Custom, Excise & Service Tax Tribunal
Ambuja Cements Limited vs Commissioner, Cgst & Central Excise ... on 17 March, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - IV
Excise Appeal No. 50256 of 2021 [SM]
[Arising out of Order-in-Appeal No. 220(CRM)CE/JDR/2020 dated 24.06.2020
passed by the Commissioner of Central Excise & Central goods and Service Tax
(Appeals), Jodhpur]
M/s. Ambuja Cements Limited ...Appellant
(Unit: Rabriyawas),
P.O.- Rabriyawas, Tehsil - Jaitaran,
District - Pali,
Rajasthan - 306709
VERSUS
Commissioner of CGST
& Central Excise, Jodhpur ...Respondent
G-105, Road No.-05, New Industrial Area, Basni, Opp. Diesel Shed, Jodhpur, Rajasthan-342003 APPEARANCE:
Ms. Sukriti Das and Ms. Mehak Mehra, Advocates for the Appellant Shri Mahesh Bhardwaj, Authorized Representative for the Respondent CORAM: HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) DATE OF HEARING: 17.03.2023 DATE OF DECISION: 17.03.2023 FINAL ORDER No. 50590/2023 DR. RACHNA GUPTA The appellant herein is engaged in manufacture of 'Cement' (OPC) & (PPC) and is registered as 'Large Tax Payer Unit' with the department of Central Excise, Mumbai. During the audit of the appellant's record, the department observed that the appellant has availed input service credit of Rs.7,94,336/- on 22.06.2009 on the basis of invoice dated 22.05.2009 issued by M/s. Mahadev Supplier, Rabriyawas which shows description of works as extra work incentive of Rs.77,12,000/- for the period from 01.01.2008 to 30.04.2009. Department also observed that the said invoice was 2 Excise Appeal No. 50256 of 2021 [SM] for work order placed by the appellant to M/s. Mahadev Supplier for Gypsum Handling, however, the company established a mechanized system for Gypsum Handling and therefore dispensed with the services of M/s. Mahadev Supplier. He negotiated with the company for compensation for his loss of business due to the installation of mechanized system for Gypsum Handling. Holding that M/s. Mahadev Supplier, Rabriyawas has not provided any services to the appellant but a compensation was paid to him for the services that the input credit on the said amount taken by the appellant is alleged to have been wrongly availed vide the Show Cause Notice No. 1169 dated 28.01.2011. The show cause notice has proposed the recovery of the aforesaid amount of Rs.7,94,336/- along with interests and penalties. The proposal was confirmed initially vide Order-in-Original No. 02/2019 dated 28.05.2019. The appeal thereof has been rejected vide Order-in-
Appeal No. 220/2020 dated 24.06.2020. Being aggrieved the appellant is before this Tribunal.
2. I have heard Ms. Sukriti Das and Ms. Mehak Mehra, Advocates for the appellant and Shri Mahesh Bhardwaj, Authorized Representative for the department.
3. It is submitted on behalf of the appellant that M/s. Mahadev Supplier was compensated in relation to the services provided by him to the appellant. Hence, it was in the nature of additional consideration for the work executed and the service provider has collected service tax amounting to Rs.7,94,336/- on the said amount and deposited the same with the exchequer vide Challan No. 5 dated 8.06.2009. He also issued a declaration/certificate 3 Excise Appeal No. 50256 of 2021 [SM] dated 20.07.2010 regarding remittance of service tax which was collected from the appellant pursuant to Invoice No. 49 dated 22.05.2009 towards providing the manpower services to the appellant. The said manpower services were undisputedly used in relation to the manufacture of final product. The Cenvat credit of service tax paid on the said payment on the strength of said invoice is mentioned to have been rightly availed. It is submitted that amount paid to the service provider is the part and parcel of the main taxable service of manpower recruitment and supply agency, thus, essentially used inactivity relating to business under Rule 2(l) of Cenvat Credit Rules, 2004. As such the credit has rightly been availed. Learned Counsel has relied upon the decision of Coca Cola India Pvt. Ltd. Vs. CCE reported as 2009 (242) ELT 168 (Bom.).
3.1 It is further submitted that Cenvat credit is otherwise also admissible as the compensation paid is in the nature of additional consideration for manpower supply service rendered by M/s. Mahadev Supplier. Learned Counsel has relied upon the decision of this Tribunal in the case of Hindustan Zinc Ltd. Vs. Commissioner, Central Goods and Services reported as 2019 (7) TMI 488 , CESTAT, New Delhi. Finally it is submitted that once the tax has been paid by the service provider, the Cenvat credit is admissible irrespective of the fact whether the activity of supplier was taxable or not. Learned Counsel has relied upon the decision of Hon'ble Apex Court in the case of CCE & C Vs. MDS Switchgear Ltd. reported as 2008 (229) ELT 485 (SC). It is also submitted that the department has otherwise wrongly invoked 4 Excise Appeal No. 50256 of 2021 [SM] the extended period. The credit entry was duly recorded in the Cenvat Register of the appellant which is a statutory record maintained under Cenvat Credit Rules, 2004. The credit availed was duly reflected in ER-1 returns, hence, there was sufficient disclosure of the said availment to the department. Suppression has wrongly been alleged while invoking the extended period and while imposing the penalty. Accordingly, the order under challenge is prayed to be set aside and appeal is prayed to be allowed.
4. While rebutting the submissions, learned DR has mentioned that for availment of Cenvat credit, the services received by the appellant should be such as are used in relation to the manufacture. In the preset case, admittedly the service provider had not provided the manpower supply service after the appellant got mechanized. Hence, any amount paid to the receiver as a compensation keeping in view the loss of his business cannot be accepted as a consideration towards providing a taxable service. The said payment does not qualify to be the payment towards eligible input service. The Cenvat credit on the said payment has rightly been denied.
4.1 It is further submitted that the appellant had rather failed to appear before Commissioner (Appeals) despite that the opportunity of personal hearing was given to him for defending his case. The amount in question was merely a compensation in the guise of work incentive. Hence, no question of any nexus between the said amount and manufacture at all arises. Impressing upon no infirmity in the order under challenge, the appeal is prayed to be dismissed.
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Excise Appeal No. 50256 of 2021 [SM]
5. Having heard the rival contentions and perusing the entire records.
6. The issue to be adjudicated in the present case is:
"Whether the appellant is entitled to avail Cenvat credit on the amount paid to its service provider, as compensation, on account of dispensation of his services during the period of the contract."
7. The apparent facts of this case are:
After installation of a mechanized system of Gypsum Handling equipment at their plant, the Appellant discontinued/dispensed with the services of the provider which was agreed to be provided under the said work order for the contracted period. For this reason, the men/manpower/labours mobilized by the service provider remained idle, resulting into increased costs at the end of the service provider. The Service Provider therefore, asked the appellant to pay compensation for increased costs at its end for reasons attributable to the appellant. Accordingly, it was mutually agreed to pay an amount of Rs.77,12,000/- towards such compensation. Further, the service provider raised invoice No. 49 dated 22.5.2009 upon the Appellant for the period January 2008 - April 2009 (relevant period").
7.1 Since the said payment was in relation to the services provided by the Service Provider to the appellant under the said work order and was in the nature of additional consideration for the 6 Excise Appeal No. 50256 of 2021 [SM] work executed, service tax amounting to Rs.7,94,336/- on the said amount was charged and collected by Service Provider from the Appellant, and the same was deposited with the Exchequer vide service tax Challan No. 5 dated 8.6.2009 under the Service Accounting Code 00440060 towards Manpower recruitment/supply agency service. Further, a declaration/certificate dated 20.7.2010 was issued by the service provider regarding remittance of service tax, which was collected from the appellant, vide invoice no. 49 dated 22.5.2009 into the Government Account towards Manpower services Supplied for unloading of various raw materials at the appellant's factory premises for the relevant period. 7.2 Inasmuch as the said amount was paid in relation to the services provided for manpower supply, which were undisputedly used in relation to manufacture of the final product, Cenvat credit of the service tax paid on the said payment was availed by the appellant vide Entry No.543 dated 22.6.2009 on the strength of the invoice raised by the service provider.
8. I observe that only bone of contention of department is that the additional compensation paid to the service provider cannot be attributed towards the services received and therefore, Cenvat credit thereof is not admissible to the appellant. I opine that though a formal amendment to the work order was not issued, the terms of payment of such compensation were negotiated with the Service Provider. The invoice dated 22.05.2009 raised by the service provider is actually an additional amount in relation to the services provided under the said work order only. Such invoice 7 Excise Appeal No. 50256 of 2021 [SM] raised by the service provider amounts to amendment of the work order thus increasing the cost of services by the additional amount paid by way of compensation. Accordingly, service tax was charged on such increased amount and the entire amount, including the service tax paid, becomes eligible for input service credit. Hence, the payment of compensation, in the present case, reflects the object of the contract and the mutual consent of the parties to the contract. Hence, the amount in question is not merely the amount of compensation in terms of Section 73 of the Contract Act but it is the amount of consideration paid additionally by the appellant to manpower supply service provider.
9. I observe that the issue is no more res integra. The compensation given in such circumstances is held nothing but the enhanced value for the services received and to be received. This Tribunal only in the case of MDS Switchgear Ltd. Vs. Commr. of C.Ex. & Cus., Aurangabad reported as 2001 (132) E.L.T. 405 (Tri.-Mumbai) has held as follows:
"7. Reasons given by the appellants for the alleged inflation of the value of the intermediate goods are logical. What was required of the Commissioner was to examine the quantum of the loading of the assessable value by the Modvat credit on the earlier inputs. That exercise has nowhere been done. If the department was of the opinion that the value of the final product was depressed, then they could have charged the Jalgaon unit with under-invoicing of their product. That has also not been done. The valuation as given by the Sinnar unit was duly approved by the Department and the payment of duty was also duly accepted. We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into "deposit of duty". There is no legal basis for such presumption. The rules entitled the receipient manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier 8 Excise Appeal No. 50256 of 2021 [SM] unit cannot be contested or challenged by the officers in charge of the recipient unit."
10. Department also in a Circular No. 1014/2 dated 1st February, 2016 has clarified that the Cenvat Credit of VD paid voluntarily is admissible, as it is a settled position that a buyer is entitled to avail cenvat credit of duty paid by the supplier. Similar is the situation in the present case as far as the impugned compensation is concerned. The Tribunal in a recent decision in the case of CCE, Delhi-ll vs. Welspring Universal reported in 2018 (359) ELT 635 has decided the issue of admissibility of Cenvat Credit once the duty/tax has been paid by the supplier of the goods/the service provider in favour of the assessee. I have no reason to differ from the afore discussed settled proposition of law. Accordingly, I hold that the Cenvat Credit cannot be denied once the duty stands paid. I am also of the opinion that the assessment cannot be re-opened at the end of the recipient of the goods/services. Compensation herein is otherwise opined to be as good as the escalated price in the supplementary invoice.
11. Further I observe that the service provider of the appellant had raised an invoice for the amount in question and had charged service tax also on the said amount. He has already deposited tax on the amount of compensation in question. Service recipient cannot be denied the benefit of Cenvat on said duty paid. I draw my support from the decision of Mumbai Tribunal in the case of Thyssenkrupp Electrical Steel India P. Ltd. vs. CCE & Cus., Nasik reported in 2011 (273) ELT 132 (Tri.- Mumbai) wherein it is held as follows:-
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Excise Appeal No. 50256 of 2021 [SM] "On careful examination of the submissions made by both the sides I find that the only dispute is that whether the appellants are entitled to take CENVAT credit on the strength of supplementary invoices which has been raised on them by their supplier as per the agreement or not? On perusal of the agreement, I find that while fixing the price, there was an agreement between the supplier and the appellants that a minimum quantity of cracked ammonia gas will have to be lifted on a price so fixed, but there was further a clause that if the appellants failed to lift the required quantity, the price of the cracked ammonia gas will be changed and extra amount for that shall be charged from the appellants for which these supplementary invoices has been raised on the appellants on which proper duty has been paid by the supplier. It is not disputed that the appellants are entitled to take credit of the proper duty paid invoices as held by the Hon'ble Apex Court in the case of MDS Switchgear Ltd. (supra) as the supplementary invoice has been raised for the minimum agreed quantity by the appellant is nothing but the escalated amount of the goods received by them. Therefore, the appellants are entitled to take the credit on the strength of the supplementary invoices. As the appellants have succeeded on merits, the limitation aspect will not be seen. With these observations, the appeals are allowed with consequential relief, if any, by setting aside the impugned order."
9. In view of the above discussion, we are of the opinion that there is no apparent mensrea on the part of the appellant to evade any duty rather the fact remains is that the duty stands already paid.
The Cenvat Credit thereof cannot be disallowed. In such circumstances, the show cause notice should not have been issued or if issued, it should have been within one year of the fact being into notice of the Department. The Department in the present case has invoked the extended period of limitation alleging suppression or misrepresentation on part of the appellant. As already held that there is absence of malafide Intent/mensrea, the Department is held not entitled to invoke the said extended period of limitation. Seen from that angle, the impugned show cause notice even suffers on limitation aspect."
12. I have no reason to have a different opinion in the given set of circumstances, also there is no denial that the service provider has discharged his liability on the impugned amount. Once the duty has been paid by the supplier, the Cenvat credit is admissible 10 Excise Appeal No. 50256 of 2021 [SM] even if the activity of supplier was taxable or no. In the present case, the supplier was providing manpower supply services which are well taxable in nature. The supplier collected the service tax from the appellant on the amount which was received at the time of dispensation of services but during the period of continuity of the contract for providing said services, the Cenvat credit is held to be admissible to the appellant. I draw my support from the decision decision of this Tribunal in the case of M/s. Ford India Pvt. Ltd. Vs. Commissioner of GST & Central Excise, Chennai reported as 2019 (3) TMI 1217 - CESTAT CHENNAI, wherein it was held that credit cannot be denied at the receivers end. The decision of High Court of Gujarat in the case of Commissioner of Central Excise Vs. Nahar Granites Ltd. reported as 2014 (305) E.L.T. 9 (Guj.) was relied upon and also the decision of Hon'ble Apex Court in the case of MDS Switchgear Ltd. (supra). Even Hon'ble High Court of Delhi in the case of Commissioner of Central Excise, Delhi-II Vs. Welspring Universal reported as 2018 (359) E.L.T. 635 (Del.) while considering the case of refund has held that once the duty has been paid by the assessee to the supplier, the assessee become entitled to the benefit as that of refund on export.
13. Above all, it is observed that the period of show cause notice is still the Year 2009 but the show cause notice is issued in 2011. There is no dispute that the supplier of appellant has deposited the service tax. There is also no dispute to the fact that the appellant was showing the availment of impugned credit in their ER-1 returns. There arises no question for any intention with the appellant to evade the payment of duty. In the given 11 Excise Appeal No. 50256 of 2021 [SM] circumstances, the suppression to evade the duty is apparent. Extended period is therefore held to have wrongly invoked by the department.
14. I need to emphasis that willful misstatement/suppression of facts is a mixed question of facts and law and the judgments on this issue are pronounced in view of the specific facts and circumstances of each case. In case of CCE Vs. Chemphar Drugs Liniments reported as 2002-TIOL-266-SC-CX, the Supreme Court held that something positive other than mere inaction or failure on the assesses part or conscious withholding of information when assessee knew otherwise is required for invoking extended period. In the case of Continental Foundation Joint Venture Vs. CCE, Chandigarh-I reported as 2007 (216) ELT 17 (SC), the Supreme Court went to the extent of saying that any incorrect statement by itself cannot be equated with willful mis-statement. Thus, I am of the view that the allegation relating to willful mis- statement/suppression of acts is not sustainable and consequently extended period and mandatory penalty are not invocable.
15. Keeping in view the entire above discussions, the order under challenge is hereby set aside and appeal stands allowed.
[Dictated and pronounced in the open Court] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) HK