Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S. Jeans Knit Pvt. Ltd on 9 December, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/20045/2014-SM, E/20046/2014-SM, E/20047/2014-SM, E/20048/2014-SM, E/20049/2014-SM, E/20050/2014-SM, E/20051/2014-SM, E/20052/2014-SM, E/20053/2014-SM, E/20055/2014-SM, E/20054/2014-SM, E/20056/2014-SM, E/20057/2014-SM, E/20058/2014-SM, E/20059/2014-SM, E/20060/2014-SM, E/20061/2014-SM [Arising out of Order-in-Appeal No. 492-520/2013 dated 04/10/2013 passed by Commissioner of Central Excise , BANGALORE-II (Appeal) ] Commissioner of Central Excise, Service Tax And Customs Bangalore-II PB 5400 CR BUIDING, QUEENS ROAD, BANGALORE 560 001. Appellant(s) Versus M/s. Jeans Knit Pvt. Ltd No.21, E1, II Phase, Peenya Industrial Area, BANGALORE - 560058 KARNATAKA Respondent(s)
Appearance:
Shri Mohammed Yousuf, AR For the Appellant Shri Ashok Deshpande, Advocate For the Respondent Date of Hearing: 09/12/2016 Date of Decision: 09/12/2016 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order No. 21375-21391 / 2016 Per : S.S GARG The department has filed 17 appeals against the impugned order dated 4.10.2013 passed by the Commissioner (A) vide which the Commissioner (A) dismissed 29 appeals filed by the Department against the Order-in-original. Out of 29 appeals filed by the department before the Commissioner (A), the Department has chosen to file only 17 appeals which are being disposed of by this common order, as in all these cases, the issue involved is refund of unutilized CENVAT credit in terms of Rule 5 of CENVAT Credit Rules (CCR), 2004 relating to various input services. All the appeals arise out of common impugned Order-in-Appeal No. 492-520/2013-CE dated 4.10.2013, the details of the appeals are furnished below: Sl.
No. Departmental Appeal Nos.
Period Refund Claim (Rs.)
1.
E/20045/2014 November 2010 7,97,709
2. E/20046/2014 July 2010 7,12,796
3. E/20047/2014 December 2010 7,19,586
4. E/20048/2014 August 2010 5,80,647
5. E/20049/2014 November 2009 58,70,982
6. E/20050/2014 September 2010 6,36,658
7. E/20051/2014 June 2010 6,02,419
8. E/20052/2014 October 2009 28,97,032
9. E/20053/2014 May 2010 6,51,409
10. E/20054/2014 March 2010 6,28,671
11. E/20055/2014 February 2010 6,08,181
12. E/20056/2014 October 2010 6,48,893
13. E/20057/2014 January 2010 7,62,213
14. E/20058/2014 February 2011 11,43,856
15. E/20059/2014 August 2011 8,32,863
16. E/20060/2014 January 2011 8,89,254
17. E/20061/2014 April 2010 6,59,184
2. Briefly the facts of the case are that the appellant is a 100% EOU holding a private bonded warehouse license and in-bond manufacture sanctioned order dated 29.11.2001 and is engaged in the manufacture and export of readymade garments falling under Chapter 62 of the Fist Schedule of CETA. The assessee filed various refund claims pertaining to different periods claiming refund of unutilized CENVAT credit under Notification No.5/2006-CE dated 14.3.2006 on various services. The Asst. Commissioner of Central Excise, Bangalore vide Order-in-Original dated 19.5.2011 sanctioned refund claims of the assessee. Aggrieved by the said order, Department filed appeal before the Commissioner (A) who vide common order in 29 appeals dated 4.10.2013 rejected the appeals filed by the department. Aggrieved by the said order, the Department has filed only 17 appeals before the Tribunal.
3. Heard the learned AR and the counsel for the respondent.
4. The learned AR submitted that the common impugned order passed by the Commissioner (A) is not sustainable in law as the appellate authority has dismissed the appeals of the department by relying on the decision of the Honble Tribunal passed in respect of the same assessee which has not attained finality and an appeal has been filed before the Honble High Court. He further submitted that the essential test for determining the admissibility of CENVAT credit on input service is their usage in the manufacture of their final products or providing output service. He also submitted there should be nexus between the manufacture and export of goods. He also submitted that the Notification No.5/2006 has been amended retrospectively in the Budget for the year 2010-11 to amend the words used in the manufacture of final products to used in or in relation to the manufacture of final products.
5. In reply to the submissions made by the learned AR, the learned counsel for the assessee submitted that the issue of refund of unutilized CENVAT on various input services involved in the present appeals has already been decided by the Honble Tribunal in the respondents own case for an earlier period which is reported in 2011 (21) STR 460 (Tri.-Bang.). He further submitted that the department has not accepted this Tribunals Final Order and had appealed against the same before the Honble High Court of Karnataka and the same was dismissed as not maintainable. Hence, the Department is bound by the CESTATs final order. He further submitted that the Department has accepted the Honble High Courts order, which is evident from the Order-in-Original dated 28.2.2015 and order dated 29.5.2015 passed by the Additional Commissioner of Central Excise, Bangalore. The learned counsel further submitted that both the authorities below have rightly sanctioned the refund claims of the assessee after examining the nexus and all other conditions of the Notification No.5/2006. The assessee has also filed in a tabular form the various services involved, its nature of services and its usage with justification of nexus or integral connection which is reproduced herein below:
Sl. No. Nature of Services Utility Justification as to Nexus or Integral Connection
1.
Banking & Other Financial Service Opening of LC, FOREX payments and other financial support such as pre-shipment for imports. Most of the financial transactions relate to payment for imports and realization of export proceeds. The receipts and payments in the FOREX have to be routed only through registered foreign exchange dealers viz., banks as per the RBI guidelines and FEMA. It is mandatory on the part of the company to use the banking channels and contravening the same would be a FEMA violation and it will jeopardize the business organization.
2. Business Auxiliary Service Sub-contracting for job work.
It is impossible to have all the manufacturing activity required for any production process by the manufacturer at one place, especially in the garment manufacturing industry. For core competitiveness, they need to outsource part of the production process to job workers.
3. CA Service (Audit, Accounting & Secretarial) For VAT Accounting/Tax Consultancy/Secretarial and Statutory Audit of Books of Accounts. As per the Companies Act, 1956 and Income Tax Act, 1961, it is mandatory to have the books of accounts audited. Non-compliance will lead to penal action and ultimately the closure of the Company.
4. Cleaning Activity (Disinfecting) Fumigation/Disinfecting/Exterminating Storage and Work-in-Progress area. Exterminating of insects, rodents and other animal forms which transmit disease and which will destroy the stocks is an essential service to keep the control over the quality and efficiency of the work force.
5. Clearing Charges (Courier - Import) Import of sample merchandise, pre-production samples.
Before bulk importation of raw materials and accessories, pre-production samples are imported for test and trials. Based on feedback the bulk production is taken up. The quality of the finished product will be badly affected if the quality of raw materials is sub-standard or does not pass the test. Hence to cater to this need, the service of couriers is required.
6. Commission & Erection Erecting of Generator Sets and Diesel Engines.
For the routine maintenance and erection of diesel gen sets, the services of the experts and company authorized service providers are availed to keep the generator set in proper running condition.
7. Excise Duty Duty paid on inputs used in the manufacture of final products.
Rule 5 read with notification no.5/2006 CE-NT provides for refund of unutilized cenvat credit in respect of inputs and input services used in or in relation to manufacture of exported final products.
8. Import Clearing Charges (CHA) Import Clearance through gateway port.
For the production of final products, 100% of the raw materials are imported. The volumes are huge and are imported through various gateway ports. It is impossible to do customs clearance independently for the timely requirement of merchandise and cost effectiveness. The CHAs are facilitators with the departmental officials with regard to inspection of imported cargo, drawing of samples, etc. So, non-availment of CHA service will adversely affect the efficiency of the production.
9. Import Steamer Agent (C&F Agent) Undertaking ship husbandry, filing of IGM and other administrative work with regard to import of merchandise. Generally, steamer agent is appointed by the shipping company in different ports to function on behalf of the company. Without the shipping companies, it is difficult to bring in any merchandise from various load ports. Thus the absence of this service will have an impact on the efficiency of production.
10. Information Technology Service Anti Spam/ Anti Virus Software.
The production processing machines such as cutting, embroidery, washing etc., function with computer software with internet support. In case of any virus attack, all the production process will malfunction which in turn will affect the efficiency of production.
11. Insurance Covering insurance of machinery, raw materials, stock in process, etc. It is a mandatory condition that the imported capital goods and raw materials are to be insured against various risks as they are bonded under section 58 of the Customs Act, 1962. If they are not covered by insurance, any major break down or pilferage will cost to the company and it will adversely affect the working efficiency of the company.
12. Renting of Immovable Property Payment of Rent for the premises engaged in the production of final products. There are 6 bonded premises used for in-bond manufacturing of readymade garments. The manufacturing process cannot be undertaken without premises. All the machines are to be put into operation in a safe and secure place, for which a building is required. It is not possible for the manufacturer to buy or own a premises as that would block the funds and would lead to financial crunch and in turn impact the efficiency.
13. Repair & Maintenance Undertaking the repairs of machinery, computers, UPS, generator sets, etc. There is about Rs.120 crores worth of machinery being used in day to day production process and wear and tear, deterioration are inevitable. Preventive maintenance is carried out to avoid unprecedented break downs. The non-maintenance of the machineries will impact the efficiency of the machinery and its production capacity.
14. Security Charges Providing security to property and persons.
The security engaged at each of the factory premises guard the companys interest against the pilferage of raw materials, semi-finished goods, samples and other fixed assets from external threats and disaster management. The economic well-being of the company will be impacted in the absence of security.
15. Service Charge for Fire Extinguishers Hiring of Fire Extinguishers.
Safety is a key word for efficient functioning. Any business involves various hazards and fire hazard is one of them. Measures need to be taken to protect the premises and the goods from such hazards and the expenses incurred in this regard are with respect to the business.
16. Supply of Tangible Goods Hiring of cranes to be used in the production plant.
In the processing section of the production plant, routine preventive maintenance work is carried out. As the machines are huge and sensitive cranes are used for the movement of the dismantled parts. Cranes are also used for servicing the boiler chimney, ducts for downloading machines, chemical tanks, stone bags for containers and their movement from storage area to processing machine area.
17. Telephone Charges Usage of telephone and internet for communication with regard to business. Telephone is used at the factory for marketing the products and follow-up regarding availability and supply of Raw-Materials, Consumables, spares, inputs, and making day-to-day calls to various concerns in relation to the smooth functioning of the production unit.
18. Testing Charges Testing of water, raw materials and finished products.
The raw materials have to be tested for the quality before usage. The finished goods have to be tested to check whether they meet the international standards with regards to physical, chemical, biological components. The water used in the wet processing division for washing of denim fabrics need to be tested before and after use, i.e., after passing through water treatment plant to comply with the pollution control rules. The quality of the products manufactured will deteriorate in the absence of this service.
19. Transportation Charges Inward and Outward transportation of goods.
Without transporting the imported inputs from the gateway port to the factories, no production can take place. Without moving the finished goods for export to the port there cannot be any sales activity. Therefore for an efficient production process, the transportation service is a must.
20. Workers Transportation Charges (Tour Operator) Pick up and Drop off of Employees.
To cater to the 24x7 production process, pick up and drop off of the employees is a must. The readymade garment industry is a labour intensive industry and the absence of labour force will adversely affect the quality and efficiency of the production process.
5.1 Further the learned counsel for the assessee has relied upon the following judgment, in support of his claim:
(i) Jeans Knit P. Ltd. vs. CC: 2011 (21) STR 460 (Tri.-Bang.) affirmed by the High Court of Karantaka in 2015 (37) STR J244 (Kar.)
(ii) CCE vs. Ultratech Cement Ltd.: 2010 (20) STR 577 (Bom.)
(iii) CCE, ST & C vs. J. K. Fabrics (Bangalore) P. Ltd.: 2015 (39) STR 315 (Tri.-Bang.)
(iv) Jeans Knit Pvt. Ltd. vs. CCE, Bangalore vide Final Order Nos.20711/2016, dated 31.8.2016; No.20619-20621/2016 dt. 8.8.2016; No.20765/2016 dt. 14.9.2016 passed by the Honble Tribunal Bangalore.
(v) Order-in-Original No.54-61/ADC/PI/BII/2015, dt.29.5.2015 and No.3-23/ADC/PI/BII/2015, dt.28.2.2015 passed by the Addl. Commissioner of Central Excise, Bangalore-II Commissionerate.
6. After considering the submissions of both the parties, I am of the considered opinion that there is no infirmity in the impugned order vide which Departments appeals have been dismissed by the learned Commissioner (A) by relying upon the assessees own case decided by Division Bench of this Tribunal and also upheld by the Honble High Court of Karnatakas judgment cited supra. In view of the above said discussions, I dismiss all the appeals of the Revenue and upheld the impugned order. (Operative portion of the Order was pronounced in Open Court on 09/12/2016) S.S GARG JUDICIAL MEMBER 10