Custom, Excise & Service Tax Tribunal
Uni Deritend Ltd vs Commissioner Of Customs & Central ... on 21 October, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal Nos. ST/129, 130 & 165/07 and E/869/09 (Arising out of Order-in-Appeal No. SVS/201/NGP-B/2007 dated 31.5.2007, SVS/262/NGP-B/2007 dated 31.7.2007 & SN/141/NGP/2009 dated 21.5.2009 passed by Commissioner of Customs & Central Excise (Appeals), Nagpur.) For approval and signature: Honble Mr.Sahab Singh, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Uni Deritend Ltd Appellant (Represented by: Mr. Bharat Raichandani, Advocate) Vs Commissioner of Customs & Central Excise, Nagpur Respondent (Represented by: Mr. Sanjay Kalara, Appraiser (A.R)) CORAM:
Honble Mr.Sahab Singh, Member (Technical) Date of Hearing : 22.09.2011 Date of Decision: 21.10.2011 ORDER NO..
Per: Sahab Singh
1. These are four appeals having common issue involved. Therefore, all these appeals are being taken up together. Details of the appeals and the period involved is as under:
Appeal No Period involved 1. ST/130 January 05 to March 06 2. ST/129/07 April 05 to September 05 3. ST/165/07 October 05 to March 06 4. E/869/01 April 06 to 30 September 06
2. Brief facts of the case are that Ms/ Uni Deritend Ltd (hereinafter referred to as appellant) are manufacturer of castings of iron and steel, copper and motor vehicle parts classifiable under Chapters 73, 74 and 87 of the Central Excise Tariff. They were availing the benefit of Cenvat Credit of inputs capital goods and service tax under Rule 3 of the Cenvat Credit Rules, 2004. It has been noted that in respect of service tax lorry receipts, Bills, invoices of transporters of the consignments of the said inputs are received in the appellants unit. As a consignee or consignor they are liable for paying service tax as defined under Rule 2 (d) (v) of the Service Tax Rules, 1994. The appellants are liable to pay service tax on input service. On scrutiny of the ST3 Returns it has been found that they have not paid the service tax payable on input service on Goods Transport Agency in cash under TR6 challans as provided in Rule 6 of the Service Tax Rules. Once the credit of service tax itself is not there for availment, consequently the appellant is required to pay service tax in cash on input service. But they have paid the same by debiting it from the Service Tax Credit (Cenvat Credit) account which resulted in non payment of service tax on input service by the appellant. As per Rule 2 (r) of Cenvat Credit Rules, 2004, a provider of taxable service includes a person liable for paying service tax. Therefore, in that context the noticee may be a provider of the taxable service but still as per provisions of Rule 2 (p) of the Cenvat Credit Rules, 2004, they do not fall under the category of output service as they have not provided the said service to the customer. Therefore, it was alleged by the department that amount of service tax paid by them through Cenvat Credit Account is not admissible to them and according Show Cause Notices for different periods were issued to them in all these four appeals. Show Cause Notices were contested by the appellant and were adjudicated by the original authority against the appellant confirming the service tax amount and by imposing penalties on the appellants. Against the Orders-in-Original, they preferred appeals to the Commissioner (Appeals) who also dismissed their appeals. Against these Orders-in-Appeal, the appellants are before me in appeals.
3. The learned counsel for the appellant submitted that they have utilized the Cenvat Credit as per provisions of Cenvat Credit Rules, 2004. The counsel has submitted that on going through Rules 2 (o), (p), (q) and (r) it is found that in case of the Goods Transport Agency service, the consignee or the consignor will be the person liable for the service tax and the person liable for paying service tax by the deeming provisions of the rules will be treated as service provider and the service will be treated as output service. He read over all the provisions of these rules and the definition of the Cenvat Credit Rules and contended that as per these definitions, they are definitely eligible for utilizing the Cenvat Credit for paying the service tax on Goods Transport Agency service. He submitted that the definition of output service does not imply that Cenvat Credit will only be utilized for payment of service tax on services actually provided by a person who utilized the credit. The Explanation to the definition of the output service deems the services if which a person is liable to pay service tax as output service If such person does not provide a taxable service or does not manufacture any final product. The intention and the purpose of the Government in providing the Explanation to the definition of the output service in the rules is to allow the service recipient to pay the service tax by way of utilizing the Cenvat Credit. He therefore submitted that they have rightly utilized the Cenvat Credit for the purpose of payment service tax on the Goods Transport Agency service. He submitted following case law in support of this contention:
(i) Commissioner of Central Excise, Chandigarh vs Nahar Industrial Enterprises Ltd 2007 (7) STR 26 (Tri-Del);
(ii) CCE vs Nahar Industrial Enterprises Ltd 2010-TIOL-868-P&H-ST;
(iii) CCE vs Shri Tubes & Steels Pvt Ltd 2011 (21) STR 370 (Tri-Bang).
4. He submitted that in all these cases, the benefit of service tax through Cenvat Credit account has been allowed by the Tribunal and the Honble Punjab & Haryana High Court has allowed this benefit in case of CCE vs Nahar Industrial Enterprises Ltd (supra). He therefore submitted that in view of the Honble High Court of Punjab & Haryanas decision, their appeals should be allowed.
5. The learned A.R. appearing for the Revenue, on the other hand, defended the Orders-in-Original and the Orders-in-Appeal passed by the lower authorities and submitted that in case of ITC vs CCE, Guntur 2011-TIOL-568-CESTAT-BANG it has been held by the Tribunal that the service tax on the Goods Transport Agencies service is to be paid in cash and cannot be paid through Cenvat Credit account.
6. The learned counsel for the appellant submitted that the case of ITC Ltd (supra) has not considered any of the decisions given by the Tribunal in their favour and also not considered the decision of the Honble High Court of Punjab & Haryana. He submitted that in the light of decision in case of Commissioner of Customs, Cochin vs State of Kerala 1993 (66) ELT 351 (Ker), of the Honble Kerala High Court, this decision should be held per incuriam as this decision has not considered any of the decisions of the Tribunal as well as the Honble Punjab & Haryana High Court.
7. After hearing both sides, I find that the issue involved in these appeals is whether Cenvat Credit can be utilized for payment of service tax on Goods Transport Agency service. The period involved in three appeals is upto 18.4.2006 and in one appeal it is from 1.4.06 to 30.09.06. The basic contention of the Revenue is that the recipient of the Goods Transport Service are not output service provider. Hence they cannot utilize the Cenvat Credit for payment of service tax on Goods Transport Agency service. On the other hand, it is the contention of the appellant that the recipient of the Goods Transport Agency service are deemed to be output service provider under law and they therefore are entitled to pay service tax on Goods Transport Agency service by utilizing the Cenvat Credit. I find that the issue has been settled by the Tribunal in various case law cited by the appellant. I also find that in a recent decision of the Bangalore Bench in the case of CCE, Bengaum vs Shri Tubes & Steels Pvt Ltd 2011(21) STR 370 (Tri-Bang) it was held by the Tribunal that for the period prior to 19.4.2006, the service tax on Goods Transport Agency service can be paid through Cenvat Credit account. In the said order, the Tribunal has held in paras 14 and 15 as under:
14. In CCE, Chandigarh Vs. Nahar Exports Ltd. reported in - (2007-TIOL-1907-CESTAT-DEL) = 2008(9) STR 252 (Tri. Del.), the Tribunal after taking note of the explanation clause held thus,
"8.1. Under clause (p) of Rule 2, there is reference to taxable service provided by the provider of taxable service. Therefore, unless a taxable service is provided, ordinarily it would not fall under the definition of 'output service'. However, the explanation created a deeming fiction by providing that, if a person liable for paying service tax does not provide any taxable service or does not manufacture final product, the service for which he is liable to pay service tax shall be deemed to be the output service. The recipient of service from Goods Transport Operator or Agent having become liable to pay service tax, would be entitled to take the benefit of the deemed fiction, if he does not provide any taxable service or does not manufacture final product on which he could have utilized Cenvat credit. Where a person provides any taxable service or manufactures final product, he can utilize the Cenvat credit in accordance with the Rules. Cenvat credit, as defined under Rule 3(1) includes duties, tax and cess as enumerated in various clauses. The service tax liable under Section 66 of the Finance Act, 1994, can also be taken as credit by a manufacturer or producer of final product or a provider of taxable service. On a plain reading of the explanation, it would appear that, if a person is either a manufacturer or a provider of taxable service, there would be no need for making a provision for such a person by way of a deeming fiction, as is sought to be done under the explanation, because, such a taxable service provider or a manufacturer can always utilize the Cenvat credit, as per the Rules. However, where a person is neither a provider of taxable service nor does he manufacture any final product, difficulty may arise in cases where input service is received by a person, who by virtue of his business has to pay service tax as a recipient, and who, but for the deeming fiction, would not be able to avail the benefit of Cenvat credit and the tax burden will rest on him, though he was not a consumer. Therefore, the explanation appears to have been enacted with a view to benefit a person who is liable to pay service tax as the recipient of taxable service, so that he can utilize the Cenvat credit for payment of service tax payable by him as recipient of any of the taxable services in respect of which a recipient is held to be liable to pay tax. However, this view would not be tenable, in view of the binding decision of the Division Bench in the case of India Cements Ltd. (supra), wherein a manufacturer was given benefit of the explanation to Rule 2(p). Therefore, respectfully following the ratio of the decision of the Division Bench of this Tribunal in the case of India Cements Ltd. (supra), I find no warrant for interference with the impugned order. The appeal of the Revenue is, therefore, dismissed."
15. Similar view was taken earlier in CCE, Chandigarh Vs. Nahar Industrial Enterprises Ltd. reported in - (2007-TIOL-555-CESTAT-DEL) = 2007(7) STR 26 which was followed in RRD Tex Pvt. Ltd. Vs. CCE, Salem reported in - (2007-TIOL-891-CESTAT-MAD) = 2007(8) STR 186, Pallipalayam Spinners Pvt. Ltd. Vs. CCE, Salem reported in - (2007-TIOL-2136-CESTAT-MAD) = 2008(9) STR 544 and Bhushan Power and Steel Ltd. CCE, C&ST reported in - (2007-TIOL-1828-CESTAT-KOL) = 2008(10) STR 18 The last decision was also followed in Mahindra Ugine Steel Co. Ltd. Vs. CCE, Raigad reported in - (2008-TIOL-657-CESTAT-MUM) = 2009(13) STR 373. Undisputedly, all these cases related to the period prior to 19/04/2006. In other words, as far as the issue in question is concerned to the extent it related to the period prior to 19/04/2006, the consistent view taken by the Tribunal is that in view of the explanation clause the assessee would be entitled to avail the benefit of such service tax in order to claim the Cenvat Credit thereof. In view of the detailed reasoning given in Nahar Exports Ltd. case - (2007-TIOL-1907-CESTAT-DEL) = [2008(9) STR 252] in relation to the explanation clause, in the absence of any other material which could justify a different view in the matter, we do not find any justifiable reason to take a different view.
8. Therefore, following the decision of the Tribunal in case of Shri Tubes & Steels Pvt Ltd (supra), the appellants are entitled to pay service tax through Cenvat Credit account for the period prior to 19.4.2006 and, therefore, the three appeals involving the period prior to 19.4.2006 are allowed.
9. As regards the period beyond 18.4.2006, the Explanation to Rule 2 (p) was withdrawn on 19.4.2006. It is contention of the appellant that they should be treated as service provider in view of the legal provisions imposing the burden of paying the service tax till the law was further amended on 1.3.2008. I find that all the decisions are in favour of the appellants for holding them to be service provider solely on the ground of Explanation of the definition of output service under Rule 2 (p). Hence the deletion of the Explanation with effect from 19.4.2006 the benefit of these decisions cannot be extended to them for the period from 19.4.2006. Therefore, as far as the period beyond 18.4.2006 is concerned, I hold that the appellants are not entitled to utilize the Cenvat Credit for payment of service tax on Goods Transport Agency service and therefore the demand of duty and interest by the department are justified. However, considering the nature of the issue where the different interpretation are being taken by the authorities I hold that imposition of penalty in respect of the period from 19.4.2006 is not justified and therefore the penalties in the matters covering the period after 19.4.2006 are set aside. In the appeal covering the period 1.4.2006 to 30.9.2006, the original authority is direct5ed to requantify the amount of service tax payable by the assessee from 19.4.2006 to 30.9.2006. This appeal is disposed of in this term.
10. Three appeals covering the period prior to 19.4.2006 are allowed and in the fourth appeal covering the period 1.4.2006 to 30.9.2006 the penalty is set aside and the service tax amount is to be requantified from 19.4.06 to 30.9.06.
(Pronounced in Court 21.10.2011.) (Sahab Singh) Member (Technical) rk 9