Custom, Excise & Service Tax Tribunal
Franke Faber India Ltd vs Cce, Aurangabad on 30 December, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/1560/11 [Arising out of Order-in- Appeal No.AGS(136) 83/2011 dated 25-7-2011 passed by the Commissioner of Central Excise (Appeals), Aurangabad ] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
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 :
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?
=======================================================
Franke Faber India Ltd
:
Appellant
VS
CCE, Aurangabad
:
Respondent
Appearance
Shri. D.R. Gadekar, Consultant for the Appellants
Shri. S.V. Nair, Asstt. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 30/12/2016
Date of decision: 20/1/2017
ORDER NO.
The fact of the case is that appellant is engaged in the manufacture of S.S. Sinks & Parts thereof. They are also engaged it the trading activity of other goods like Taps, Bio Food Disposer etc which are accessories to sinks. They are availing Cenvat credit of duty paid on inputs and input service and capital goods. A show cause notice was issued contending that appellant is availing cenvat credit on the common input services such as Advertising Agency or Travel Agent, Business Support Service, Business Auxiliary service, Business Exhibition Service, Cargo Handling Servcie, Chartered Accountant, Clearing & Forwarding, Courier Insurance, Telephone, Manpower Recruitment and Supply, Travel Agent, CHA, Online Data, GTA, Rent-a-Cab, etc. Since these are common input services availed by the appellant for procuring, processing and selling of their goods, in the show cause notice the credit on the common input services attributed to the trading activity was proposed to be recovered as the same was not used in manufacture of dutiable goods. The adjudicating authority confirmed the demand and the Commissioner(Appeals) upheld the same therefore the appellant is before me.
2. Shri. D.R. Gadekar, Ld. Consultant appearing on behalf of the appellant as regard the trading activity, submits that it is not exempted service, the trading activity was defined as exempted service only w.e.f. 1-4-2011 therefore in terms of Rule 6 the credit is not available on the input services used in the trading activity, therefore prior to amendment on 1-4-2011 there is no provisions to deny the credit used in the manufacture as well as for trading activity. He further submits that activity of the appellant as regard the manufacturing and trading activity is well known to the department as department carried out extensive audit of entire books and accounts and excise record therefore there is no suppression of facts on the part of the appellant accordingly demand is time bar which pertains to the period 2006-07 to 2009-10 whereas show cause notice was issued on 30-7-2010, accordingly demand is for the period prior to one year of the show cause notice is time bar. In support of his submission, he placed reliance on the following judgments:
(a) Kundan Cars Pvt Ltd Vs. Commissioner of Central Excise, Pune[2016(43) S.T.R. 630(Tri. Mumbai)]
(b) Tricity Auto Vs. Commissioner of C. Ex. Chandigarh-II[2016(44) S.T.R. 601(Tri. Chan.)]
(c) Krishna Auto Sales Vs. Commissioner of C. Ex. & S.T. Chandigarh[2015(40) S.T.R. 1121(Tri. Del.)]
(d) Sanjay Automobile Engineering Pvt Ltd. Vs. Commissioner of Central Excise, Pune-II[2016-TIOL-1314-CESTAT-MUM]
3. Shri. S.V. Nair, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. I have carefully considered the submissions made by both sides and perused the record.
5. I find that the credit was denied on the ground that the common services were used in the trading activity also. Since the trading activity is not taxable, the Cenvat credit used in such activity was denied. I observe 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 CE(n.t.) dated 1-3-2011 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 provisions for either denial of credit or for reversal of the same as provided under Rule 6 of CCR. This issue has been considered by this Tribunal in various judgments. In case of Kundan Cars Pvt Ltd (supra) this tribunal after considering all the judgment 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 trading activity 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 trading activity. 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 Honble Andhra Pradesh High Court. The operative orders portion is reproduced below :
The Andhra Pradesh High Court Bench comprising Honble Mr. Chief Justice Kalyan Jyoti Sengupta and Honble 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.
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 above judgments, since the identical facts are involved the appellant is not required to reverse the Cenvat credit attributed to the trading activity of passenger cars.
As regard the judgments relied upon by the Revenue in the case of Mercedes Benz India Pvt. Ltd. (supra). I find that this matter was taken to the Honble Bombay High Court when the matter was remanded back to the Tribunal therefore the ratio of the judgment of the Tribunal cannot be applied. As regards Synise Technologies Ltd. (Supra), I find that it is a Single Member Bench decision of this Tribunal wherein the Division Bench decision of the Shariff Motors (supra) though distinguished this Synise Technologies Ltd. judgment has followed the Mercedes Benz decision of this Tribunal. Since the Tribunal order was set aside and matter was remanded, Synise Technologies Ltd. does not remain as a good law, therefore the same is of no help to the Revenue. In the case of Mercedes Benz India Pvt. Ltd. v. Commissioner of Central Excise 2014 (36) S.T.R. 704 (Tri.-Mumbai), I find that this decision is given by the Division Bench of this Tribunal where as the Division Bench decision in the case of Shariff Motors (supra) has been considered by the Honble High Court and upheld the same. In this position the Mercedes Benz (supra) decision of this Tribunal stands distinguished.
As regards limitation, I find that the Ld. Commissioner (Appeals) while dropping the penalty under Section 78 given the following finding :
From the decisions of various higher appellate authorities in the matter, it is clear that there was scope for varying interpretations during the period prior to 1-4-2011 and this appears to be the reason for introduction of Explanation under Rule 2(e) of the CCR. Therefore, I find merit in the Appellants prayer for setting aside the penalty imposed under Section 78 of the Act, considering the fact that explanation to Rule 2(e) of the CCR was added w.e.f. 1-4-2011. This is enough to establish that the matter under consideration was not free from doubt and there was indeed an ambiguity in the issue and therefore I find that the charge of intent cannot be levelled against the Appellant. Thus in absence of the ingredient such as fraud, collusion, suppression of facts, etc., with intent to evade duty, it is incorrect to impose penalty under Section 78 of the Act read with Rule 15(3) of the CCR. As regards the imposition of penalty under Section 77, I agree with the Ld. Adjudicating Authority. From the above finding, the Ld. Commissioner (Appeals) has conclusively held that in the absence of ingredients such as fraud, collusion, suppression of fact, etc., with intent to evade payment of duty, the penalty is not imposable under Section 78. The Revenue has not challenged this finding therefore the same attained finality. Considering this finding which equally applicable in case of invocation of extended period in terms of proviso to Section 73, the demand is not sustainable on the ground of time-bar also. As per my above discussion, I am of the considered view that the impugned order is not sustainable on merit as well as on limitation. Therefore the same is modified. The appeal is allowed.
Since various judgments on the issue has been considered by this Tribunal I need not to visit the other judgments cited by the Ld. Counsel. As per above decision of this Tribunal, it is clear that recovery of Cenvat credit attributed to the trading activity is not sustainable. Following the ratio of the above tribunal order, I set aside the impugned order and allow the appeal.
(Order pronounced in Court on ___________ ) Ramesh Nair Member (Judicial) sk 2 E/1560/11