Custom, Excise & Service Tax Tribunal
M/S Maharashtra Seamless Ltd vs Commissioner Of Central Excise, Raigad on 7 July, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/1228 & 1229/09 (Arising out of Order-in-Appeal No. YDB/42 & 43/RGD/2009 dated 26.8.2009 passed by the Commissioner of Central Excise (Appeals), Mumbai-II). For approval and signature: Honble Shri S.K. Gaule, 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? ====================================================== M/s Maharashtra Seamless Ltd. Appellant Vs. Commissioner of Central Excise, Raigad Respondents Appearance: Ms. Aparna Hinrandagi Advocate for Appellant Shri Sanjay Kalra JDR for Respondent CORAM: SHRI S.K. GAULE, MEMBER (TECHNICAL) Date of Hearing: 07.07.2011 Date of Decision: 07.07.2011 ORDER NO. WZB/MUM/2011 Per: S.K. Gaule
These appeals have been filed by the appellants against Order-in-Appeal No. YDB/42 & 43/RGD/2009 dated 26.8.2009 whereby the Commissioner (Appeals) has upheld the orders of the lower adjudicating authority dated 7.5.2008 and 8.5.2008. The issue involved in both the appeals is common, therefore, they are taken up together for disposal.
2. Briefly stated facts of the cases are that the manufacturing unit of the appellant is located in Nagothane, Raigad District and they are engaged in manufacturing of excisable goods falling under Chapter 73 of Central Excise Tariff Act, 1985. They availed CENVAT credit amounting to Rs.3,45,836/- and Rs.4,25,185/- on various services rendered for their wind mill farm situated in Satara District. During the audit of CENVAT records of the appellant, department found that the appellant is not eligible for CENVAT credit on the service tax paid on the inputs services used at their wind mill situated at Satara and credit availed at their manufacturing unit at Raigad. The proceedings against them were initiated accordingly. The lower adjudicating authority confirmed the various proposals in the show-cause notice. The appellants challenged the same before the Commissioner (Appeals), who upheld the lower adjudicating authoritys order of confirmation of demand of CENVAT credit along with interest and imposition of penalty of equal amounts. Hence, these appeals.
3. Ms. Aparna Hirandagi, learned Counsel appearing for the appellants submitted that they have availed CENVAT credit on service tax paid on input services for maintenances of windmill at Satara. The electricity generated at Satara is transmitted to MSEB Power Grid at Satara and in turn equal quantum of electricity are credited to MSEB Pen circle from where the appellant company is supplied power for the manufacturing of finished goods. She further submitted that in case of input services, there is no mandate under the definition that input services should be used in factory of manufacturing alone. The learned Counsel has tried to distinguish from definitions 4(1) & 4(7) that there is a requirement that inputs should be used in the factory whereas same is not the case with input service. Therefore, the ground taken by the department that service tax paid on the input services, which is not used in the factory is not sustainable. The electricity transmitted to MSEB is in turn received by their unit which is used for manufacture of their final product establishes nexus or connection in relation to manufacture of the goods. In support of their contention, she relied on decisions of the Tribunal in the case of Indian Rayon & Industries Ltd. 2006 (4) STR 79 (Tri-Mum) and Honble High Court of Bombay in the case of Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd. 2010-TIOL-745-HC-MUM-ST.
4. The learned JDR reiterates the findings of the lower authorities. He submitted that the electricity generated at wind mill at Satara has no nexus between the manufacture of final products. He placed reliance on the Tribunals decision in the case of Rajhans Metals Pvt. Ltd. Vs. Commissioner of Central Excise, Rajkot -2007 (8) STR 498 (Tri-Ahmd) wherein it was held that services used at the site of the wind mills cannot be held as input services by the unit situated at different place. He also placed reliance on the Tribunals decision in the case of Asian Tubes Ltd. Vs. Commissioner of Central Excise, Ahmedabad 2011 (21) STR (Tri-Ahmd). The learned JDR also submitted that they are not receiving the same quantum of electricity at their unit, which is produced at their wind mill. In the rejoinder, learned Counsel submitted that this was not the issue in any of the proceedings of the department.
5. I have carefully considered the submissions and perused the records. The CENVAT credit availed on Service Tax paid on input service used in maintenance of wind mill located at Satara, which was availed by their manufacturing unit situated at Raigad on the ground that no services used by the manufacturer directly or indirectly in or in relation to manufacture of their final products. Input service is defined under Rule 2(l)(ii) of Cenvat Credit Rules, 2004, which is reproduced herein as under: -
"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. From the above it follows that the said definition not only covers services which are used directly or indirectly in or in relation to manufacture of final products and also includes other services, which have direct nexus or which are integrally connected in business of manufacture of final products.
6. Input services rendered for manufacture of wind mills for generation of electricity is not in dispute. The electricity so generated is used in the manufacture of final product. Therefore, the service falls under the definition of input service. As regards input service used at a different place it is pertinent that there is no mandate in law that it should be used in the factory unlike inputs, which is clear from Rule 4(1) and 4(7) of the Cenvat Credit Rules, 2004 reproduced herein: -
Rule 4(1) - The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service:
Provided that in respect of final products, namely, articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker.
Rule 4(7) - The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9.
7. The Tribunal in the case of Indian Rayon & Ind. Ltd. (supra) has held that no such stipulation regarding receipt of input service, which is separately defined under the Rules, is provided. The Honble High Court in the case of Ultratech Cement Ltd. (supra) has held that the definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the case of Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd. 2010-TIO)-1227-CESTAT-MUM, this Tribunal has held that the denial of CENVAT credit on the ground that services were not received by the respondent in factory premises is not sustainable.
8. So far as contention of the department that the same quantum of electricity has not been received in the factory for manufacturing of final products, I find force in the contention of the learned Counsel that this was not an issue in any of the proceedings of the department. The appellant has paid service tax on the input services is also not in dispute. As regard the reliance placed by the learned JDR in the case of Rajhans Metals (supra) and Asian Tubes Ltd. (supra), I note that decision of the Hon'ble High Court of Bombay in the case of Ultratech Cement Ltd. (supra) was not before the Tribunal in both the cases.
8. In view of the above, I find that the order of the Commissioner (Appeals) is not sustainable in law. Therefore, the same is set aside and the appeals are allowed.
(Dictated and pronounced in Court) (S.K. Gaule) Member (Technical) Vks/ 1