Custom, Excise & Service Tax Tribunal
Valco Industries Ltd vs Cce, Chandigarh on 17 August, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing : 17.8.2012
Excise Appeal No. 1694 of 2010-SM
[Arising out of the Order-in-Appeal No. 53/CE/CHD-I/2012 dated 12.3.2012 passed by the Commissioner (Appeals), Customs & Central Excise, Chandigarh]
For Approval & signature :
Honble Shri Mathew John, Member (Technical)
1. Whether Press Reporter 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?
Valco Industries Ltd. Appellant
Vs.
CCE, Chandigarh Respondent
Appearance:
Appeared for Appellant : Shri Ashwani Gupta, Director
Appeared for Respondent : Shri Bharat Bhushan, A.R.
CORAM: Honble Shri Mathew John, Member (Technical)
Order No.dated.
Per Mathew John:
The appellant is a manufacturer of excisable goods and they avail benefit of Cenvat Credit Scheme.
2. The dispute involved in the present appeal is about Cenvat credit taken by the appellant during the period January 2008 to December 2008 in respect of five types of input services. The input services involved are the following :-
(1) Service tax mount of Rs.28,930/- on security services for their factory at Chandigarh.
(2) Service tax amount of Rs.6,248/- on services billed by the service provider in the name of Valco Aluminium Extrusion and Vishnu Associates Ltd. (3) Service tax amount of Rs.5601/- on Insurance of vehicles registered in the personal name of the Director, and mobile phones used by Directors. (4) Service tax amount of Rs.1,483/- paid on fee for membership of Clubs for Directors.
(5) Service tax amount of Rs.2,518/- relatable to services exclusively relatable to Baddi unit.
3. Revenues case is that these services were received at their headquarters and the headquarters transferred the credit to their factory at Chandigarh which is manufacturing dutiable products. Revenue points out that the appellant is having another factory at Baddi where the goods manufactured are exempted from excise duty. He also points out that the appellant did not get themselves registered as input service distributor and follow procedure as applicable. Further there is the argument that these services have no nexus with excisable goods manufactured.
4. The Counsel for the appellant submits that the security services availed related entirely to the factory at Chandigarh. This fact needs to be verified. According to the Counsel the only issue is that the bill was raised at the address of the headquarters of the company. For transferring of credit covered by one invoice to the concerned factory as a whole there is no need to get registered as an input service distributor.
5. In the matter of invoices in the names of Valco Aluminium Extrusion and Vishnu Associates Ltd. the Counsel submits that Valco Aluminium Extrusion is the brand name of their product and Valco Industries Ltd. is the registered name of the company. So some of the service providers used their brand name to refer to the company and that is the reason why such name appears on the invoices in some cases. They also point out that their unit at Chandigarh was earlier known as Vishnu Associates Ltd. before their name was changed to Valco Industries Ltd. A few service provides had issued bills in their earlier name. There is no other company by name Vishnu Industries Ltd. and the services in question was received by them and utilized. So considering provisions of the proviso to Rule 9(2) of Cevant Credit Rules, 2004 there is no justification in denying the credit.
6. In the case of insurance of vehicles, the argument of the appellant is that though these vehicles were registered in the name of the Directors the vehicles were bought using funds of the company and it were reflected as assets in the balance sheet of the company. Further the entire expenditure on vehicle was being met by the company only. He argues that the conveyance provided to the Director was for better functioning of the company and therefore there is no reason to deny Cenvat credit for service tax paid on insurance services for the vehicle notwithstanding the fact that vehicle was registered in the names of the Directors.
7. In the case of mobile phones there are many decisions of the Tribunal allowing Cenvat credit of service tax paid on such services considering it as an input services used in the manufacture of excisable goods. One such decision is that in J.K. Sugar Ltd. Vs. CCE 2011 (270) ELT 225 (Tri.-Del.). But he fairly concedes that a part of the service may be attributable to the activities of the factory at Baddi.
8. In respect of items (4) and (5) listed in para-2 above the Counsel did not give any argument at all.
9. Opposing the prayer of the appellant, ld. A.R. for Revenue submits that since the services of mobile phones and insurance of vehicles has no nexus with the manufacturing activity and hence credit of such tax paid cannot be allowed. He also points out that these services were used partially in relation to dutiable goods manufactured in the factory at Chandigarh and partially in relation to exempted goods manufactured in the factory of the appellant at Baddi. The appellant has taken entire service tax paid on such services without complying with the requirements of Rule 6 of the Cenvat Credit Rules 2004 and therefore credit taken is not proper.
10. I have considered arguments on both sides. One main objection of Revenue is that the impugned services had no nexus with process of manufacture. But from the definition of input services at Rule 2(l) of Cenvat Crdit Rules, it is very clear that the level of nexus required in this case of input services is lower than that for inputs. Input services taken for furthering business prospects also is covered though such services may not be have direct nexus with manufacturing process. One of the main objections raised by Revenue is that the appellant did not follow the procedure of getting registered as input service distributor. In the instant case bills received at Headquarters were transferred to one factory. There was no distribution as such. Since there have been decisions of the Tribunal that there is no serious irregularity in taking credit in one factory based on duty paying documents addressed to the main office of the company there is no sufficient reason to deny credit when proviso to Rule 9(2) of Cenvat Credit Rule also is taken into account. The only issue is that they did not comply with provisions of Rule 6 of Cenvat Credit Rules, since one of those factories was in the exempted area. This issue can be taken care of.
11. In the matter of invoices in the names of Valco Aluminium Extrusion and Vishnu Associates Ltd. also the explanation given is satisfactory having regard to proviso to Rule 9(2) of Cenvat Credit Rules.
12. I do not find any reason to deny Cenvat credit in respect of security services for the factory at Chandigarh. However, the submission of fact made by the Counsel in this regard needs verification. In respect of mobile phones also, the credit is to be extended based on precedent decisions though such credit should be apportioned as would relate to dutiable products following the principles laid down under Rule 6 of Cenvat Credit Rules.
13. In the case of service tax relating to insurance service for the vehicles in the name of the Directors, I note that as per submissions of the Counsel these assets actually belong to the company and its expenditure is being met from the accounts of the company. The fact that the vehicle is registered in the personal name of the Director cannot be a reason to deny Cenvat credit on services relating to assets belonging to the company and used by Directors. Quite often companies register such assets in the name of the Directors as it may be convenient to transfer the vehicle to the Directors themselves on payment of depreciated cost at the end of the tenure of the Director. Since during the relevant time, the vehicles were stated to be used by the Directors of the company in the interest of the company as evidenced from the fact that the expenditure was being met by the company, I hold that Cenvat credit can be allowed in respect of such items also. However, it is necessary to verify the factual submissions regarding the fact that vehicles were figuring as assets in the balance sheet of the company and its expenditure was being met by the company. Further, it is necessary to apportion the Cenvat credit on this item also between the value of dutiable goods and value of exempted products manufactured by the appellants following the principles laid down under Rule 6 of Cenvat Credit Rules 2006.
14. In view of the discussions above, subject to verification of facts claimed by the Appellants, I allow Cenvat credit in respect of security services fully and I direct the adjudicating authority to decide the eligible Cenvat credit in respect of other two items as related to the dutiable products following the principles laid down under Rule 6 of Cenvat Credit Rules 2004. In respect of the two items for service tax amounts of Rs.2518/- and Rs.1,483/- regarding which no submissions were made during hearing credit is disallowed.
15. In this case there has been failure on the part of the appellants in making clear submissions before lower authorities on facts and law on the impugned credits. Another opportunity is being given in the larger interest of justice. So it is the responsibility of the appellant to place relevant records before the adjudicating authority to help him to verify the claims and quantify eligible credit. On submission of such details the Adjudicating Authority is directed to do necessary verifications and quantify the amounts of credit that is to be extended based on decisions above.
(Pronounced in Court) (Mathew John) Member (Technical) RM