Custom, Excise & Service Tax Tribunal
Cubane Speciality Chemicals Pvt Ltd vs Medchal - G S T on 7 September, 2018
(1)
Appeal No: E/30104/2018
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Single Member Bench
Court - I
Appeal No.E/30104/2018
(Arising out of Order-in-Appeal No.HYD-EXCUS- HYD-EXCUS-MD-AP2-056-17-18
dated 15.09.2017 passed by Commissioner (Appeals-II), Hyderabad)
Cubane Speciality Chemicals Pvt Ltd ..... Appellant(s)
Vs.
CCT, Medchal - G S T ..... Respondent(s)
Appearance Shri Lalit Mohan Chandna, Advocate for the Appellant. Shri P.S. Reddy, Asst. Commissioner/AR for the Respondent. Coram:
Hon'ble Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL) Date of Hearing: 04.09.2018 Date of Decision: 07.09.2018 FINAL ORDER No. A/31082/2018 [Order per: M.V. Ravindran]
1. This appeal is directed against the Order-in-Appeal No. HYD-EXCUS-
MD-AP2-056-17-18 dated 15.09.2017.
2. The relevant facts that arise for consideration are, the appellants are engaged in manufacturing paper quality products, organic compounds and water treatment chemicals falling under Chapters 29 & 38 of Central Excise Tariff Act, 1985. They registered with the Central Excise Department vide CER No.AADCC0379GXM001. They also registered with the Service Tax vide STR No.AADCC0379GSD001. The appellant is deemed manufacturer by (2) Appeal No: E/30104/2018 virtue of Chapter Note 10 to Chapters 29 & 38 of Central Excise Tariff Act, 1985 wherein Packing & re-packing / Labelling & re-labelling amounts to manufacture. As per the said chapter note read with the provisions of Rule 2 f (iii) of Central Excise Act, 1994 the appellant is deemed manufacturer as they are undertaking labelling or re-labelling and packing or re-packing of the goods under the said Chapters. They neither have any manufacturing facility nor any plant & machinery for production of the goods in their registered factory premises. They purchase goods from other manufacturers and repack and re-label them with their brand name and clear on payment of appropriate Central Excise duty.
3. The appellant has entered into a 'Royalty Agreement' with M/s Solute Consultants Pvt. Ltd., Chennai (hereinafter referred to as M/s Solute) on 29.03.2008. As per the agreement, M/s Solute have to make available the technical knowhow, technical information and assistance in production and sale of high quality, speciality chemicals used in paper and pulp industry and they also grants exclusive right to issue sub-licenses / user licences to corporate entries and / or individuals in the domestic territory and grants exclusive rights to apply for licenses to manufacture and sell the products.
4. The appellant has entered into a 'Confidentiality Agreement' with M/s Srivilas Hydrotech Pvt. Ltd., Bollaram (hereinafter referred to as M/s Srivilas) and provided certain proprietary information relating to product formulations, technology etc. which they procured from M/s Solute to M/s Srivilas and getting certain goods manufactured for them as per their requirement. M/s Srivilas manufacture the goods only for the appellants and (3) Appeal No: E/30104/2018 they maintain confidentiality of the technical information what they received from the appellants.
5. The accounts of the appellant was audited by the authorities and objections were raised as regards availment of CENVAT credit of service tax paid by the appellant to M/s Solute on the ground that the said CENVAT credit is ineligible being an amount paid as Royalty charges for technical knowhow which was raised by M/s Srivilas for manufacturing final products. Show cause notice was issued for the demand / reversal of such CENVAT credit. The appellant contested the show cause notice on merits and also on limitation. The adjudicating authority after following due process of law, confirmed the demands raised along with interest and imposed penalties. The appeal against such order also was rejected.
6. Learned counsel after giving overall picture of the issue involved, submitted that appellant herein has purchased the finished goods from M/s Srivilas and availed the CENVAT credit of Central Excise Duty paid on the finished goods and re-packed and re-labelled the same into smaller containers and cleared the same from their premises on payment of appropriate duty as being deemed manufacturer of the goods. It is his submission that the CENVAT credit of service tax paid on Royalty charges is used directly or indirectly in the manufacture of final products. He would draw my attention to the decision of Tribunal in the case of TATA Motors [2017 (50) STR 28] wherein identical issue was considered. He would submit that though initially appellant had indicated that there was understanding as a job worker between appellant and M/s Srivilas but it was an arrangement of purchase of finished goods manufactured by M/s Srivilas, (4) Appeal No: E/30104/2018 but the fact remains that appellant had shared the technology procured by them from M/s Solute, was sold by the appellant in smaller packs as deemed manufacturer. It is his further submission that the issue is also contested on limitation as appellant availed the CENVAT credit and informed the departmental authorities about the same in the monthly returns. The objection as raised by the audit party and demand on them in the show cause notice is blatantly time barred as they have taken the credit on 2011, 2012 & 2013, while show cause notice was issued in September, 2015. He submits that there is no suppression of fact nor there can be allegation that it was intent to evade duty, and they were under bonafide belief that they are eligible to avail CENVAT credit of service tax paid on royalty charges.
7. Learned departmental representative on the other hand submits that the availment of CENVAT credit of the services rendered by M/s Solute would be available only for the manufacturing of final product which was done so by M/s Srivilas. It is his submission that once finished goods are manufactured by the technology procured on payment of service charges, the question of availing CENVAT credit by the appellant does not arise as it is on records that appellant had no manufacturing capacity. It is his further submission that question of limitation raised by the appellant does not arise as appellant had tried to misdirect the queries of the department by stating that they had job worker arrangement with M/s Srivilas. It is his submission that there was an intention to avail ineligible CENVAT credit.
8. I have considered the submission made at length on both sides and perused the records.
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Appeal No: E/30104/2018
9. On perusal of records the only issue that falls for consideration is whether the appellant is eligible to avail CENVAT credit of the service tax paid by him on Royalty charges paid to M/s Solute. Undisputedly, appellant procured technology for manufacturing of speciality chemicals from M/s Solute, paid royalty charges and discharged service tax. The appellant having no manufacturing capacity of his own got the finished goods manufactured from M/s Srivilas by sharing the technology procured by them. After getting the bulk finished goods from M/s Srivilas they re-packed and re-labelled the same from bulk quantity to retail packs and discharged the Central Excise Duty as deemed manufacturer.
10. On the above factual matrix, appellant had availed the CENVAT credit of the service tax paid on the procurement of technology from M/s Solute, which in my view cannot be faulted with and demanded as being availed with an intention to evade duty. The factual matrix clearly indicates that finished goods manufactured out of the technology procured by appellant was marketed by the appellant after retail pack would itself mean that appellant entertained a bonafide belief that they are eligible for CENVAT credit of service tax paid as it is used in relation to the manufacture of final products. It is also undisputed that appellant had declared the availment of such CENVAT credit to the authorities in the monthly returns which would mean that department was aware of the same in the year 2011-13 when the returns were filed. The revenue authorities are not contesting that the service tax liability has not been paid or they are not required to pay the tax. In my view, if the revenue is not contesting the service tax paid by the appellant and genuinity of the documents, appellant's availment of CENVAT credit seems to be under bonafide belief and cannot be faulted with as being (6) Appeal No: E/30104/2018 with an intention to evade duty by misstatement and suppression of facts. In my view, the show cause notice issued in September, 2015 is blatantly time barred. Hence the entire demand raised on the appellant needs to be set aside on the question of limitation itself.
11. Since on the limitation the entire demand is set aside I am not recording any other findings on various submissions made on both sides.
12. The impugned order is set aside on limitation and the appeal stands allowed.
(Pronounced in the Open Court on 07.09.2018) (M.V. RAVINDRAN) MEMBER (JUDICIAL) Veda