Custom, Excise & Service Tax Tribunal
Welspun Corp Ltd vs Rajkot on 16 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 3
EXCISE Appeal No. 13640 of 2014-DB
[Arising out of Order-in-Original/Appeal No RAJ-EXCUS-000-COM-12-14-15 dated
21.08.2014 passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-RAJKOT]
Welspun Corp Limited .... Appellant
Survey No. 665, Village : Varsamedi,
Taluka : Anjar, KUTCH, GUJARAT -370110
VERSUS
Commissioner of Central Excise & ST, Rajkot .... Respondent
Central Excise Bhavan, Race Course Ring Road Income Tax Office, Rajkot, Gujarat -360001 WITH EXCISE Appeal No. 13635 of 2014-DB (E/Cross/10161/2015) [Arising out of Order-in-Original/Appeal No RAJ-EXCUS-000-COM-12-14-15 dated 21.08.2014 passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-RAJKOT] Commissioner of Central Excise & ST, Rajkot .... Appellant Central Excise Bhavan, Race Course Ring Road Income Tax Office, Rajkot, Gujarat -360001 VERSUS Welspun Corp Limited .... Respondent Survey No. 665, Village : Varsamedi, Taluka : Anjar, KUTCH, GUJARAT -370110 APPEARANCE :
Shri Vishal Agarwal, Ms. Dimple Gohil and Shri Kartik D. Advocates for the Appellant Shri Anoop Kumar Mudvel, Superintendent (AR), for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) DATE OF HEARING : 21.03.2024 DATE OF DECISION: 16.07.2024 FINAL ORDER NO. 11559-11560/2024 C.L. MAHAR :
The brief facts of the matter are that the appellant namely M/s. Welspun Corporation Limited are engaged in the manufacture of steel pipes falling under Chapter No. 72 and 73 of the first schedule to the Central 2 Appeal Nos. E/13640, 13635/2014 Excise Tariff Act, 1985. The availing Cenvat credit under Cenvat Credit Rules, 2004 on the inputs and input services availed by them for manufacture of excisable goods. The department during the course of audit of financial record of the appellant has noticed that the appellant has sent bare steel pipes to M/s. Zebra Marketing, Ahmedabad for cement coating on the pipes as the appellant M/s. Welspun Corp. Limited does not have necessary facility of cement coating at their premises. After getting cement coating done on the steel pipes from the job worker, the appellant has cleared cement coated pipes under exemption Notification No. 6/2006-CE dated 01.03.2006 directly from the job worker's premises. The job worker namely M/s. Zebra Marketing has charged service tax on the cement coated pipes which were cleared by the appellant under Notification No. 6/2006-CE. The department is of the view that activity undertaken by the job worker that of cement coating on the steel pipes amounts to manufacture as per clause (5) of the Chapter note 73 of Central Excise Tariff Act, 1985 hence the job worker is not liable to charge and pay any service tax on such activity. The department is of the view that under the definition of Business Auxiliary Service, the activities which amount to manufacture are specifically excluded from the definition of Business Auxiliary Service. The department is of the view that that the availment of Cenvat credit by the appellant amounting to Rs. 55,77,605/- during the period from 2008-09 to 2012-13 on the basis of invoices issued by M/s. Zebra Marketing, is legally not correct and therefore the show cause notice demanding reversal of Cenvat credit under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, 1944 was issued which has been adjudicated by the impugned order-in-original dated 21.08.2014 whereunder all the charges as invoked in the show cause notice have been confirmed by the Adjudicating Authority.
2. The learned advocate appearing for the appellant submits that they have availed Cenvat credit of service tax reimbursed by them to their job-
workers. It has further been mentioned by the appellant that they have been following the procedure prescribed under Rule 6(2)(i) of the Cenvat Credit Rules, and paying equal to 6% of the value of exempted goods in respect of clearances affected by them availing the exemption from payment of Central Excise duty as per Notification No. 6/2006-CE dated 01.03.2006. It has further been submitted that the authorities having jurisdiction over 3 Appeal Nos. E/13640, 13635/2014 the job workers have never objected to the payment of service tax discharged on the cement coated pipes and the appellant being the service recipient has availed Cenvat credit of the tax paid by them. It is not open to the department to examine the correctness or otherwise of the tax paid nor they can deny the tax paid by the recipient of the service on the ground that service provider was not required to discharge service tax on the activity undertaken by them.
3. The learned advocate has relied upon the decision of Hon'ble Supreme Court in the case of CCE vs. MDS Switchgear Limited - 2008 (229) ELT 485 (SC) and in the case of Sarvesh Refractories vs. CCE - 2007 (21) ELT 488 (SC). The learned advocate has contended that the show cause notice has wrongly alleged that the service rendered by the job workers was exclusively availed on the clearance of goods without payment of duty and consequently the assessee was not eligible to avail Cenvat credit. The learned advocate has submitted that the appellant has made clearances from the premises of the job workers of their excisable goods both on payment of duty as well as without payment of duty. In respect of clearance made without payment of duty in terms of Notification No. 6/2006-CE dated 01.03.2006, the appellant has paid 6% of the value of said clearance as provided under Rule 6(3)(i) of Cenvat Credit Rules, 2004.
4. We have also heard the learned AR who reiterated the findings as given in the impugned order-in-original.
5. We find from the record that appellant has been clearing cement coated pipes from the premises of the job work namely M/s. Zebra Marketing on payment of duty as well as by availing the benefit of exemption under Notification No. 6/2006-CE. It is matter of record that since the appellant have availed credit of common input services which have been used both in the manufacture of dutiable and exempted goods and have not maintained separate accounts with respect to dutiable and exempted goods as required under Rule 6(2) of the Cenvat Credit Rules, 2004 they have paid an amount equal to 6% of the value of exempted goods cleared by them, as provided under Rule 6(3)(i) of Cenvat Credit Rules, 2004. With regard to the question whether the appellant is entitled to avail Cenvat credit of the service tax paid by the job worker for the activity which 4 Appeal Nos. E/13640, 13635/2014 amounts to manufacture and thus falls beyond the scope of definition given for Business Auxiliary Service. We find that the matter has already been decided by the Hon'ble Gujarat High Court in the case of CCE, Ahmedabad vs. Nahar Granites Limited reported under 2014 (305) ELT 9 (Guj.). The relevant extract of the decision is reproduced below:-
"7. Rule 3 of the Cenvat Credit Rules, 2004 allows a manufacturer or producer of final product or a provider of taxable service to take Cenvat credit of the duty of excise specified in the First Scheduler to the Excise Tariff Act. Rule 4 of the Cenvat Credit Rules, 2004 lays down the conditions for allowing Cenvat credit. Sub-rule (1) thereof provides that Cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Proviso to sub-rule (1) puts certain limitations on such immediate availability of Cenvat credit. We are however, not concerned with the proviso.
8. In terms of Rules 3 and 4 of the Cenvat Credit Rules, 2004, a manufacturer would be entitled to avail the Cenvat credit in respect of the inputs used for the manufacture of a final product or in providing taxable service of the excise duty specified in First Schedule to the Excise Tariff Act. Insofar as the respondent is concerned, he had purchased the inputs and utilised the same for manufacture of a final product. Such goods were duty paid. Rules 3 and 4 of the Cenvat Credit Rules, 2004, thus would enable him to avail the Cenvat credit. It is a different thing that the supplier of the goods to the respondent paid excise duty on such product under mistaken belief. In law as declared by the Supreme Court in case of Collector of Central Excise, Patna v. Tata Iron and Steel Co. Ltd. (supra), no duty was payable on such product. Strictly speaking therefore, such amount deposited by the original manufacturer would not partake the character of excise duty.
However, when the department did not dispute the classification of such manufacturer, accepted the declarations and duties, Cenvat credit on such duty cannot be declined to the purchaser of the goods who otherwise fulfilled all conditions tor availing Cenvat credit thereof.
9. Case is substantially similar to one before the Supreme Court in case of MDS Switchgear Ltd. (supra). In the said case, the Tribunal while accepting the department's allegation of inflation of the value of intermediate goods to load the assessable value, observed that if the department was of the opinion that the value of the final product was depressed, it could have charged the original manufacturer unit in under-invoicing their product. This was however, not done. Valuation was duly approved and the payment of duty was also accepted. The Tribunal further observed that "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 receipt 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 unit cannot be contested or challenged by the officers in charge of recipient unit."
This Tribunal in the case of Aarti Industries Limited vs. CCE - 2023 (5) TMI 77-CESTAT Ahmedabad has also taken the similar view. The relevant extract is reproduced below:-
5Appeal Nos. E/13640, 13635/2014 "7. The appellant had been issued Advance Authorization and since they did not use those Advance Authorization for duty free import of inputs, they got the same invalidated and obtained invalidation letters in favour of certain domestic suppliers for duty free supply of the inputs. However, domestic suppliers instead of supplying the inputs duty free in terms of Notification No. 44/2001-C.E. (N.T.), dated 26-6-2001 supplied those inputs on payment of duty. The appellant took Cenvat credit of that duty. The Department's contention is that the domestic suppliers in whose favour the invalidation letters had been obtained by the appellant from DGFT for duty free supply, should have supplied the inputs without payment of duty, but since they have paid the duty on these inputs, the amount paid towards duty cannot be treated as Central Excise duty and hence the appellant would not be eligible for its Cenvat credit. We find that this very issue has been considered at length of the Tribunal in the case of M/s. Oleofine Organics (India) Pvt. Ltd. & M/s Fine Organics (India) Pvt. Ltd. v. CCE, Thane-I (supra) and the same stands decided in the favour of the appellant. Not only this, as held by the Apex Court in the case of CCE & CUS v. MDS Switchgear Ltd.
(supra), while considering availability of Cenvat credit to a manufacturer in respect of some inputs procured by him from another manufacturer, the quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officials in-charge of the recipient unit. In this case, there is no evidence produced that the assessment of duty at the end of the domestic suppliers had been reviewed and the duty paid by them has been refunded to them. When this is so, there is no question of denying the Cenvat credit to the appellant. In view of this, the impugned order is not sustainable. The same is set aside. The appeal as well as stay application are allowed."
5. On the issue that whether the payment of duty can be disputed while allowing Cenvat credit at the recipient end of the inputs, in the case of Pearl Polymers Limited (supra), the Tribunal has held as under:-
"The appellant is in appeal against the impugned order.
2. The facts of the case are that during the period of July, 2004 to August, 2004, the appellant procured certain inputs from the 100% EOU. The EOU cleared inputs to the appellant by paying duty under Serial No. 3 of the Notification No. 23/2003-C.E., dated 31-3-2003. The appellant availed Cenvat credit of duty paid by the supplier as per Rule 3 of the Cenvat Credit Rules, 2002, thereafter, a show cause notice was issued to the appellant alleging that as the supplier of goods was not established that they have not procured indigenously inputs manufactured the goods supplied to the appellant. Therefore, the duty is not payable by the supplier under Serial No. 3 of the Notification. In that circumstance, the appellant is not entitled to avail 100% credit of duty paid by the supplier. The matter was adjudicated, the demand was confirmed along with interest and penalty was also imposed on the appellant. Aggrieved from the said order, the appellant is before me.
3. The ld. Counsel for the appellant submits the fact that the supplier has paid duty under Serial No. 3 of Notification 23/2003-C.E. is not disputed. In that circumstances, whatever the duty has been paid by the appellant is entitled for Cenvat credit as per Rule 3 of the Cenvat Credit Rules, 2002. Therefore, the impugned order is to be set aside.
4. On the other hand, the ld. AR opposed the contention of the ld. Counsel and submits that as per Rule 14 of the Cenvat Credit Rules, 2004 duty cast on the appellant that they have to verify supplier of the goods (in case of 100% EOU) 6 Appeal Nos. E/13640, 13635/2014 that EOU has manufactured the goods supplied to the appellant by using indigenously manufactured inputs which the appellant have failed to do so. In that circumstance, the appellant is not entitled for 100% EOU credit.
5. Heard the parties and considered the submissions.
6. In this case the payment of duty under Serial No. 3 of Notification 23/2003 is not disputed by the parties. The duty cast on the appellant is to verify that the 100% EOU has paid duty under Sr. No. 3 of the said notification when the duty has been paid under Sr. No. 3 of Notification 23/2003-C.E., the same is sufficient to entitlement to the credit to the appellant. In that circumstance, I hold that the appellant has correctly availed the Cenvat credit. Therefore, the impugned order deserves no merits, hence set aside. Consequently, the appeal is allowed with consequential relief, if any."
6. In view of the above judgments, it can be seen that on both the counts i.e. on the issue of availment of exemption Notification No. 44/2001-CE (NT) dated 26.06.2001 by the supplier and also where even if the duty is not payable by the supplier but the same was paid, Cenvat credit cannot be denied at the recipient end. Consequently, the personal penalty on Shri Omdev R. Mishra is also not imposable. Accordingly, the impugned orders are set-aside and the appeals are allowed."
6. In view of the above decisions as well as the facts of the matter we are of the view that once the job worker has paid service tax, which has been accepted by the department, any CENVAT credit has been availed by the recipient of service, cannot be denied. Therefore, we hold that order-in- original in question is without any merits.
7. The department has also filed appeal (No. E/13635/2014) against the impugned order-in-original on the following grounds:-
"(a) The Adjudicating Authority at Para 16.3 of the order had held that "As the amount paid does not represent service tax under section 66 ibid, accordingly, it cannot be taken as credit by the noticee. Hence, I disallow the credit of service tax amounting to Rs.54,74,533/- availed by the noticee on the said 49 invoices.
(b) However the Adjudicating Authority has not dwelt on the important issue raised at Para 6 of the SCN, that Service Tax has been paid exclusively on those goods which are cleared without payment of duty and therefore also the availment of CENVAT credit by the assessee is incorrect and the same is liable to be reversed. Para 9 of the SCN also alleges contravention of the provisions of CENVAT Credit Rules, 2004 as the said credit was availed by the assessee in respect of exempted goods."7
Appeal Nos. E/13640, 13635/2014
8. It can be seen that the respondent assessee in this appeal, in their written submission dated 09.06.2014, as mentioned in the order-in-original, stated as follows:-
"(c) They have made clearances from the premises of job worker on payment of duty as also made clearances without payment of duty. In respect of clearances made without payment of duty in terms of Notification No. 6/2006-CE dated 01.03.2006, they have reversed, an amount of 6% of the value of the said clearance in terms of Rule 6(390) while in respect of clearances without payment of duty in terms of Notification No. 108/95-CE dated 28.08.1995, no such reversal under Rule 6(3)(1) was warranted by virtue of Rule 6(6)(iv). They also submitted Exhibit 'A' which shows clearance of cement coated pipes from the job worker premises on payment of duty as well as under
exemption Notification No. 6/2006-CE ibid during the period from 2008-09 (January 2009) to 2012-13 (upto December 2013), Exhibit 'A' also explains that some of the input service credit taken by them for various types of work such as Maintenance and Management of dumpsite, Sand Rows and unloading/stacking of coated pipes carried out by the job worker i.e. M/s. Zebra Marketing.
(d) They submitted that since they have availed credit on common input services which have been used both in the manufacture of dutiable and exempted goods and have not maintained separate accounts with respect to dutiable and exempted final products as mandated in Rule 6(2), they were duty bound to have followed Rule 6(3), which have been duly complied by them. They have, as provided in Rule 6(3)(i), paid an amount equal to 6% of the value of the exempted goods cleared by them as envisaged in Rule 6(3)(i)."
The respondent/assessee M/s. Welspun Corp. Limited in their cross-objection has mentioned that cement coated pipes obtained from M/s. Zebra Marketing were being cleared by the assessee M/s. Welspun Corp. Limited on payment of appropriate duty of excise as well as the same were also cleared to SEZ without payment of duty. It has been emphasized by the learned advocate that it is wrong on the part of the department to allege that the service tax of cement coating under Business Auxiliary Service on which Cenvat credit has been availed by the respondent is only being cleared without payment of duty. It is a matter of record that the goods so obtained 8 Appeal Nos. E/13640, 13635/2014 after getting necessary coating on pipes were also cleared on payment of Central Excise duty.
9. We hold that it is matter of record that M/s. Welspun Corp. Limited were reversing 6% of the value of goods which were cleared without payment of duty as per the requirement of Rule 6(3)(i) of Cenvat Credit Rules, 2004. At the same time, in their reply to show cause notice, it has categorically been mentioned by the respondent assessee that they have also been clearing the cement coated pipes on payment of Central Excise duty. In view of above, we feel that the grounds taken by the department for filing this appeal are devoid of merits. We therefore, hold that the appeal filed by the department is not maintainable on merits and therefore, we set-
aside the same.
10. In view of above discussions, we hold that Appeal No. E/13640/2014 filed by M/s. Welspun Corp. Limited is allowed and appeal No. E/13635/2014 filed by department is dismissed as discussed above. Cross Objection also get disposed of accordingly.
(Pronounced in the open court on 16.07.2024) (Ramesh Nair) Member (Judicial) (C L Mahar) Member (Technical) KL