Custom, Excise & Service Tax Tribunal
Reliance Gas Transportation ... vs Commissioner Of Service Tax on 6 April, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. ST/88514/14 (Arising out of Order-in-Appeal No. 43/ST-11/RS/2014 dated 22.05.2014 passed by Commissioner of Customs, Central Excise, & Service Tax, Mumbai II) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, 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 : No 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?
Reliance Gas Transportation Infrastructure Ltd.
Appellant Vs. Commissioner of Service Tax Mumbai II Respondent Appearance:
Shri Vipin Kumar Jain, Advocate Shri Vishal Agarwal, Advocate for Appellant Shri V.K. Singh, Spl Counsel for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing: 06.04.2016 Date of Decision: ..
ORDER NO Per: M.V. Ravindran The undisputed fact of the case is that the Appellant is rendering Transportation of Gas through pipeline services, for which it has laid cross country pipelines from Kakinada in Andhra Pradesh to Bharuch in Gujarat, spanning around 1285 kms, over which right of way has been granted to it by the respective State Governments.
2. The said pipe line was commissioned in March 2009. The dispute in hand relates to the Cenvat Credit availed on input services and capital goods between March 2008 and March 2009 i.e. prior to the commissioning of the pipeline. The credit on input, input services and capital goods availed after the commissioning of the pipe line, though disputed in the show cause notice, have been held by the respondent to be admissible, which finding has become final as the same was not reviewed nor appealed against.
3. The credit in respect of the following input services is in dispute:
i) Services rendered by the pipeline laying contractors who have been appointed by the Appellant for laying the pipeline, which was used for rendering its output service.
ii) Services rendered by service providers who were appointed by the Appellant, for rendering interalia the following services;
a) design and engineering the pipeline,
b) GTA services,
c) Rent-a-cab services,
d) CHA services,
e) Business Auxiliary services, etc. These service providers are for ease of reference being referred to hereinafter as other than pipeline laying contractors.
4. The credit on capital goods which is under dispute was undisputedly availed on specified capital goods such as pipes, valves, pumps, and compressor. The credit on the very same capital goods, availed post commissioning of the pipeline is not in dispute.
5. The notice issued to the appellant sought to deny the credit availed by it on the services rendered by the pipeline laying contractor only on the ground that the said input services resulted in the creation of an immoveable property. Insofar as credit on the services rendered by the other service providers, i.e. other than the pipeline laying contractors as also in respect of capital goods is concerned the only ground on which the notice sought to deny credit was that the same were required by the pipeline laying contractors for rendering their services and could not be said to be input services and capital goods for the Appellant.
6. The Respondent has, in the order impugned before us upheld the denial of the input service credit of the tax paid by the pipeline laying contractors on the ground that the said services were availed of for creation of an immovable property and that the Larger Bench of the Tribunal has in the case of Bharti Airtel vs CCE 2012-TIOL-209- CESTATMUM has held that credit on goods and services used in the erection of a telecom tower, which is a immoveable property, cannot be availed under the Cenvat Credit Rules. The respondent has also held that there was no direct nexus between the credit availed and the output services to be rendered and in the absence of the same credit could not be readily admissible. Insofar as the credit on other input services and capital goods is concerned, the respondent has denied the same only on the ground that appellant was under an obligation to provide the input services and the pipes, valves, compressor, etc (capital goods) for the purpose of laying the pipeline, consequently credit on the same was not admissible in the hands of the appellant and would be an input/input service for the pipeline laying contractor, who could have taken credit.
7. We have heard Shri Vipin Jain, Ld Counsel for the Appellant, who has contended that :
(i) Insofar as the credit availed of the tax paid by the pipeline laying contractors is concerned, the same was clearly admissible as without availing of the said services it could not have been rendered the output services of transportation of good through pipeline. Further the definition of input service at the relevant time specifically envisaged and provided that credit of input services used for setting up, modernization, renovation or repair of a factory, premises of a provider of output service or an office relating to such factory or premises would be admissible. The issue regarding admissibility of credit on input services used for construction, used for setting up of a factory or warehouse had specifically considered and held to be admissible by the Honble Punjab and Haryana High Court in the case of CCE vs Bellsonica Auto Components India Pvt Ltd 2015 (40) STR 41 (P&H). To the same effect is the decision of the CESTAT in the following cases:
a) Gujarat State Petronet Ltd vs CCE - Order No.10473-10477/WZB/AHMD/2013 dated 15.4.2013 and the ROM order thereon viz: Order No.A/14188-14190/WZB/AHMD/2013 dated 18.9.2013.
b) Carrier Air conditioning and Refrigeration Ltd vs CCE 2016-TIOL-450-CESTAT-AHM.
c) Vamona Developers Pvt Ltd vsCCE 2015-TIOL-2705-CESTAT-AHM
d) MCA vs CCE 2015-TIOL-2418-CESTAT-AHM
e) Varun Industries vs CCE 2015 (317) ELT 731 CESTAT
ii) Insofar as the decision in the case of Bharti Airtel that has been relied upon by the Respondent is concerned, it was submitted that the said decision was concerned only with the admissibility or otherwise of cenvat credit of various steel items as inputs/capital goods and there was no dispute therein with regard to credit on input services.
iii) Insofar as the credit of the tax paid by the service providers other than the pipeline laying contractors and credit on the capital goods is concerned it was submitted that the Respondent has proceeded on a misconceived premise that it was admitted that the services/goods were actually not used by the Appellant but were supplied to the pipeline laying contractors for laying the pipeline, which was a baseless finding.
iv) It was also submitted that the entire demand was barred by limitation as before availing credit the Appellant had specifically under cover of its letter dated 28.7.2006 informed the jurisdictional Assistant Commissioner about the business operation it was to conduct as also its intention to avail cenvat credit on various inputs/input services and capital goods that were to be used for providing the output services. In that letter the Appellant had specifically pointed out that the pipes that would be laid would be embedded to the earth and had sought permission to avail credit. The Assistant Commissioner had after taking due note of the Appellants submissions, informed it that it was eligible to avail credit under cover of its letter dated 11.10.2006. Further the fact of availment of credit from time to time was also reflected in the ST-3 returns.
8. Shri V K Singh the Ld. Special Counsel, for the respondent has contended that Appellant being a service provider was entitled to avail cenvat credit on the inputs, capital goods and input services received by it, however in the Appellants case the pipeline laid by the contractor was an immoveable property, which is neither capital goods nor input services and consequently credit was not admissible. Further for credit on input services to be held as admissible there has to be a direct nexus between the input service and the output service. Only in the case of a manufacturer would credit be admissible even if services have been indirectly used and not in the case of a service provider. Insofar as, limitation is concerned the Appellants letter dated 28.7.2006 had not disclosed the fact that it would be appointing contractors to lay the pipe line and consequently it could not be said that there was complete disclosure of facts so as to resist the ground of limitation.
9. Having examined the submissions made by both sides, we find that the show cause notice and the impugned order have categorized the denial of credit into two distinct categories:
i) Denial of the credit in respect of the tax paid by the pipeline laying contractors on the premise that the said services had been availed of for creation of a immoveable property
ii) Denial of Credit in respect of the other service provider and in respect of capital goods on the ground that the same were not used by the Appellant for rendering its output service but were instead used by the pipe line laying contractors.
10. Insofar as the denial of the credit of tax paid by the pipe line laying contractors is concerned, the ground assigned by the Respondent for denying credit is clearly fallacious and contrary to the definition of input services, which is reproduced here-in-below for ease of reference.
(l) input service means any service,-
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the 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, modernization, 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, 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 upto the place of removal.
A perusal of the definition of input services shows that the definition of input service has two main limbs qua one a service provider and another qua a manufacturer. There is also an inclusive limb which is common to both, a service provider and a manufacturer.
11. The main limb of the definition of input service provides qua a service provider stipulates that credit would be admissible in respect of any service used by a provider of output service for providing an output service. We are concerned here with credit of service that has been used for laying a pipeline, which by itself was used for providing the output service of transportation of gas through pipeline. There cannot be a more direct immediate nexus, between availing the input services and rendition of output service. It is beyond our comprehension as to how the Appellant could have rendered its output service without availing of the services of the pipeline laying contractors. The said services in our view are clearly eligible to credit by virtue of the main limb of the definition of input services.
12. Even otherwise the inclusive limb of the definition also specifically covers services used in relation to setting up, modernization or repair of a factory, premises of a provider of output service or an office relating to such factory or premises. It is not in dispute that the services used for laying of the pipeline were used for setting up the premises of the provider of output service. What is being contended by the Revenue is that the credit of the input services used for setting up was not admissible as the premises that were set up, were an immoveable property. We do not find any merit in the contention of the Revenue that credit would be admissible only in respect of such factory/premises that are not immoveable. This artificial division and distinction which the Revenue seeks to introduce in the definition of input service is clearly baseless and contrary to the plain language used in the definition of input service. To us it appears completely inconceivable that when the Central Government framed the definition of input service to cover therein services used for setting up a factory /premises of an output service provider, it intended to cover only such input services that were consumed in relation to setting up a factory/office that was mobile or could be moved from one place to other and not a factory or office that was attached to earth and immoveable. To our understanding it is only in exceptional situations that one can have factory/premises which are not immoveable, most factories and premises will be immoveable. In our view any service used in relation to setting up a premises of output service provider is eligible for credit and the concept of movability or immovability, is irrelevant for determining eligibility to input service credit.
13. The aforesaid view of ours also finds support in the judgement of the Honble Punjab and Haryana High Court in the case of Bellsonica Auto Components India Pvt Ltd 2015 (40) STR 41 (P&H), wherein the Honble High Court had upheld the order of the CESTAT holding that credit was admissible on the input services used for construction of a factory building for a manufacturer. The Honble High Court held that credit was admissible by virtue of the main limb of the definition of input services as also the inclusive limb of the definition. The relevant observations of the Honble High Court are extracted herein below for ease of reference:
8.?The land was taken on lease to construct the factory. The factory was constructed to manufacture the final product. The land and the factory were required directly and in any event indirectly in or in relation to the manufacture of the final product and for the clearance thereof up to the place of removal. But for the factory the final product could not have been manufactured and the factory needed to be constructed on land. The land and the factory are used by the manufacturer in any event indirectly in or in relation to the manufacture of the final product, namely, metal-sheets. The respondents case, therefore, falls within the first part of Rule 2(l) aptly referred to by Mr. Amrinder Singh as the means part.
9.?The respondents case also falls within the second part of Rule 2(l) i.e. the inclusive part. The definition of the words input service also specifically includes the services used in relation to setting up of a factory. Mr. Amrinder Singh rightly contended that it was not the Appellants case that the services were not used for the setting up of the factory. The doubt in this regard is set at rest by the second part of Section 2(l)(ii) which includes within the ambit of the words input service the setting up of a factory and the premises of the provider of the output service. The inclusive definition, therefore, puts the matter, at least so far as the payment for services rendered by the civil contractor for setting up the factory is concerned, beyond doubt. As the plain language of Section 2(l)(ii) indicates, the services mentioned therein are only illustrative. The words includes services establish the same. It can hardly be suggested that the lease rental is not for the use of the land in relation to the manufacture of the final product.
14. To the same effect is the ratio laid down by a co-ordinate bench of this Tribunal, in the case of GSPL Ltd vs CCE (supra) wherein this Honble Tribunal has in para 5.3 of its order dated 15.4.2013 held that credit of the tax paid by the EPC contractors in respect of the services for laying of the pipeline was admissible in the hands of the service recipient. The relevant observations of the Tribunal in this regard are extracted herein below:
As regards the service rendered by the EPC contractors the grounds canvassed is that what has emerged is an immoveable property which is neither a service nor goods. In this case, it has to be noted that the EPC contractor has not paid service tax on the pipeline system but on the services provided for constructing the system. Definition of input service clearly covers this and it cannot be said that the service is not provided to output service..
15. The Appellant has cited several other decisions of the CESTAT on this issue, having otherwise come to the conclusion that on a plain reading of the definition of input services, Appellant was eligible for the credit of the tax paid by the service provider in respect of the services rendered for laying of the pipeline, we are not adverting to the other authorities that had been cited by the Appellant in its favour.
16. Before concluding, it will be not out of place to mention here that the decision of the Honble Bombay High Court in the case of Bharti Airtel, which was relied upon by the Ld. Authorised Representative appearing for the revenue, does not in any manner further the case of the Revenue and is completely inapplicable to the facts of the present case. The Honble High Court in Bharti Airtel was concerned only with the eligibility to credit on various steel items such as tower parts and shelters/pre-fabricated building which were used for fabrication of a telecom tower, which according to the assesse were being used for rendering telecom services. The issue in dispute therein was whether cenvat credit was admissible on such steel items as inputs or capital goods. There was no dispute therein with regard to credit on input services if any. The said judgement does not at all deal with the scope and ambit of the definition of input services which has been dealt by two other co-ordinate benches of the Honble High Court in the case of Ultra Tech Cement vs CCE 2010 (20) STR 57 Bom and Coca Cola India Pvt Ltd vs CCE 2009 (15) STR 657, wherein it has been specifically held that the definition of input services is wider than the definition of inputs.
17. The other decision which the Ld. Counsel of the Revenue relied upon was that the Larger Bench of the Tribunal in the case of Tower Vision India Pvt Ltd vs CCE 2016 TIOL 539 CESTAT-DEL-LB. The said judgement also was dealing with the dispute with respect to eligibility of cenvat credit of then duty paid on MS angles, channels/parts of tower, etc, which were used for fabrication of telecom towers, as inputs or capital goods. This judgement also does not deal with eligibility of cenvat credit on input services and consequently cannot be relied upon to deny input service credit in the hands of the Appellant.
18. The other set of input service credit which has been denied in the impugned order is in respect of the tax paid by the other service providers, who were engaged by the Appellant to render various services, other than that of laying of the pipe line. The Respondent has also denied credit on capital goods such as pipes, valves, compressors, etc. Both these credits have been denied by the Respondent on the sole premise that the same were not input services and capital goods for the Appellant but were in the nature of input and input services for the pipeline laying contractors, who if at all could have availed credit in respect of the same. The Appellant has demonstrated before us that it was eligible to avail cenvat credit of services rendered by the other service providers, who were engaged by the Appellant for engineering and designing the pipeline;(consulting engineer services) for movement of pipes and other materials (GTA); for movement of the Appellants personnel as also of the contractor engaged by it (Rent-a-cab); for clearances of the pipes and other material imported by it (CHA); as also for coating of the pipes that were to be laid, (BAS). All these service providers wereengaged, contracted and paid for by the Appellant. It is the Appellant who has availed the services from the different service providers for ultimate rendition of its output services, being transportation of goods through pipeline.
19. The mere fact that some of these services could as well have been contracted for, by the pipeline laying contractors if the agreement between the Appellant and the pipeline laying contractor so envisaged, such a hypothetical possibility cannot lead to denial of credit in the hands of the Appellant, who has contracted for and availed of the services. In any service contract, it is the scope of the agreement between the service provider and the service recipient that is relevant and needs to be examined for determining the scope of service. To give a simple illustration, a maintenance contract may provide that in case of a break down the part to be replaced be provided by the service recipient it can as well provide as in the case of in a comprehensive contract, that it is the service providers responsibility to source and replace that part that is to be replaced. In the former example,if the the part being replaced is of a specified machinery falling under chapter 85, 84, 90, the part so procured would be eligible for credit in the hands of the service recipient as capital goods. While on the other hand in the later type of contract, where it is service providers obligation to supply and replace the part, then the very same part would have been eligible to credit in the hands of the service provider as an input being used for rendition of an output service. We are not concerned in this case with the later type of contract. From the record it clearly comes out that the privity of contract in the instant case was between the Appellant and the service provider and that these service providers were under no obligation whatsoever to the pipeline laying contractors nor were the pipeline laying contractors under any obligation to pay for the said services or to compensate or otherwise for the deficiency in the services of the said service providers. This being the case the finding that services availed of from the other service providers as also the capital goods were used by the pipeline laying contractors is clearly untenable.
20. We find that the coordinate bench of the Tribunal has in the case of GSPL in its clarificatory order dated 18.9.2013 addressed a similar issue and held that were a service provider is engaged by a service recipient, credit cannot be denied in the hands of the service recipient on the premise that the services could have been input services for a contractor who had been engaged by the service recipient. The relevant finding of the Tribunal in this regards are extracted herein below for ease of reference:
....................It can be seen from the above reproduced findings that we had only considered the ineligibility of cenvat credit of the service tax paid by the service provider on the inputs services received by the EPC contractors. We had not recorded any findings on the input services received by the Appellant directly from the service providers in respect of the laying down of the pipelines system. We also note that in paragraph No.5.3, we have specifically stated that the service tax paid by the EPC contractors is for the services rendered by them for constructing the pipeline system and definition of input services clearly covers this kind of services and cenvat credit is eligible to be availed of services tax paid by EPC contractors. To that extent, it needs to be clarified that any service tax paid by the Appellant himself to the service providers in respect of Engineering Consultancy, Inspection services, etc, received from other contractors directly and used in execution of the pipeline system which is used the Appellant for providing an output services i.e. Transportation of goods through pipelines or other conduit services they are eligible to avail cenvat credit. .
21. The Ld Authorised Representative appearing for the revenue did not seriously dispute that the ratio laid down by the Tribunal in the case of GSPL would apply insofar as credit availed of the tax paid by the other service providers as also in respect of the capital goods. The Ld Authorised Representative however contended that since the said input services and capital goods were utilized for laying of the pipeline which was embedded to the earth and consequently an immoveable property, credit on the input services and capital goods would not be admissible and inn support of this contention reliance was placed on this judgement of the Honble Bombay High Court in the case of Bharti Airtel Ltd supra.
22. Though the submission made by the Ld Authorised Representative for the Respondent is beyond the scope of the allegation levelled in the notice as also the findings of the Respondent and merit rejection on this count alone, we also find that the same is otherwise also completely untenable.
23. Insofar as the inapplicability of the Judgement of the Honble High Court in the case of Bharti Airtel to the credit on input services is concerned, the same has already been dealt by us in the preceding part of the order. We accordingly hold that the contention of the Ld Special Counsel was in error in contending that credit on input services was not admissible as the same had been used in respect of laying of a pipeline, which became an immoveable property.
24. Coming to the credit on capital goods, it is not in dispute that pipes, valves and compressor on which credit had been availed are all specified capital goods on which credit is available as capital goods. There is also no dispute that there pipes, valves, compressors are all being used for rendition of the output service. The limited issue, which needs to be examined is whether the judgement of the Honble Bombay High Court in the case of Bharti Airtel can be so interpreted to mean that credit in respect of goods, which qualify as capital goods, can be denied only by virtue of the fact that the same have been made immoveable for their utilization purposes.
25. We find that the Honble High Court in the case of Bharti Airtel was concerned with the credit on steel items which are not specified capital goods. Even the Tower that was erected was classifiable under chapter 7308, is not specified capital goods. It is in this context that the Honble High Court held that credit was not admissible as capital goods since the items on which credit was availed were not specified capital goods nor the items into which they were fabricated was a specified capital goods. On the alternate contention of the assesse therein that credit on the angles, channels which were used for the fabrication of the tower which was to house the base trans receiver station was admissible as an accessory for the base trans receiver station is concerned, the Honble High Court has held that Angles, Channels could not be said to be components, spares and accessories of the base trans receiver station, which is a specified capital goods.
26. The decision of the Honble High Court has been rendered in the context of the specific facts of that case. It is settled law laid down by the Apex Court that a decision or an order is not to be applied as Euclids theorem and that one additional or different fact can make a world of difference to the conclusion arrived at Alnoori Tobacco Products vs CCE 2004 (170) ELT 135. In the instant case the pipes, compressor, valves, etc on which credit has been availed as capital goods are undisputedly all specified capital goods by themselves. The right to avail credit in respect of such capital goods accrues the minute they are received in the premises of the provider of output service provider. The same have also clearly been used for rendering the output service, as without the valves, pipes, compressors, etc, the service of transportation of goods through pipeline would not have been rendered. The right to avail credit in respect of the same is clearly indefeasible.
27. We further note that the facts in the case of Bharti Airtel being clearly distinguishable from the facts in the resent case, the ratio laid down therein does not in any manner lead to the conclusion that capital goods which are otherwise eligible to credit would cease to be capital goods by virtue of the mere fact that the same have been made immovable for their effective utilization. If this was the logic to be applied, then the very scheme for credit on capital goods which was introduced from the year 1994 would be a nullity and a dead letter in as much there is hardly any machine, which is not made immovable for its effective utilization. In our view as long as the goods on which credit are being availed in their receipt to the factory or the premises of the service provider qualifies as capital goods, the mere fact that the same are being subsequently immoveable subsequently for their effective utilisation cannot be a ground for denying credit as capital goods.
28. We find that the coordinate bench of this Tribunal has in the case of CCE vs JSW Ispat Steel Ltd reported in 2015 (327) ELT 549 has specifically dealt with this very issue. The relevant observations are extracted herein below:
5.1?As per Rule 2(a) of Cenvat Credit Rules, 2004, capital goods means :-
(A) the following goods, namely :-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank, used -
(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service; Thus, it includes not only goods falling under Chapters 82, 84, 85 and 90, which are machinery, equipment, appliances and also components, spares and accessories of the goods falling under the aforesaid Chapters. In the present case, the plant has been set up using various machinery and equipments falling under Chapter 82, 84, 85 or 90 or components, spares or accessories of these goods and these facts are not disputed. Merely because the various machinery, equipment, appliances and parts have been assembled at the site to set up the Oxygen Plant and such a plant being immovable property, Cenvat credit is sought to be denied. Nowhere in the Cenvat Credit Rules, it is envisaged that the machinery, equipment, appliances or their components should be used as such in the manufacture of excisable goods. The manufacturing plant facility in a factory would comprise of a number of capital goods and all these things have to be assembled together so that they act in unison to perform the required processes. For example, in a sugar factory there may be a Boiler plant for generation of steam, a crusher installed for crushing of the sugar cane, a distillation plant for undertaking the various chemical processes involved in the manufacture of sugar. The boiler, crusher and distillation equipment, all have to be assembled together to form a sugar plant. Merely because all have been assembled together to form a sugar plant, can it be said that the capital goods credit cannot be allowed on Boiler, Crusher or a distillation equipment. Such a view according to us results in an absurd situation. In none of the manufacturing plants, all the machineries can be used as such and directly, the various machineries and equipments have to function in conjunction and in unison with each other and for this purpose, they are assembled into a plant. Merely because all the individual equipment, machinery or components are assembled together, it will be pre-posteriors to suggest that the capital goods credit cannot be allowed on this individual machinery/equipment or appliances. The purpose of allowing capital goods credit is to relieve the burden of cascading effect of taxes. If that purpose is to be achieved in a meaningful way, the law has to be interpreted in a reasonable manner so that the object is achieved.
5.2?In the decisions relied upon by the Appellant, the issues contested by the Revenue have been adequately addressed. For example, in the case of Pepsi Foods (supra), it has been held that ownership of goods is not a criterion for denial of credit on capital goods and even if it is leased for a particular period, the assessee is eligible to take Cenvat credit. In the present case, merely because M/s. Inox Air Products Ltd. has leased out the plant to the Appellant, that does not disentitle the Appellant from availing Cenvat credit of the excise duty paid on capital goods. Similarly, in the case of Gujarat Ambuja Cement Ltd. (supra), Rajarambapu Patil SSK Ltd. (supra) and KCP Ltd. (supra), this Tribunal and the Honble High Court of Himachal Pradesh held that Cenvat credit of excise duty paid on parts, components and accessories would be admissible under the Capital Goods Credit scheme even if they are assembled into goods which are immovable or exempted. Similarly, in the ICL Sugars Ltd. (supra), it was held that immovability has no bearing on eligibility for availment of Cenvat credit on capital goods. In the light of these decisions, the interpretation of law undertaken in the impugned order does not appeal to any common sense or logic. So long as the individual machinery, equipment or appliance or parts and components thereof fall within the definition of capital goods under Rule 2(A) of the Cenvat Credit Rules, 2004 and so long as they are used within the factory of production for the manufacture of excisable goods which are chargeable to duty, the benefit of capital goods credit cannot be denied and we hold accordingly.
5.3?As regards the reliance placed by the Revenue on the Vandana Global (supra), the said case did not deal with the admissibility of Cenvat credit on capital goods. The issue before the Larger Bench was whether angles, channels, cement, etc., used in the erection of structures for the support of capital goods would be eligible for capital goods credit as parts and components of capital goods. The Larger Bench held that such cement, angles, channels, components, etc., used in the fabrication of structures for installation of production machinery cannot be considered as inputs for the manufacture of capital goods and, therefore, it was held that they will not be eligible for the Cenvat credit of excise duty paid under the category of capital goods. In the said decision, there was no finding by the Larger Bench stating that capital goods credit is not admissible in respect of machinery, equipments and appliances used within the factory of production which were used in the assembly of the manufacturing plant. Therefore, the facts of the said case are completely different and distinguishable from the facts of the present case and, therefore, the ratio of the said decision is not applicable to the present case. Similarly, in the case of Bharti Airtel Ltd. (supra), the question before the Tribunal was whether the erection of a tower consisting of various Iron & Steel items and cement can be considered as capital goods and this Tribunal held that tower per se is not capital goods as it does not undertake any process either in relation to manufacture of goods or in the rendering of any services and, therefore, it was held that iron and steel products and cement which have gone into the erection of any immovable property cannot be considered as capital goods. Thus, the facts involved in the said case are also completely different and distinguishable from those involved in the case before us. Therefore, the ratio of the said decision also has no application.
6.?In view of the above, we are of the considered view that the Appellants are rightly entitled for capital goods credit on various machinery, equipment, appliances and parts and components thereof used in the setting up of oxygen plant within the factory premises. Thus the order denying the capital goods credit is unsustainable in law. Accordingly, we set aside the same. Since the impugned order is set aside, the appeal filed by the Revenue against the corrigendum issued becomes infructuous and therefore, the Revenues appeal is liable to be dismissed.
29. In view of the above, we hold that the additional ground urged by the Ld Counsel also does not further the case of the Revenue and the Appellant is as such clearly entitled to the credit of the capital goods in question.
30. We also note that the demand raised against the Appellant is hopelessly barred by limitation inasmuch as the Appellant had made a clean breast of all the relevant facts under cover of its letter dated 28.7.2006 before availing credit. In this letter the Appellant had clearly informed the jurisdictional Assistant Commissioner about the business Model that it was to follow and of its intention to avail credit on the input, input services and capital goods that it was to use for rendering its output service. The Appellant had also informed the Revenue of the fact that the pipeline which is being laid would be embedded to the earth. We find that the Jurisdictional Assistant Commissioner had after taking note of the submissions made, informed the Appellant under cover of letter dated 11.10.2006 that it was eligible to avail credit in respect of input, input services and capital goods subject to its maintaining appropriate records. Given the aforesaid facts we are of the view that there has absolutely no suppression whatsoever on the part of the Appellant so as to warrant invocation of the extended period of limitation. In fact the Appellant had been more than forth right in making its disclosure. It appears that the Revenue had initially agreed to the Appellants entitlement to the eligibility to credit and as for this reason did not raise any objection from 2006 onwards, since then the Appellant has been availing credit. Even on the subsequent audit that were conducted by the anti-evasion team in the year 2010 and C&AG in the year 2012, no such objection seems to have been raised. If the revenue on a later date wants to take a different view in the matter there is definitely no warrant alleging suppression of facts and invoking the extended period of limitation.
31. In view of the foregoing, we find that on merits as well as on limitation the appeal filed by the appellant needs to be allowed and accordingly hold so.
32. Impugned order is set aside and the appeal is allowed.
(Pronounced in Court on.) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) nsk ??
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1 30Appeal No. ST/88514/14