Custom, Excise & Service Tax Tribunal
M/S. India Japan Lighting Pvt. Ltd vs Cce & St, Ltu, Chennai on 8 February, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/40646/2014
(Arising out of Order-in-Appeal No. 01/2014 dated 02.01.2014 passed by the Commissioner of Central Excise & Service Tax, LTU, Chennai).
M/s. India Japan Lighting Pvt. Ltd. : Appellant
Vs.
CCE & ST, LTU, Chennai : Respondent
Appearance Ms. Minchoo Punnose, Adv., for the Appellant Ms. Indira Sisupal, AC (AR), for the Respondent CORAM Honble Shri P. K. Choudhary, Judicial Member Date of Hearing/Decision: 08/02/2016 FINAL ORDER No. 40299 / 2016 The appellant M/s. Indo Japan Private Ltd., are the manufacturers of automotive lighting equipment falling under the Tariff Heading 8512 2010 of Central Excise Tariff Act, 1985 and are availing cenvat credit on inputs, capital goods and input services.
2. The brief facts of the case are that during verification of cenvat documents of the appellants it was found that they have availed cenvat credit of service tax paid on various services viz., Clearing and forwarding, repair contract, labour contract and professional charges etc., during the period August, 2010 to December, 2011, which worked out to Rs. 1,68,148/-. A show cause notice was issued alleging that the services do not qualify as input services as defined under Rule 2 (l) of, 2004 and why the same should not be demanded from them under Rule 14 of CENVAT CREDIT RULES, 2004 read with Section 11 A of CENTRAL EXCISE ACT, 1944, along with interest and penalty. The Dy. Commissioner while passing the OIO dated 11.01.2012, allowed the credit in respect of courier charges and labour contract service and partially allowed under the repair contract service and confirmed the demand for an amount of Rs.1,19,737/- allegedly wrongly availed credit in respect of repair contract, clearing and forwarding and professional charges and also ordered for recovery of interest under Rule 14 of CENVAT CREDIT RULES, 2004 read with Section 11 AB of CENTRAL EXCISE ACT, 1944 and also imposed a penalty of Rs.2,000/- under Rule 15 (1) of CENVAT CREDIT RULES, 2004. Aggrieved by the above order, the appellant preferred appeal before the Commissioner (Appeals), who rejected their appeal. Aggrieved by the order of the Commissioner (Appeals), the appellant assesse is in appeal before the Tribunal.
3. The LD. Counsel Ms. Minchoo Punnose, Advocate, appearing on behalf of the appellant assessee submits that the Ld. Commissioner (Appeals) did not consider the submissions made and the evidences on record before passing the impugned order and the same is liable to be set aside. She further submits that the expenses on repair and replacement services have been incurred for repair of the machineries within the factory and the same is necessary for smooth management of the manufacturing activities. Regarding clearing and forwarding services, she submits that the goods manufactured were first sent to their joint venture partners M/s. Koito Manufacturing Co. Ltd., Japan, as samples for testing purposes. Only after getting their approval, the appellants continue their manufacturing process and obtain orders from the buyers. She further submits that the place of removal in case of exports will be the port. This position has been clarified by the Board vide the Master Circular No. 96/3/2007 dated 23.08.2007. She submitted that accordingly the clearing and forwarding services used for exporting their final products is used in relation to their business activities and they have rightly availed the credit and the demand is liable to be set aside. She also referred to the findings recorded at para-8 of the Adjudicating Authority. In respect of clearing and forwarding service she relied on the decision of the Tribunal in the case of CCE, Ahmedabad Vs. Fine care Biosystems 1. Regarding professional charges, she submitted that the charges were incurred for engaging services of technocrats from professional agencies for activities related to manufacture. She relied on the decision in the case of CCE, Vishakapatinam Vs. Andhra Pradesh Paper Mills Ltd. 2.
Note:
1. 2010 (17) STR 168 (Tri.-Ahmd.)
2. 2010 (254) ELT 354 (Tri.-Bang.).
4. Ld. AR Ms. Indira Sisupal, AC, submitted that the documents filed by the appellant assesse failed to prove their claim. She further submitted that the eligibility to the credit is not under doubt provided it is proven by them, under which category they are claiming the credit. She reiterated the findings of the adjudicating authority and the Commissioner (Appeals) and also submitted that credit in respect of clearing and forwarding service claimed by the appellant assesse are not for export of goods. Only the samples were sent to the joint venture partners in Japan for testing purposes but their entire sales were within the country only. Hence, the Dy. Commissioner has rightly disallowed the credit in respect of clearing and forwarding service.
4.1. In respect of professional charges, she submitted that on perusal of the documents submitted in this regard, it is seen that the expenses pertain to activities like assessing of draw-back claims, verification of antecedents of staff appointed and sales tax assessment etc. Since these services do not fall within the definition of input services as defined under Rule 2 (l) of the CENVAT CREDIT RULES, 2004. Hence, the credit availed on the professional charges have been rightly disallowed.
4.2 Regarding repair contract service, wherever there was direct nexus to the manufacture, credit was allowed and the balance credit of Rs. 4,687/- availed against the same service was not allowed as the documents failed to prove their claim. She drew my attention to pages 10 & 11 of the Order-In-Original and submitted the adjudicating authority recorded the details of all the invoices, which is self-explanatory.
5. After hearing both sides and on perusal of records, I find that the issue to be decided is whether credit availed on service tax paid on various services which are repair contract service, clearing and forwarding service and professional charges service etc., qualify as input services in relation to manufacture or not. The contention of the appellant is that the Input Service Credit which was availed by them in respect of Repair and replacement Services for repair of the machineries within the factory. Without the machineries the manufacturing activity cannot take place and for proper and efficient running of the machineries it is necessary to repair the machineries whenever needed. Replacement of worn out parts also required for the machineries to run effectively. If it is factually proven that the services were used for repair of the machineries, without doubt, the appellants are eligible for credit. The matter is remitted to the original authority on the above terms. With regard to Clearing and Forwarding service, the contention of the appellant is that, they send the manufactured lamps to their JV partner M/s. Koito Mfg. Co. Ltd., Japan, for testing purpose. Only on obtaining the approval/satisfaction as to the quality, specifications etc. of the product, the lamps are manufactured by the appellant. The appellants cannot proceed to manufacture goods unless they get the approval from the JV located abroad. In anticipation of the correctness of the goods without carrying out the testing abroad, no manufacturer would waste his capital and produce the goods and store the same in his factory. The appellants have stated this with evidences which according to the Ld.AR were not furnished to the lower authorities. This being the circumstance, the original authority is directed to verify the documents and pass appropriate orders on merits. With regard to Professional charges service, that the subject service has been incurred for engaging the services of specialists, technocrats and other professional agencies which is in relation to the business activity of the appellants.
6. In view of the facts and circumstances of the case, I feel that this is a fit case to remand to the adjudicating authority to re-examine the claim of the appellant assesse, in the light of the evidences on the record and the decisions of the co-ordinate Benches of the Tribunal and decide the case afresh and pass order by following the principles of natural justice. Accordingly, the appeal is allowed by way of remand on the above terms and conditions.
(Operative part of the order Pronounced in open court) (P.K. CHOUDHARY) Judicial Member BB 1