TaxTMI 
TaxTMI 
2015 (6) TMI 79
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....For the above mentioned two activities, i.e. manufacturing and trading, they are using number of taxable input services. They are availing credit of service tax paid on such input services. Since there is no excise duty or service tax on the trading activities, the entire credit is utilized towards payment of excise duty on the goods manufactured by the appellant. Further, since they have two units i.e. one located in Pune and the other in Bangalore, they are utilizing the said credit in the two units. For purpose of distributing the said credit, the main appellant took another registration as an input service distributor in Pune itself and based upon their registration as an input service distributor, they are distributing the credit of input services between the two units. 3. The dispute between the Revenue and the appellant is that since trading is not a taxable activity either under Excise Law or Service Tax law, and since the input services have been used both in manufacturing and trading, appellants are not eligible for availing the entire credit of input services under Rule 3 read with Rule 2(l) of the Cenvat Credit Rules. The Revenue is of the view that the appellant is ....
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....e Hon'ble Supreme Court's decision in the case of Flock India Pvt. Ltd. reported in 2000 (120) ELT 285 (SC) is quoted to support the contention. It is further submitted that the Bangalore Bench of this Tribunal in their own case, has set aside the demand vide final order No. 20723-20724/2014 dated 7.5.2014. It is also contended that if for some reason, the present Bench is of the different opinion, then the matter may be referred to a Larger Bench and in support of this contention, the judgment of the Hon'ble Allahabad High Court in the case of Xerox India Ltd. reported in 2011 (270) ELT 654 (All.) is quoted. It is also submitted that CBEC has issued letter No. 137/68/2013-ST dated 10.3.2014 and this letter of the CBEC is not binding on CESTAT as it is contrary to the ratio laid down by CESTAT. It is submitted that in case of conflict between the Board circular and CESTAT order, CESTAT order has to prevail and in support of the same, certain case laws are submitted. It is further submitted that the ratio of the judgment of this Tribunal in the case of Mercedes Benz reported in 2014 (36) S.T.R. 704 (Tri. - Mumbai) - is not applicable in the present case. According to the....
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....2011 and the show cause notice was received by them in April 2011. Hence the demand prior to March 2010 is hit by limitation, as the issue relates to interpretation of statutory provisions and there was a bona fide belief that in the absence of any reversal provisions, no cenvat credit is to be reversed for trading activity upto March 2011. 6. The learned Commissioner (AR), on the other hand, submitted that the appellant is one and the same and they have taken registration for manufacturing activity. Since they wanted to distribute the credit of input services, they have taken registration as an input service distributor in addition to as manufacturer. It is to be noted that both the registrations are in the name of SKF India ltd., Chinchwad, Pune. Function relating to input service distributor is being carried out from the office which is also located in the same premises as that of the factory. He further submitted that show cause notice has been issued to the appellant, both as a manufacturer as also an input service distributor. For both the activities viz. manufacturing and input service distribution, the jurisdiction is that of Commissioner of Central Excise, Pune-I. Under....
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...., accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal. Further, the term 'final product' is defined under clause (h) of the said Rule. In view of the said definitions, the appellant is not permitted to take credit of input services used in the trading activities. Since the input services are of such a nature that these are used both in the trading as also the manufacturing activities, the only solution is to divide the credit in proportion to the turnover of trading activity and manufacturing activity. The learned AR further submitted that the issue has been discussed in detail by this Tribunal in the case of Mercedes Benz India Pvt. Ltd. vs. CCE Pune -I reported in 2014 (36) S.T.R. 704 (Tri. - Mumbai) -. In the said judgment, this Tribunal has taken a view that trading is not a service. The learned AR also submitted that even the appellant at the time of original adjudication has taken the same plea that trading is not a service and, there....
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..... vs. CCE, Belapur reported in 2014 (301) ELT 573 (Tri.-Mumbai) (para 5.3); (vi) AG Industries Pvt. Ltd. vs. CCE, New Delhi reported in 2001 (129) ELT 218 (Tri.-Del.) (para 2). 7. We have considered the submission of both the sides. The main contentions raised by the learned counsel is relating to jurisdiction. The relevant provision for registration is provided under Section 69 of the Finance Act, 1994. The said provision is reproduced below:- "69. - (1) Every person liable to pay the service tax under this Chapter or the rules made thereunder shall, within such time and in such manner and in such form as may be prescribed, make an application for registration to the Superintendent of Central Excise. (2) The Central Government may, by notification in the Official Gazette, specify such other person or class of persons, who shall make an application for registration within such time and in such manner and in such form as may be prescribed." A bare reading of the said section would indicate that registration is required to be taken by (i) every person liable to pay service, tax, and (ii) other person or class of persons as notified by the Central Government. Thus, the ....
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....e services but distributes the credit in its own entities alone. 8. In the case in hand, the appellants are located in Chinchwad, Pune and are registered as manufacturer of goods under the Central Excise Act. If this was the only factory, there was no need to get registered as input service distributor. Since they have another unit in Bangalore, they have registration of the Pune unit as an input service distributor also. The purpose of such a registration is that the concerned authority is aware that the registered person is receiving invoices relating to input services used in their both the factories /locations. They normally would be paying excise duty in both the factories and accordingly the credit of input services is distributed among both the factories. It is to be noted that all the functions i.e. receipt of the invoices, distribution of the credit of such invoices, availment and utilization of such credit are done by the same legal entity. The only reason for distribution is that excise duty is paid factory-wise. So credit of duty on input services is also required to be distributed in both the factories. 9. The main objection of the appellant that the show cause n....
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....ails of Education cess received and distributed Details of Credit Apt/Oct May/Nov June/Dec July/Jan Aug/Feb Sept/Mar (1) (2) (3) (4) (5) (6) Opening Balance Credit of education cess received Credit of education cess distributed Credit of education cess not eligible to be distributed* Closing Balance * as per rule 7(b) of CENVAT Credit Rules, 2004 (C) The taxable services on which input service credit has been distributed during the half year period _______________ _______________ _______________ _______________ Self Assessment memorandum (a) I/We declare that the above particulars are in accordance with the records and books maintained by me/us and are correctly stated. (b) I/We have assessed and paid the service tax and/or availed and distributed CENVAT credit correctly as per the ....
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....tter may be referred to the Larger Bench. As discussed earlier, in the present case, both ISD as also the Pune factory are located in the same premises and, therefore, the case laws quoted are distinguishable and hence, in our view, there is no need to refer the matter to a Larger Bench and the contention is rejected. 13. The learned counsel has also submitted that the letter issued by the CBEC dated 10.3.2014 clarifying that the provision of Rule 14 of the Cenvat Credit Rules, 2004 shall only be invoked for denial of credit, is not binding on the CESTAT. There can be no doubt that circular issued by the CBEC is not binding on the CESTAT. In fact, this is applicable to appellant's contention regarding order dated 27.11.2013 passed by another Commissioner in the case of M/s. Godrej & Boyce Mfg. Co. Ltd. 14. The learned counsel has also submitted that the decision in the case of Mercedes Benz (supra) is not applicable in the present case. In our view, the said decision of the Tribunal in the case of Mercedes Benz is 100% fully applicable to the facts of the present case. In the said case, Mercedes Benz were manufacturing cars in India as also trading by importing certain mo....
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....se by a manufacturer in or in relation to the manufacture of final products. Further, the said definition relating to manufacture not only relates to the services which are used in the manufacturing operations but also includes services used in relation to setting up, modernization, renovation or repairs of a factory, advertisement or sales promotion , market research, storage upto the place of removal etc. The definition further includes activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security. Thus we observe that second part of the definition includes services which are required for setting up of the factory or marketing of the goods. For example, advertisement or sales promotion or market research or storage upto the place of removal etc. are activities which may not be directly used in the manufacture of the goods but are required for sale of manufactured goods. Further, there are certain services which are not directly related to the manufacture or ultimate sale of the goods but would be used by the manufacturer in his day-to-day business act....
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....gment, he was of the opinion that "a manufacturer claiming the benefit of CENVAT credit on any service under Rule 2(l) on the premise that the service is covered by the above expression should establish an integral connection between the activity/service and the business of manufacturing the final product." 31.1 I find that the decision in the case of Coca Cola analyses the definition of "input services" in 5 limbs and holds that each limb of the definition of input service can be considered as providing an independent benefit or concession or exemption. One of the limbs considered related to "services used in relation to activities relating to business....". However, the scope of the term "activities relating to business" was not spelt out in the said decision. 31.2 However, the latter decision of the Hon'ble High Court of Bombay, Nagpur Bench in the case of Ultratech Cement Ltd. has dealt with the scope of the said phrase and held as under : "29. The expression "activities in relation to business" in the definition of "input service" postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected wit....
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.... used in business are not included in the definition of input service. This part of the definition reads - activities relating to business such as accounting, auditing, financing, recruitment and......" Thus the services used in activities such as accounting, auditing, financing, recruitment etc. are only to be allowed. The services under dispute are mainly advertisement, even management, business auxiliary, business support services. None of these services are relating to activities illustrated or enumerated in the definition. On this ground also we do not find any merit in the contention of the appellant assessee that they would be entitled to the credit of common services. We, therefore, hold that the common services are not covered by the definition of activities relating to business." The appellant has given the breakup of credit taken on various services. In fact, after going through the said list, in our view, the decision in the case of Mercedes Benz is squarely applicable in the present case even for determining the quantum of credit to be reversed i.e. on turnover basis. Almost 50% of credit is for business support service which will be equally applicable for tra....
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....he difference between the sale price and the purchase price of the goods which is not so in the case of manufactured goods. On a query by the Bench that since Ld.Sr. advocate is arguing that only the value addition should be taken in respect of the traded goods, then why the same criteria should not be applied in the case of manufactured goods i.e. take the differential amount between the selling price and cost of various raw materials Ld.Sr. advocate stated that in case of manufactured goods so many things go into production process like labour, electricity and many other services and it will not be appropriate to take the value addition. In support of his contention that in case of traded goods only value addition should be taken, Ld.Sr. advocate took us through the judgment of the Court (5th Chamber) dated 14.7.1998 in case C-172/96 which was passed on a reference under Article 177 of the EC Treaty by the High Court of Justice of England and Wales, Queen's Bench Division. We have gone through the said judgment carefully. In the said case, the issue was how to determine the turnover for purpose of value added tax in case of transactions in different currencies by the First Na....
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....of Explanation 1 has no application for determining the apportionment of the credit of service tax on input services, the question is how to determine the same. We find that the major amount pertains to the services in relation to the advertisement, even management, business auxiliary service and business support service. When the appellant is spending certain amounts for sales promotion such as advertisement of the cars and consequent to the said expenditure he has certain turnover of the cars out of which some of the cars manufactured indigenously while other cars are imported and hence traded. In our view, the credit of tax paid on such sales promotion activities should be apportioned with reference to the turnover of the manufactured cars and turnover of the traded cars. For example, if the turnover in particular period is say Rs. 1000 crore out of which turnover of Rs. 700 is pertaining to the indigenous cars and turnover of Rs. 300 crores pertains to the imported and traded cars then if the input credit of 10 crores is available then 7 crore should be considered for the manufactured cars in India and credit of Rs. 3 crore should be considered pertaining to imported and traded....
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....ition of 'input services' with reference to the business of manufactured and imported goods. We therefore, do not find the ratio of the said judgment applicable in the present circumstances." In view of the said decision of the Tribunal, the contention of the appellant needs to be rejected. 17. Yet another contention of the appellant is that the demand needs to be recomputed as there are certain services which are directly used for manufacturing activity. We find that during investigation, the appellant has not made any such claim and not provided any such detail. Even while filing the appeal, no such claim has been made. It is only at the time of argument, a peculiar claim of this type has been made without giving any details. Under the circumstances, we reject the contention. 18. The appellant has submitted that major part of the demand is time barred. The main contention is that the period of limitation cannot be applied as the issue relates to the interpretation of the statutory provisions and they were under bona fide belief that in the absence of any reversal provision, no cenvat credit has to be reversed for trading activity upto March 2011. We are unable to....
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....33% under Notification No. 15/2004-S.T. and Notification No. 1/2006-S.T., admitted to have availed of the said notifications and even mentioned these notifications in their ST-3 Returns even when the said notifications specifically, unambiguously and expressly debarred completion and finishing services from such benefit and also they (i.e. appellants) nowhere disclosed that the service for which the said exemption notifications were claimed was completion and finishing service. All this clearly establishes suppression of facts on their part with intention to evade service tax. The judgments cited by them in this regard do not come to their rescue as none of them deals with a situation where benefit of an exemption notification was claimed so brazenly and blatantly to evade service tax when there was no scope for any ambiguity or confusion regarding the inadmissibility thereof. In coming to a finding regarding suppression of facts overall facts and circumstances of the case have to be considered in each case as was also held in the case of Mett Macdonald Ltd. v. CCE, Jaipur - 2006 (2) S.T.R. 524 (Tri.-Del.) = 2011 (134) E.L.T. 799 (Tribunal). In the present case, the fact that the a....