Custom, Excise & Service Tax Tribunal
Cce, Ludhiana vs M/S Nestle India Ltd on 16 May, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. I DATE OF HEARING/DECISION : 16/05/2014. Service Tax Appeal Nos. 80-82 of 2009 [Arising out of the Order-in-Appeal No. 342-344/CE/LDH/2008 dated 20/10/2008 passed by The Commissioner (Appeals), Central Excise, Chandigarh.] For Approval and signature : Honble Shri Justice G. Raghuram, President Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? CCE, Ludhiana Appellant Versus M/s Nestle India Ltd. Respondent
Appearance Shri Govind Dixit, Authorized Representative (DR) for the appellant.
Shri B.L. Narasimhan, Advocate for the Respondent.
CORAM : Honble Shri Justice G. Raghuram, President Honble Shri Rakesh Kumar, Member (Technical) Final Order No. 52322-52324/2014 Dated : 16/05/2014 Per. Rakesh Kumar :-
The facts leading to filing of these appeals by Revenue are, in brief, as under.
1.1 The respondent in their factory at Moga manufacture Nescafe prepared mix, Nestle three-in-one, Iced Tea, Tea pre-mix, growing up milk powder, taste makers, inter-mixture of vitamins etc. chargeable to Central Excise duty. These items are also manufactured by the respondent in their factories located in other parts of India. Some of these products are also got manufactured by them through their job workers in India. Beside this, these products are also manufactured by their sister concerns located outside India M/s Nestle Bangladesh, M/s Nestle Indonesia, M/s Nestle Lanka Ltd. etc. The respondent in their factory at Moga have a fully equipped Central Quality Assurance Laboratory (CQAL) in which not only they test the goods manufactured at Moga factory but also test the samples received from their job workers, their other units located in India and the samples received from their sister concerns abroad. For testing the samples received from M/s Nestle Bangladesh, M/s Nestle Indonesia, M/s Nestle Lanka Ltd., they received payment in convertible foreign exchange. The service of testing for quality control purposes is taxable under Section 65 (105) (zzh) of the Finance Act, 1994 as technical testing and analysis service. The period of dispute in this case is from 01/07/03 to 30/09/07 and the dispute is in respect of testing of the samples received from job workers who are manufacturing the goods for the respondent on job work basis and the samples received from their sister concerns abroad for testing. The Department was of the view that the amount charged by the respondent for testing of the samples received from job workers and from sister concerns abroad would attract service tax. The Commissioner (Appeals) vide the impugned order-in-appeal dated 20th October 2008 held that the testing of the samples received from respondents sister concerns abroad would not attract service tax during period till 14/03/05 in terms of exemption Notification No. 21/2003-ST dated 20th November 2003 which exempted the taxable services specified in Section 65 (105) of the Finance Act, 1994 provided to any person from the whole of the service tax leviable thereon if the payment for the same is received in India in convertible foreign exchange, subject to condition that the foreign exchange received has not been repatriated from or sent outside India. In respect of the period w.e.f. 15/03/05, the Commissioner (Appeals) held that the testing service provided by the respondent to their sister concern abroad would not attract service tax in terms of Export of Service Rules, 2005 as the service provided by the respondent amounts to export of service in terms of Rule 3 (1) readwith Rule 3 (2) of the Export of Service Rules, 2005. With regard to the testing of the samples received from the job workers manufacturing the respondents products, the Commissioner (Appeals) held that the respondent have not provided service to anybody as they have tested their own goods in their own laboratory and had not received any payments from their job workers. Accordingly the Commissioner (Appeals) set aside the service tax demands in respect of testing of samples received from the job workers and received from the sister concerns of the respondent company located abroad. Against this order of the Commissioner (Appeals), the Revenue has filed these three appeals, as the Commissioner (Appeals)s order dated 20th October 2008 was a common order in respect of appeals filed against three separate orders-in-original passed by the original Adjudicating Authority.
2. Heard both the sides.
3. Shri Govind Dixit, the learned DR, assailed the impugned order by reiterating the grounds of appeal in the Revenues appeal. He emphasized that during the period w.e.f. 15/03/05, service tax would be chargeable in respect of testing services provided by the respondent to M/s Nestle Bangladesh, M/s Nestle Indonesia, M/s Nestle Lanka Ltd. as in terms of Export of Service Rules, 2005, the technical testing and analysis service covered by Section 65 (105) (zzh) would be treated as exported out of India only if it has been performed outside India, while the service, in question, has been performed in India and hence the same cannot be treated as service export. With regard to the testing of the samples received from the job workers manufacturing the finished products for the respondent on job work basis, Shri Dixit pleaded that cost of the said tests was being put into the account of the said job workers and, therefore, service tax would be chargeable on the cost of these tests. He, therefore, pleaded that the impugned order is not correct.
4. Shri B.L. Narasimhan, Advocate, the learned Counsel for the respondent, pleaded that as regards the services of testing provided to M/s Nestle Bangladesh, M/s Nestle Indonesia, M/s Nestle Lanka Ltd., during period prior to 15/03/05 these services were fully exempted from service tax by virtue of exemption Notification No. 21/2003-ST as payment in respect of these services was being made to the respondent in convertible foreign exchange and there is nothing on record to show that these payments or any part thereof was repatriated from or sent outside India, that as regards the period w.e.f. 15/03/05, during this period the Export of Service Rules, 2005 had come into force and in terms of Rule 3 (1) (ii) readwith Rule 3 (2) of the Export of Service Rules, 2005, the services provided by the respondent which are performance based service covered by Section 65 (105) (zzh) have to be treated as performed outside India, as while testing had been done in India, the test reports had been delivered outside India and therefore these services have to be treated as performed outside India and since payment for the services had been received in convertible foreign exchange, the services provided have to be treated as export of service, that in this regard, he relies upon Tribunals judgment in case of CCE, Ahmedabad vs. B.A. Research India Ltd. reported in 2010 (18) S.T.R. 439 (Tri. Ahmd.), that as regards testing of the samples received from the job workers, since no payment had been made by the job workers and the respondent have tested their own goods being manufactured by the job workers, no service has been provided by the respondent and no service tax would be chargeable. He, therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records.
6. As regards the testing of the samples received from the job workers, these samples are from the goods which were being manufactured by the job workers for the respondent on job work basis and there is nothing on record to show that the respondent had charged any amount for testing the samples from the job workers. Therefore, we agree with the findings of the Commissioner (Appeals) that the respondent have tested their own goods and, as such, have not provided any service to the job workers and, hence, no service tax would be chargeable. Even in the grounds of appeal in the Revenues appeal, it is not mentioned as to whether the respondent had charged any amount from the job workers for testing of the samples and if so, how much amount had been charged.
7. As regards the testing of the samples received from M/s Nestle Bangladesh Ltd., M/s Nestle Indonesia, M/s Nestle Lanka Ltd. there is no dispute that payment for conducting the tests had been received by the respondent in convertible foreign exchange and the amount received in foreign exchange had not been repatriated from or sent outside India. Therefore during period till 14/03/05 no service tax would be chargeable in view of exemption Notification No. 21/2003-ST. As regards the period w.e.f. 15/03/05, in view of judgment of the Tribunal in case of CCE, Ahmedabad vs. B.A. Research India Ltd. (supra) the services, in question, covered by Section 65 (105) (zzh) provided by the respondent to M/s Nestle Indonesia Ltd., M/s Lanka Ltd. and M/s Nestle Bangladesh Ltd. would have to be treated as export of service on the basis of the provision of Rule 3 (1) (ii) readwith Rule 3 (2) of the Export of Service Rules, 2005. The grounds of appeal in the Revenues appeal do not mention as to how the services provided by the respondent to their sister concern abroad were not exempt from service tax in terms of Notification No. 21/2003-ST dated 20/11/03 during period upto 15/03/05 and how during the period w.e.f. 15/03/05, no service tax would be payable in respect of these services as the same have to be treated as service exports in terms of the provisions of Export of Service Rules, 2005.
8. In view of the above discussion, we hold that the impugned order does not suffer from any illegality or impropriety. The Revenues appeals are therefore dismissed.
(Operative part of the order pronounced in the open court.) (Justice G. Raghuram) President (Rakesh Kumar) Member (Technical) PK ??
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