TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1096
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....ontractors procured pipes, other materials and equipment and used the same in laying the pipeline system. 1.2 The contract between GSPL and the contractors was on a lump sum price basis; yet, the latter issued two invoices, one for sale of the materials (including pipes) and the other for the services rendered by them. They discharged service tax liability under the category of "Commercial and Industrial Construction Services" or "Erection, Commissioning and Installation Services" on the services portion. As for the sale of materials used under the contract, they availed of the benefit of Notification No. 12/2003-S.T., dated 20-6-2003. 1.3 As per the aforesaid notification, the value of materials and goods sold in the course of rendering the taxable service is deductible from the gross amount charged subject to the condition that credit of duty paid on these goods and materials is not availed. Thus, the EPC contractors did not pay either CENVAT duty or service tax on the fabrication and assembly portion of completing the pipeline system and consequently did not avail CENVAT credit of duty paid on such pipes etc. 1.4 GSPL, however, availed of credit of duty paid on....
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....heir account and thereafter, issued it to EPC contractors for use in laying the pipelines. The pipeline was used for transporting the oil and gas. It was also submitted that with the support of documents issued by the manufacturers who supplied pipes, in the invoice, consignee was shown as GSPL even though the invoice was in the name of EPC contractor. The learned counsel relied upon the clarification issued by the Board under MODVAT Scheme wherein a view was taken that the credit can be taken even when the assessee was shown as consignee. It was submitted that what is required is that the pipe should have been used in the pipeline and CENVAT duty should have been paid on the same. It was also submitted that in the case of service providers, it is not necessary that inputs or capital goods should have been used within the premises of the service provider. It was also submitted that this ground has not been taken as a basis for denying the credit. 3.2 The learned special counsel for the Revenue submitted that GSPL is not entitled credit of CENVAT duty paid on pipes by EPC contractors on both conceptual and legal grounds. When CENVAT operates in a chain of transactions, each tr....
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....aid to the EPC contractors the full contract value of 100 as in Situation I. (ii) The total S. Tax paid by the contractors was only 5.9 GSPL bore this burden and took credit of the same. In addition, they took credit of an amount of 6.4. Thus, they took credit of 12.3, while the D. Tax paid was only 5.9. GSPL got an undue benefit of 6.4 (iii) On the contrary, in Situation I, the total S. Tax burden would have been 12, matching the total credit availed of 12. EPC contractors would have used credit of duty paid on materials i.e. 6.4 (iv) In Situation II, in comparison with Situation I, Revenue got less S. Tax revenue by 6.1 (12 minus 5.9) and the credit taken by GSPL being 12.3, the total revenue outgo was 18.4 as against 12 in Situation I. Net result : GSPL got undue benefit to the tune of credit of Cenvat (on materials including pipes) duty paid by the EPC contractors on the materials on account of simultaneous availment of 12/2003 and Cenvat credit. This happens because in either situation, the EPC contractor retained his contract value. But in situation II, by using credit of 6.4 against the services rendered by them, GSPL gaine....
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..... 3.9 The next ground taken by the learned special counsel is that from the legal angle also, availment of duty credit on pipes by GSPL is not justified. According to the Explanation to sub-rule (7) of the Rule 3 of the CENVAT Credit Rules, "Where the provisions of any other rule or notification provide for grant of whole or part exemption of condition of non-availability of credit of duty paid on any input or capital goods, or service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules". Since the service provider in this case, availed the benefit of Notification No. 12/2003, the provision of the notification prevailed over Rule 3 of CCR and, therefore, both GSPL and the contractors are not eligible to avail CENVAT credit. 3.10.1 Rule 3(1) starts with the words "a manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of". In this case, Notification No. 12/2003 has been availed by EPC contractors and not by GSPL. Therefore, question arises as to whether the Explanation can be applied to GSPL at all....
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....ng the distinction and difference between the definition of 'input' for manufacture and for service providers, the Tribunal observed as follows in paragraph 6 :- "6. The main thrust of the appellant's argument is that the definition of input as contained in Rule 2(k)(ii) is all goods "used for providing any output service". It stands contended by them that any item which is required for the ultimate providing of the service, should be considered as an input. The expression used for providing should be construed as "used for the purpose of providing". The expression for the purpose of business stands interpreted by the Hon'ble Supreme Court to be of wide import. As they have contended that jetty is used for providing port services and cement and steel in question are used for construction of such jetty. As such it has to be held that cement and steel stand used for providing the output services. We find that the definition of input is provided in Rule 2(k), in two different clauses i.e. (i) and (ii). Clause (i) refers to the definition of inputs for the purposes of excise duty whereas clause (ii) refers to the definition of input for the purposes of service tax. When we compa....
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....credit though eligible. Therefore, the decision in the case of Mundra Port is applicable to the present situation and it would not be possible to take a view that the pipes have been used for providing service of transportation of oil and gas in view of the words used "used for". 3.12 As rightly submitted by the learned Special Counsel, reliance of the appellants on the decisions in the case of Commissioner of C. Ex., Chennai v. Pepsico India Holdings Ltd. [2001 (130) E.L.T. 193 (Tri. - Chennai)] and Jaypee Bela Plant v. Commissioner of C. Ex., Bhopal [2005 (180) E.L.T. 31 (Tri. - Del.)] cannot be applied since in both the cases, what was in consideration was use of goods in or in relation to manufacture of final products and we have already distinguished between the meaning of the input for manufacture and for output service. 3.13 Another submission was that pipes have been received by GSPL and thereafter, the same were issued for construction/laying down of pipeline and, therefore, the appellant is eligible for the benefit. Since the Commissioner has taken a view that substantive requirements for taking CENVAT credit are fulfilled by GSPL, this point may be ignored. T....
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....credit in respect of defective documents also provides that even if name and address of the first and second stage dealer is not available in the invoice, credit can be extended provided the Assistant Commissioner/Deputy Commissioner is satisfied that the goods for service have actually been received and used. Therefore, even if the dealers were not registered, this was rectifiable defect and GSPL could have applied to the Assistant Commissioner/Deputy Commissioner for rectification. In any case, these are procedural requirements and would arise only if a view is taken that GSPL is eligible for a credit in the first place. But we are unable to agree with the submission of the learned special counsel that on this ground, credit can be denied to GSPL outright. 3.15 The next submission by the learned special counsel for the Revenue is that since EPC contractors do not pay duty on the pipeline system and pipeline systems are not excisable goods being immovable property, the appellant is not eligible for credit of duty on the pipes or pipelines. No doubt, EPC contractors have not paid excise duty and, therefore, this question does not arise. The question is whether the appellant i....
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....overed by capital goods. But once again as discussed earlier in respect of inputs, in this case also capital goods are required to be "used for" providing output service according to the definition of 'capital goods' under Rule 2(a) of CENVAT Credit Rules, 2004. In the case of capital goods for a manufacturer, what is required is use of capital goods in the factory of the manufacturer of final products whereas in the case of capital goods for service providers, they are required to be used for providing output service. Pipes are used for construction of pipeline by the service provider and pipeline system is handed over to the appellant. Construction of pipeline is an activity covered for service tax levy and it can be said that the pipes are used for providing output service by the service provider namely EPC contractor and not the appellant. The definition of 'input' also would not be of any help to the appellant since definition of 'input' also requires the input to be used for providing output service. Appellant is not using pipes for providing any output service but have supplied it for construction of pipeline to the EPC contractor. Being a free supply material, if the value ....
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.... not paid service tax on 'pipeline system' but on the services provided for constructing the system. Definition of 'input service' clearly covers this and it cannot be said that this service is not provided to output service. Moreover the decision of Hon'ble Andhra Pradesh High Court in the case of Sai Sahmita Storages (P) Ltd. [2011 (270) E.L.T. 33 (A.P.) = 2011 (23) S.T.R. 341 (A.P.)] also supports the case of appellants. In this case it was held that inputs used for construction of warehouse is admissible as credit. 6. Whether the notices for the period during the year 2005 to 2008 are barred by limitation? 6.1 It was submitted by the learned counsel for the appellant that appellant entertained a bona fide belief that the credit of duty paid on the pipes can be taken by them since the situation is revenue neutral. He would submit that if the EPC contractor had availed the benefit of CENVAT credit, appellant would have got the entire credit of duty paid on the pipes also since service tax was paid by the EPC contractors. Further he also submits that the appellant had taken legal opinion from M/s. Price Waterhouse Coopers Ltd. (PWC), who had opined that the appellant c....
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....id on pipes by their EPC contractors and such pipes were used by their EPC contractors for providing output service of 'Commercial and Industrial Construction'. It was also submitted that when the provisions of Section 11A are seen, it would show that in the case of suppression, there is no need to prove that the assessee had the intent to evade for invoking the extended period. Only in the case of provision relating to contravention of provisions of law, that would be required. 6.3 Before we proceed further, it would be appropriate to discuss the argument relating to provisions of Section 73(1) of the Finance Act, 1994. Section 73(1) reads as under : "Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of - (a) Fraud; or (b) Collusion; or (c) Wilful mis-statement; or (d) Suppression of facts; or (e) Contravention of any of the provisions of this chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the serv....
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....mitted to the department which were in reality not submitted, the allegation of suppression of facts or finding to that effect cannot be sustained. 6.6 This leads us to the question whether extended period could have been invoked. No fraud, collusion or contravention of provisions of Rule with intent to evade duty has been alleged. It would be still appropriate to discuss whether wilful misstatement can be found against the appellants. It can be said that when the appellants availed CENVAT credit on pipes to which they were not eligible, they have made a misstatement. This is because in every return filed, assessee is required to file a declaration below that the information given therein is true. Further as rightly submitted by the Revenue, it is the responsibility of the assesee to assess due tax correctly and pay the same. Assessment includes availment of CENVAT credit and its utilization. Therefore when wrong credit is availed which is not admissible, there is no doubt a misstatement has occurred. The credit which is not eligible has been taken and utilized whereas the assessee makes a claim that duty have been assessed correctly and paid correctly. However there is no di....
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.... of fact could not have been alleged, wilful misstatement or its existence or otherwise should have been considered. We find that in the facts and circumstances of this case, it is not possible to sustain wilful misstatement especially in view of the discussion about the illustration given by the learned Special Counsel to show dual benefit to appellants in this order. 6.7 The facts and circumstances would show that appellants obtained legal opinion; legal opinion said they can take credit but a different view was possible; they approach the apex body C.B.E. & C. for clarification and did not get any reply; there was no suppression of facts since there is no allegation of incomplete or no credit returns; the situation is revenue neutral if a view is taken that appellant is eligible for the benefit of credit of service tax paid by EPC contractors; as per the records and documents it was EPC contractors who sold the pipes to the appellant who in turn issued the pipes for use in the pipeline; Notification No. 12/2003 applied when there was a sale of goods from the contractor to the principal; the CENVAT credit of duty taken by the appellants was in fact paid by them; it is not t....