that whether credit is eligible to be availed on invoices/debit notes issued by 'Input Service Distributor' [ISD] prior to their registration under the Service Tax [Registration of Special Category of Persons) Rules, 2005, has categorically remarked that there is nothing in the said Rules of 2005 or in the Rules of 2004 that would automatically and without any additional reasons disentitle an Input Service Distributor from availing Cenvat Credit unless and until such registration was applied and granted. Thus, in view of such a procedural lapse, substantial benefit of CENVAT Credit cannot be denied to an assessee.
A.2. The Respondent submits that in view of the aforesaid decision, it is clear that the Cenvat Credit claimed by the Respondent on the basis of the invoices issued for the period of December 2008 i.e. prior to its registration as ISD being mere procedural lapse, cannot be denied to the Respondent.
A.3. The Respondent also puts reliance on the following cases:
Deepak Fertilizers and Petrochemical Corp. v. CCE, 2013 (32) STR 532 Alstone Industries Pvt. Ltd. V. CCE, JAIPUR, 2021 (44) GSTL 295 A. 4 Accordingly substantial questions of law are answered in favour of the Respondent and against the Department. Hence, in light of the same the Impugned A4 Order is liable to be upheld B. Distribution of Cenvat credit, prior to its registration as Input Service Distributor [ISD] is a curable and condonable being technical in nature.
B.1 It was alleged by the department in the Show Cause Notice that the Gajambuja Office had distributed Input Service Tax Credit to the Respondent before obtaining ISD Registration which is the requirement of law for distribution of Cenvat Credit amongst different units of a company.
B.2 It is submitted in this regard that when all the substantive questions of law are answered in favoured of the Respondent, the Respondent cannot be denied the benefit of Credit for mere procedural lapse on its part. It is submitted that identical view was taken by the Hon'ble Tribunal in the case of Demosha Chemicals Pvt. Ltd. v. CCE & ST, Daman, 2014 (34) STR 758 (Tri.-Ahmd.) wherein it was held that not taking ISD Registration is at best a procedural irregularity and Page |6 E/13154/2018-DB Credit is not deniable on this ground. Further, reliance is placed on the decision of Doshin Ltd. v. CCE, Ahmedabad, 2013 (288) ELT 291 (Tri.- Ahmd,) wherein the Hon'ble Tribunal has held that in such cases there is no extra benefit accruing to the assessee nor any loss is caused to the Revenue; therefore, these are pure procedural irregularities.
B. 3 To further substantiate the above submission, the Respondent also places reliance on the following decisions:
CCE Vs Hinduja Global Soluations Ltd, 2022 (4) TMI 71- Karnataka High Court CCE v. Dashin Ltd., 2016 (2) TMI 71- Gujarat High Court Spice Digital Ltd. v. CCE, 2023 (5) TMI 196- CESTAT CHANDIGARH 3M Electro & Communication India Pvt. Ltd. v. CCE, 2023 (6) TMI 1104-CESTAT CHENNAI United Phosphorus Ltd. v. CCE, 2022 (11) TMI 747- CESTAT AHMEDABAD M/s. Sanghi Industries Ltd. v. CCE, 2019 (12) TMI 528- CESTAT AHMEDABAD Philips Electronics (I) Ltd. v. CCE, 2019 (6) TMI 361- CESTAT AHMEDABAD Hindalco Industries Ltd. v. CCE, 2016 (10) TMI 31- CESTAT AHMEDABAD B.4 Reliance is further placed on the case of Imagination Technologies India Pvt. Ltd. v. CCE, Pune- 3, 2011 (23) STR 661 (Tri.- Mumbai) wherein it was held that there was no provision under the Cenvat Credit Rules, 2004 for denial of Credit on tax paid on the invoices prior to Registration.
B. 5 It was held in the case of Shah Yarn Tex (P) Ltd. v. CCE, Coimbatore, 2008- TIOL 1975-CESTAT-MAD that a substantive right cannot be denied on the ground of infraction of procedural provisions. Procedure is only a hand maid of justice and therefore, proposal to the deny Credit on technical and procedural aspects is not tenable B. 6 Therefore, it is submitted that denial of Cenvat Credit to the Respondent is a travesty of justice and the same is not sustainable in light of the above decisions Hence, on this ground alone, the Impugned Order is liable to upheld.
C. The issue involving C&F agency services in the present appeal is no more res-integra as it has already been settled by the Hon'ble High Court of Gujarat in the case of Commissioner Page |7 E/13154/2018-DB of C. Ex., Ahmedabad v. Cadila Healthcare Ltd., 2013 (30) STR 3 (Guj.).
C. 1 The Respondent at the outset submits that issue of eligibility of CENVAT Credit availed in respect of services such as (i) testing, inspection and certification services, scientific and technical consultancy services; (iii) management consultancy services, (iv) maintenance and repairs services; and (v) clearing and forwarding agent's services, had arose for examination before this Hon'ble Tribunal in the case for the prior period (FY 2007-08). The Hon'ble Tribunal vide theorder reported at Cadila Healthcare Ltd. v. Commissioner of C. Ex., Ahmedabad, 2010 (17) STR 134 has allowed the credit in respect of aforesaid services.
C. 2 The aforesaid order of tribunal was also challenged in appeal before Hon'ble High Court of Gujarat by the Revenue, wherein the Hon'ble High Court vide order reported at Commissioner of C. Ex., Ahmedabad v. Cadila Healthcare Ltd., 2013 (30) STR 3 (Guj.) affirmed the view taken by Hon'ble Tribunal and allowed the CENVAT credit availed by the Respondent in respect of all the service in question except the service received against the commission paid to foreign agents.
C. 3 In view of above discussion, the Respondent submits that on this ground alone the impugned order allowing the benefit of CENVAT credit to the Respondent in respect ofservices which had already been examined by Hon'ble Gujarat High Court, becomesliable to be upheld.
D. All the disputed services such as (i) technical consultancy services; (ii) maintenance and repairs services; and (iii) clearing and forwarding agent's services are covered by "means" clause of the definition of "input service".
D. 1 The definition of the term 'input service as defined under Rule 2(1) of the Cenvat Credit Rules, 2004 has three parts
i) the 'means' part which is the main part of the definition and
ii) 'inclusive' part which is illustrative and certainly not exhaustive and
iii) 'excludes part which contains the list of services on which no Cenvat credit is admissible D. 2 First leg of the definition which is commonly called 'means' portion would coverevery service used directly or indirectly, in or in relation to manufacture of final products and clearance of final products up to the place of removal Page |8 E/13154/2018-DB D. 3 Second leg of the definition (as stood after amendment dated 1.4.2011) Which is commonly called 'includes' portion could be dissected as under.
i) Services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises,
ii) Advertisement or sales promotion,
iii) Market research
iv) Storage upto the place of removal,
v) Procurement of inputs,
vi) Activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking. credit rating, share registry, and security,
vii) Inward transportation of inputs or capital goods and outward transportation upto place of removal D. 4 The third part of the definition is the 'excludes' portion which contains the list of services on which the Cenvat credit is not admissible.
D. 5 The Respondent submit that the 'means' part of the definition covers any service used directly or indirectly, in or in relation to manufacture of the final products and clearance of the final products up to the place of removal. The definition is one of very wide connotation. It covers within its ambit all services received by the manufacturer of final products. The Respondent submit that the definition of input service is wide and illustrative. Therefore, it would be incorrect to deny credit on the aforesaid disputed services.
D.6 It is clear from the above definition of 'input service' that services which are used directly or indirectly, in or in relation to manufacture would qualify as "input services' within the 'means' part of the definition.
D.7 The Respondent place reliance on CCE Vs. Cadila Healthcare Ltd.- (supra) wherein it had availed technical testing and analysis service for testing of clinical samples by various agencies prior to commencement of commercial production. However, the commercial production of products of which clinical samples were got tested by various agencies was not yet started. The Revenue was of the view that technical testing and analysis service could not be considered as "Input Service"
since the said service had not been used directly or indirectly, in or in Page |9 E/13154/2018-DB relation to the manufacture of final products as no manufacturing of final products pertaining to these clinical samples had been undertaken. By considering the said facts, the Hon'ble High Court held that unless such testing and analysis is carried out, it would not be possible to produce the final product inasmuch as unless the trial batches are sent for testing and analysis and approval is obtained, the final product cannot be manufactured Accordingly, the Hon'ble High Court held that the services availed in respect of technical testing and analysis services are directly related to the manufacture of the final product.
D. 8 Further, in the case of Dy. General Manager, Tata Motors Ltd. Vs. CCE - 2015 (40) STR 269 (T), the Hon'ble Tribunal has held that services used in development and manufacture of prototypes of vehicles is in relation to manufacture of final product only. Prototype only being primary version before commencement ommercial production and hence, cenvat credit on the consulting engineer services used in the manufacture of prototype is eligible. In other words, credit on input services which are used in Research and Development (R&D) activity is available, irrespective of the fact that the finished goods for which R&D has been undertaken comes in to existence or not. J.9 The ratio of the aforesaid decisions are applicable in the present case also. Since, even in the present case, the Respondent have availed credit on input services for setting up of the factory which is required to start commercial production. Therefore, the disputed services are used in or in relation to manufacture of final products.
The "means" part of the definition is widely worded.
D. 9 In support of the above submissions, the Respondent submit that, on a plain reading of the definition of "input service" it is clear that 'means part of the definition is widely worded. The words 'directly or indirectly' and 'in or in relation to further widen the scope of the definition. The words 'in or in relation to have been interpreted by the Supreme Court in the case of CCE Vs. Rajasthan State Chemical Works 1999 (55) ELT 444 (SC) and Union of India Vs. Ahmedabad Electricity Co. Ltd. - 2003 (158) 29 ELT 3 (SC) wherein it has been held that such words widen and expand the scope, meaning and content of expressions. Hence, services which are integrally connected with the process of manufacture without which such manufacture would be impossible or commercially inexpedient shall be covered within the definition of input service' D. 10 The scope of the words 'directly or indirectly' as well as in or in relation to manufacture has been explained by the Hon'ble Supreme Court in the decision of Doypack Systems (P) Ltd. Vs. UOI-1988 (36) ELT 201 (SC) wherein it was held by the Hon'ble Apex Court that the expressions "in relation to" is a very broad expression. which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well P a g e | 10 E/13154/2018-DB as an indirect significance depending on the context. The term "relating to" has been held to be equivalent to or synonymous with as to "concerning with" and "pertaining to".
D. 11 Therefore, the Respondent submit that the aforesaid disputed services are certainly required 'in or in relation to manufacture of the final products as it would not be possible (commercially expedient) to carry of the activity of manufacture without the aforesaid input services. Further, without use of disputed services, the Respondent cannot procced with manufacture finished goods. Hence, the disputed services would qualify as 'input service' in terms of Rule 2(1) of the Cenvat Credit Rules.
D. 12 In view of above discussion, the impugned order is liable to be upheld.
E. The Department erred in contending that the issue of services availed for the movement of goods has never been raised before the Original Adjudicating Authority.
E. 1 The Respondent submit that the entire case of the department pertaining to the issue of credit of is on the line that the issue of services availed for the movement of goods for stock transfer to warehouse/depot/dumps was not raised before the original Adjudicating Authority.
E. 2 The Respondent submits that there has neither been examination during the stage of investigation on part of department nor was there any such allegation in the show cause notice. Accordingly, the Ld. Appellate Authority in its findings at para 8 of the impugned order records that there was no determination regarding the "place of removal" in the initial show cause notice. Hence, it is explicit that it had never been the case of the department. Therefore, allowing any such examination at this stage of litigation would be tantamounting to travelling beyond the scope of the show cause notice.
E. 3 In view of above discussion, the aforesaid prayer raised by the Respondent is not sustainable and accordingly order deserves to be upheld F. Interest and penalty is not payable The Respondent submits that where the demand is not maintainable, there is no question of interest and penalty on the recovery of cenvat credit. Hence, the interest demand and penalty on the eligible Cenvat credit is not maintainable. There is no suppression of facts by the Respondent. The mandatory penalty under Rule 15(3) of the CCR, 2004 is not imposable also because of revenue neutrality P a g e | 11 E/13154/2018-DB G. In view of the above, it is humbly submitted that the Impugned Orders passed by the Ld. Commissioner is correct in the eyes of law and is therefore, liable to be upheld.
He placed reliance on the following judgments:
Deepak Fertilizers and Petrochemical Corp. v. CCE 2013 (32) STR 532 Alstone Industries Pvt. Ltd. v. CCE, Jaipur 2021 (44) GSTL 295 CCE Vs Hinduja Global Soluations Ltd 2022 (4) TMI 71-Karnataka High Court CCE Vs Dashion Ltd 2016 (2) TMI 183-Gujarat High Court Spice Degital Ltd Vs CCE 2023 (5) 196 CESTAT Chandigarh 3M Electro & Communication India Pvt. Ltd Vs CCE 2023 (6) TMI 1104-CESTAT Chennai United Phosphorus Ltd Vs CCE 2022 (11) TMI 747-CESTAT Ahmedabad Sanghi Industries Ltd Vs CCE 2019 (12) TMI CESTAT Ahmedabad Philips Electronics (1) Ltd Vs CCE 2019 (6) TMI 361-CESTAT Ahmedabad Hindalco Industries Ltd Vs CCE 2016 (100 TMI 31-CESTAT Ahmedabad CCE VS ECOF Industries Pvt. Ltd 2011 (2) TMI 1130-Karnata High Court ECOF Industries (P) Ltd Vs CCE 2009 (10) TMI 171-CESTAT Bangalore CCE Vs Oerlikon Balzers Coating P. Ltd 2018 (12) TMI 1300-Bombay High Court CCE Vs Rajasthan State Chemicals Works 1991 (55) ELT 444 (S.C) ABB Ltd Vs CСЕ, 2009 (15) STR 23 (Tri-L.B) CCE Vs Parth poly Wooven Pvt. Ltd. 2012 (25) STR 4 (Guj) Cadila Healthcare Ltd Vs CCE 2010 (17) STR 134 (T) CCE VE Cadila Healthcare Ltd 2013 (30) STR 3 (Guj) Zydus Lifesciences Ltd Vs CCE 2023 (12) TMI 6-SC Order Ambuja Cement Ltd Vs CCE 2022 (6) TMI 819-CESTAT Nitco Limited Vs CCE 2022 (5) TMI 250-CESTAT Gujarat Insecticides Ltd Vs CCE 2021 (10) TMI 380-CESTAT GD Goenka Pvt. Ltd Vs CCE 2023 (8) TMI 995-CESTAT Expositions and Conventions v. CCE, Ahmedabad-II, 2024 (1) TMI 728-AHM P a g e | 12 E/13154/2018-DB
4. We have carefully considered the submissions made by both the sides and perused the records. We find that the following issues to be decided in the present appeal. (1) whether the distribution of Cenvat Credit prior to registration as ISD is correct or otherwise. (2) whether the Cenvat Credit in respect of the C & F agent service is admissible to respondent or otherwise.
As regard the issue that the Cenvat Credit was passed on to the respondent from their Jetty without registration as ISD, we find that the period involved is 1st December, 2008 to 31st December, 2008, during that period there was no restriction that the credit can be distributed to one unit of the assessee therefore even if the credit has been distributed by the respondent Jetty to the appellant factory it is merely procedure lapse and for that reason credit cannot be denied. The main criteria for allowing the Cenvat Credit on input services is that the input service should be tax paid, it should be received in relation to manufacture of excisable goods and the same are received by the assessee who availed Cenvat credit. These facts are not in dispute, the only contention of revenue is that the respondent Jetty has not distributed the Cenvat Credit to the respondent without any registration. This issue has been considered in many judgments as cited by the respondent. Therefore the issue is no longer res integra.
As regard the Cenvat Credit denied holding some services are inadmissible input service such as clearing and forwarding services , maintenance and repair services, man power supply services etc. we find that these services have been held as admissible input service time and again in various judgments cited by the learned counsel therefore as of now there is no dispute that these miscellaneous services are indeed used in or in relation to the manufacture of the excisable goods and in relation to overall business activity of the appellant therefore we hold that the services such as C & F agent service, repair and maintenance service, management consultancy service etc. are admissible input service and Cenvat credit on P a g e | 13 E/13154/2018-DB these services are legally available to the respondent therefore we do not find any infirmity in the impugned order.
5. Accordingly the impugned order is upheld, the revenue's appeal is dismissed.
(Order pronounced in the open Court on 18.10.2024) (RAMESH NAIR) MEMBER ( JUDICIAL ) (C. L. MAHAR) MEMBER ( TECHNICAL ) Dharmi