Custom, Excise & Service Tax Tribunal
M/S. Shasun Chemicals & Drugs Ltd vs Cce, Pondicherry on 4 November, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH, CHENNAI ST/356/2010 (Arising out of Order in Appeal No. 50/2010 (P) dated 09.03.2010 passed by the Commissioner of Central Excise (Appeals), Chennai). For approval and signature Honble Dr. CHITTARANJAN SATAPATHY, Technical Member M/s. Shasun Chemicals & Drugs Ltd., : Appellant Vs. CCE, Pondicherry : Respondent
Appearance Shri V. Ravindran, Advocate, for the appellants Shri A.B. Niranjan Babu, SDR, for the respondents CORAM Dr. CHITTARANJAN SATAPATHY, Technical Member Date of hearing : 04.11.2010 Date of decision : 04.11.2010 ORDER No._____________ Heard both sides.
2. The appellants are manufacturing pharmaceutical ingredients as well as formulations. The appellants have also sold DEPB scrips not utilized by them through a commission agent. The appellants are seeking credit of service tax paid on the services received from the commission agent for selling DEPB scips against excise duty payable on pharmaceutical ingredients and formulations manufactured by them. The credit of service tax has been denied by the authorities below on the ground that the service relating to sale of DEPB scrips cannot be considered as an input service in or in relation to manufacture of the pharmaceutical goods.
3. Shri V. Ravindran, Ld. Advocate argues that the service relating to sale of DEPB scrips is an input service as the money received from such sale is utilized for buying raw materials for the manufacture of the finished goods. He supports his claim by relying on the following four case law:-
a) Pan Asia Corporation Vs. CCE, Mumbai-II 2009 (16) STR 587 (Tri.-Mum.)
b) CCE, Vapi Vs. Nilkamal Crates & Bins 2010 (19) STR 431 (Tri.-Ahm.)
c) Rane Trw Steering Systems Pvt. Ltd. Vs. CCE, Trichy 2010 (19) STR 251 (Tri. Chen.)
d) CCE, Raipur Vs. H.E.G. Ltd., 2010 (20) STR 312 (Tri.-Del.)
4. Shri A.B. Niranjan Babu, Ld. SDR, appearing for the department supports the impugned orders and states that there is no nexus between the sale of DEPB scrips and the manufacture of pharmaceutical goods. These DEPB scrips are in no way connected with procurement of raw materials and the authorities below have rightly denied the credit of service tax paid for such sale through the commission agent.
5. I have considered the arguments from both sides. The input service has to have a nexus with the manufacturing process for grant of credit of tax paid on input service for paying duty on finished excisable goods. The argument that the money received from sale of DEPB scrips is utilized for the purchase of the raw material is rather far fetched to establish the required nexus. The appellants can utilize any kind of money available with them for the purchase of raw material and they can also utilize the sale proceeds of DEPB scrips for any purpose and for incurring any expense whether connected or not connected with their manufacturing business. The sale of DEPB scrips is a totally different business for them and unconnected with their manufacturing business. The case laws cited by the Ld. Advocate do not support the claim of the appellants that the service of the commission agent availed by them for selling DEPB scrips has nexus with their manufacturing activity.
6. Moreover, by a detailed order in the case of CCE, Chennai Vs. Sundaram Brake Linings 2010 (19) STR 172 (Tri.- Chen.), this Bench has examined in great detail the tests required for entitlement to credit of tax paid on input service for paying excise duty on manufactured goods in the light of the Honble Supreme Courts decision in the case of Maruti Suzuki Ltd. Vs. CCE 2009 (240) ELT 641 (S.C.). Applying the same decision of the Honble Supreme Court, the Honble Bombay High Court in the case of CCE, Nagpur Vs. Manikgarh Cement 2010-TIOL-720-HC-MUM-ST has also taken a view that nexus should be established between the service and the business carried on before benefit of cenvat credit is allowed. In the present case, it is clear that no such nexus exists between the service availed for selling DEPB scrips and the manufacture of pharmaceutical products. Hence, the credit of service tax paid on such input service cannot be allowed as has been rightly held by the authorities below. Accordingly, the appeal is dismissed.
(Operative part of the Order pronounced in the open Court on 4.11.10) (Dr. CHITTARANJAN SATAPATHY) TECHNICAL MEMBER BB 4