Custom, Excise & Service Tax Tribunal
M/S. Orient Paper Mills vs Cce & St,Raipur on 29 June, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/Date of Decision:29.06.2016
Excise Appeal No.50051/2016-EX(SM)
[Arising out of Order-in-Appeal No.BHO-RPR-EXCUS-002-APP-192-15-16 dated 30.09.2015 passed by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Raipur]
For Approval and Signature:
Honble Shri B. Ravichandran, Member (Technical)
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Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
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Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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Whether Their Lordships wish to see the fair copy of the Order?
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Whether Order is to be circulated to the Departmental authorities?
M/s. Orient Paper Mills Appellants
Vs.
CCE & ST,Raipur Respondent
Appearance:
Rep. by Ms. Priyank Goyal, C.A. for the appellant.
Rep. by Shri M.R. Sharma, AR for the respondent.
Coram: Honble Shri B. Ravichandran, Member (Technical) Final Order No. 52277/2016 Dated:29/06/2015 Per B. Ravichandran:
The appeal is against order dated 30.09.2015 of Commissioner (Appeals), Raipur. The appellants are engaged in the manufacture of paper liable to central excise duty. They were availing credit on inputs and input services. The present appeal deals with the dispute regarding appellants eligibility for service tax credit of Rs.4,90,316/- paid towards availing repair and maintenance service and erection and commissioning services with reference to water pipe line laid by the appellant to obtain water from Sharda OCM Plant situated away from the manufacturing facility of the appellant. The credits were denied on the ground that the services availed have no nexus to the manufacturing activity of the appellant and these are relating to pipe lines situated outside the factory premises of the appellant.
2. Ld. Counsel for the appellant submitted that water is one of the main input item used in the manufacture of paper. The appellants laid pipe line to obtain water from Sharda OCM Plant, who had water storage facility at their abandoned mines. The services are availed by the appellants and for the purpose of input services, there is no necessity to avail the services inside the premises of the factory only. She relied on the decided case laws in support of the contention that the scope of Rule 2(l) is quite wide and cannot be restricted to the services received inside the factory only.
3. Ld. AR supported the findings of the lower authorities and submitted that the pipe line for transport of water has no direct link to paper manufactured and as such, the denial of credit is justified.
4. Heard both the sides and examined the records.
5. The short point for decision is that eligibility of the appellant for service tax credit paid on the services availed with reference to the pipe lines for transport of water to their factory. The input services as defined under Rule 2 (l) of Cenvat Credit Rules, 2004 states that any service used by a manufacturer, whether directly or indirectly in or in relation to the manufacture of final products is eligible for credit. The admitted fact is that the services received by the appellants in the present case are not falling under any exclusion Clause. The Revenue disputed that the pipe line related services are not having any nexus with the manufacture of paper by the appellants. In this context, it is to be seen that for the appellant, water is one of the main input items used in the manufacture of paper. Admittedly, water is being transported from outside by a pipe line laid and maintained by the appellant. Input Services to be eligible for credit is not linked to any location for receipt of such services. The Honble Bombay High Court in case of Deepak Fertilizers & Petrochemicals Corpn. Ltd. 2013 (32) STR 532 (Bombay) examined the scope of Inputs Services and held as under:-
5.?Now at the outset it must be noted that Rule 3(1) allows a manufacturer of final products to take credit inter alia of Service Tax which is paid on (i) any input or capital goods received in the factory of manufacturer of the final product; and (ii) any input service received by the manufacturer of the final product. The subordinate legislation in the present case makes a distinction between inputs or capital goods on the one hand and input services on the other. Clause (i) above provides that the Service Tax should be paid on any input or capital goods received in the factory of manufacture of the final product. Such a restriction, however, is not imposed in regard to input services since the only stipulation in clause (ii) is that the input services should be received by the manufacturer of the final product. Hence, even as a matter of first principle on a plain and literal construction of Rule 3(1) the Tribunal was not justified in holding that the appellant would not be entitled to avail of Cenvat credit in respect of services utilized in relation to ammonia storage tanks on the ground that they were situated outside the factory of production. The definition of the expression input service covers any services used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. The words directly or indirectly and in or in relation to are words of width and amplitude. The subordinate legislation has advisedly used a broad and comprehensive expression while defining the expression input service. Rule 2(l) initially provides that input service means any services of the description falling in sub-clauses (i) and (ii). Rule 2(l) then provides an inclusive definition by enumerating certain specified services. Among those services are services pertaining to the procurement of inputs and inward transportation of inputs. The Tribunal, proceeded to interpret the inclusive part of the definition and held that the Legislature restricted the benefit of Cenvat credit for input services used in respect of inputs only to these two categories viz. for the procurement of inputs and for the inward transportation of inputs. This interpretation which has been placed by the Tribunal is ex facie contrary to the provisions contained in Rule 2(l). The first part of Rule 2(l) inter alia covers any services used by the manufacturer directly or indirectly, in or in relation to the manufacture of final products. The inclusive part of the definition enumerates certain specified categories of services. However, it would be farfetched to interpret Rule 2(l) to mean that only two categories of services in relation to inputs viz. for the procurement of inputs and for the inward transportation of inputs were intended to be brought within the purview of Rule 2(l). Rule 2(l) must be read in its entirety. The Tribunal has placed an interpretation which runs contrary to the plain and literal meaning of the words used in Rule 2(l). Moreover as we have noted earlier, whereas Rule 3(1) allows a manufacturer of final products to take credit of excise duty and Service Tax among others paid on any input or capital goods received in the factory of manufacturer of the final product, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of the final product. This must be read with the broad and comprehensive meaning of the expression input service in Rule 2(l).The input services in the present case were used by the appellant whether directly or indirectly, in or in relation to the manufacture of final products. The appellant, it is undisputed, manufactures dutiable final products and the storage and use of ammonia is an intrinsic part of that process.
6. The Tribunal in Welspun Maxsteel Ltd. 2013 (31) STR 64 (Tribunal-Mumbai) upheld the credit on security services received in connection with the pump house for pumping water from the outside situated factory premises. In case of ZF Steering Gear (India) Ltd. 2015 (317) ELT 580 (Tribunal-Mumbai), the Tribunal upheld the eligibility of credit of input services with reference to annual maintenance of wind mill installed outside the factory premises for generation of electricity.
7. Considering the above discussion and analysis, I find no justification for denial of credit to the appellant and as such, set aside the impugned order. The appeal is allowed accordingly.
[Order dictated & pronounced in open court] ( B. Ravichandran ) Member (Technical) Ckp.
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