TaxTMI 
TaxTMI 
2015 (8) TMI 346
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....n 11A of the Central Excise Act, 1944. 2. An amount of Rs. 27,79,30,282/- out of the above mentioned Rs. 40,57,15,829/- was found to have been availed even before the registration of ISD is ordered to be recovered from the 'Noticee'. 3. I impose a penalty of Rs. 40,57,15,829/- under Section 11AC of the Central Excise Act, 1944 read with the provisions contained in Rule 15(4) of the Cenvat Credit Rules, 2004 on M/s. ONGC Uran Plant. 4. I order M/s. ONGC Ltd. Uran plant to pay interest, at the appropriate rates & as applicable, in force, under Section 11AB of the Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 on credit of Rs. 40,57,15,829/- wrongly availed by them. 5. I also imposed penalty on the Input service distributors of M/s. Oil & Natural Gas Corporation Ltd., equivalent to the amount shown respectively against their names under Rule 15(4) of Cenvat Credit Rules, 2004. 2. The fact of the present case is that, the appellants Uran factory is engaged in the manufacture and sale of petroleum products like Naphtha, Lean Gas, Propane, LPG, C2C3 etc. The crude oil required for the production of the above said....
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....at credit of Rs. 40,57,15,829/- availed by Appellant on the basis of invoices issued by the ISD distributing the credit of service tax paid on input services. The credit was sought to be denied on two grounds namely: The Cenvat Credit distributed by the ISD pertains to input services availed and used exclusively at the oil fields of Mumbai offshore to produce exempted crude oil. Hence, credit of input services used for the production of crude oil cannot be availed at Uran factory of appellants. The Uran factory of the appellants are not entitled to Cenvat credit of service tax paid on the input services received by the administrative divisions prior to the registration as ISD but distributed by the ISD after taking registration. The proposal made in the show cause notice was confirmed by the Respondent vide Order-in-Original dated 6.5.2011 and imposed penalties on the appellants and ISDs. The appellants filed an appeal challenging the Order-in-Original before this Tribunal who vide Final Order reported at 2013 (31) STR 214 (T) affirmed the Order-in-Original against the appellants and imposed penalties. However, the Tribunal set aside the penalties imposed on th....
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....f the services rendered for the production of crude oil in Mumbai offshore locations. Thereafter, the ISDs of the appellants issued invoices under Rule 4A of the Service Tax Rules, 1994 distributing the credit of service tax paid to the service providers. The Uran factory of the appellants availed cenvat credit on the basis of the original invoices issued by ISD only and the same was made available to the department for verification. (D) The appellants in this connection refer to the provisions of Rule 2(m) of Cenvat Credit Rules, 2004 and submits that the said rule does not stipulates any condition that ISD can not distribute the credit related to purchase of services prior to ISD registration. (E) Rule 3(1) provides that a manufacturer of final products shall be allowed credit of duty paid on inputs and capital goods as well as service tax paid on input services received by him. In the present case, there is no dispute that the input services in question have been received by the appellants. (F) Rule 9(1) specifies the documents on the basis of which cenvat credit can be taken by the manufacturer or service provider or ISD, as the case may be. ....
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.... is no timelimit provided under Cenvat Credit Rules in availing the credit of service tax paid on input services. The restriction canvassed by the department that the ISD can distribute only credit of service tax paid on input services received after registration is unwarranted and not provided in law. (K) The Tribunal has examined whether the credit of input services received prior to registration can be availed for providing output service in Imagination Technologies India Ltd. Vs. CCE, Pune-III - 2011 (23) STR 661 (T). After examining the legal provisions under the Cenvat Credit Rules, 2004, the Tribunal has held that there is no provision in the CENVAT Credit Rules specifically prohibiting availment of CENVAT Credit in respect of inputs/input service which have been received prior to their registration as an output service provider. (L) The Tribunal WNS Global Services Pvt. Ltd. Vs. CCE, Nashik - 2013 (32) STR 657 (T) held that credit can be availed if nexus between input service and output services has been established. The Head Office being not registered as ISD will not disentile the appellants from availing the credit of service tax paid on input services ....
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....nvoices for input services since they are intangible in nature unlike inputs. The verification of input services can be done through document which is adversely affected by registration or non-registration. In the instant case, appellants have availed credit based on invoices issued by the service provider only. These documents are available with the ISDs and there is no dispute raised by the department in the present proceeding regarding availably of documents with the ISDs. Hence, the contention of the Ld. A.R. that the appellants have violated procedural condition is incorrect in law and facts. (Q) The department is not prejudiced by the delay of the assessee in getting registered as ISD. The department can verify the factual position regarding invoices at any point. The ISDs can avail credit based on valid documents at any point of time. The registration is not a condition for availing the credit. During the period in dispute the law never provided any time limit for availing the credit. The law has been subsequently been amended to provide time limit for availing the credit. (R) The ISDs can avail the credit of service tax paid on input services based on the ....
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....r than last day of the manufacture following half year period. In this regard it is his submission that as per the said half yearly return input service distributor is required to declare details such as opening balance, credit of service tax received, credit of service tax distributed, closing balance etc. In view of the above details return to be submitted by input service distributor, which contains the details such opening balance and receipt of service tax to be distributed. In the present case, since at the time of registration by input service distributor, the service tax received earlier cannot be considered as opening balance therefore the same could not have been distributed, in other words data in returns can be shown and submitted only in respect of services received on or after registration as input service distributor, for this reason also input service credit relate to the service received by the input services distributors prior to registration is not eligible to be distributed to the appellant, therefore appellant has wrongly availed the Cenvat Credit. He submits that prior to registration whatsoever services were received are not governed by the provision of input....
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....ribution of input service has not followed correctly, therefore the credit distributed by the input service distributor in the present case is not legal and correct and same is not admissible to the appellant. 5. We have carefully considered the submission made by both sides and perused the records. 6. When the matter first time came before this Tribunal, the issue involved was whether the credit availed by the appellant is in respect of exempted goods i.e. crude oil etc. therefore whether the credit is admissible. Secondly, credit can be allowed in respect of services received by the input service distributor before the registration under input service distributor and distributed the same after the registration. This Tribunal had passed following order: 2013 (31) S.T.R. 214 (Tri- Mumbai) Oil & Natural Gas Corporation Ltd. Versus COMMR. OF C. EX., RAIGAD 7. In view of the above, we hold that credit of service tax paid on input services used in manufacture of Crude oil and Natural gas at Mumbai Offshore is not admissible to Uran Plant. Since credit is not admissible we do not go into second aspect of admissibility of credit only after date of registered as....
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....n the First and Second Schedules to the Central Excise Tariff Act, paid on the following:- "(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004." (emphasis supplied) In the present case, it is clause (ii) which is of relevance. Hence, in order to enable a manufacturer to avail of Cenvat credit, the requirement is that the duty of excise ought to have been paid on any input service received by the manufacturer of a final product. The expression "input service" is defined in rule 2(1) as follows:- "(1) "input service" means any service, - (i) used by a provider of taxable service for providing an output service, or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting....
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....ion and inventory of inputs and input services meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods. Rule 6(2) stipulates that a manufacturer can take Cenvat credit only on that quantity of input service which is intended for use in the manufacture of dutiable goods. In other words, Cenvat credit is not admissible on that quantity of input or input service which is not intended for use and is not used in the manufacture of dutiable goods. Rule 6(5) confers an option to follow one of two courses of action to a manufacturer not opting to maintain separate accounts. Under Rule 6(5), which has a non obstante provision over-riding sub-rules (1), (2) and (3) credit of the whole of the service tax paid on taxable services of a specified description is allowable unless such a service is used exclusively in or in relation to the manufacture of exempted goods or provision of exempted services. In other words, where a service is of the description which is specified in Rule 6(5), the manufacturer is entitled to credit of the whole of the service tax unless the service is used exclusively, that is to say solel....
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....scription of services that are utilised by the manufacturer directly or indirectly in or in relation to the manufacture of dutiable final products. The manufacture of the dutiable final products cannot take place without the process in question. To accept the contention of the Revenue would be to completely ignore the implication of the words "used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products." Such a construction as proposed by the Revenue is impermissible. These words used in the subordinate legislation fulfill the statutory object and purpose of presenting a cascading effect and burden of duty. They must be given their plain and natural meaning. At the same time, it would be necessary to clarify that Cenvat credit can be availed of only on that quantity of input service which is used in the manufacture of dutiable goods. 15. In arriving at this conclusion, we have placed reliance on two judgements of the Supreme Court. The first judgment is a judgement in Escorts Ltd. v. Commissioner of Central Excise, Delhi - 2004 (171) E.L.T. 145 (S.C.) In Escorts's case, the Appellant manufactured tractors and availed....
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.... Solaris Chemtech Limited - 2007 (214) E.L.T. 481 (S.C.). The explanation to Rule 57A defined "input" inter alia to include inputs used as fuel, this clause being brought into existence on 1 March 1994. In that case, Low Sulphur Heavy Stock (LSHS) was used by the assessee as fuel for generating electricity which was in turn captively consumed for the production of caustic soda and cement. The Revenue contended that LSHS generates electricity, but that process did not result into the manufacture of cement and caustic soda and, therefore, Modvat credit was not admissible for the duty paid on LSHS. Electricity, as the Supreme Court noted, is not an excisable item. The Supreme Court held that without the utilisation of LSHS, it was not possible to manufacture cement or caustic soda and, therefore, LSHS fell within the ambit of the expression used "in or in relation to manufacture of final products". The wide ambit of the expression "used in or in relation to the manufacture of the final product" has been emphasised by the Supreme Court in the following observations:- "Lastly, we may point out that in order to appreciate the arguments advanced on behalf of the Department one ne....
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....an input used in the manufacture of final product. However, the doubt may arise only in regard to use of some articles not in the mainstream of manufacturing process but something which is used for rendering final product marketable or something used otherwise in assisting the process of manufacture. This doubt is set at rest by use of the words "used in relation to manufacture". In the present case, the LSHS is used to generate electricity which is captively consumed. Without continuous supply of such electricity generated in the plant it is not possible to manufacture cement, caustic soda etc. Without such supply the process of electrolysis was not possible. Therefore, keeping in mind the expression "used in relation to the manufacture" in Rule 57A we are of the view that the assessees were entitled to MODVAT credit on LSHS. In our opinion, the present case falls in clause (c), therefore, the assessees were entitled to MODVAT credit under Explanatory clause (c) even before 16-3-95. Inputs used for generation of electricity will qualify for MODVAT credit only if they are used in or in relation to the manufacture of the final product, such as cement, caustic soda etc. Therefore, it....
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.... Rule 2(m) defines "input service distributor" as under: "input service distributor" means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be. In the above definition it provides that the input service distributor should receive invoices under Rule 4(a) of the Service Tax Rules, 1994 towards purchase of inputs services and issues invoices for the purpose of distribution of credit of service tax paid on the said service to such manufacturer or producer or provider, as the case may be. The Rule 2(m) does not stipulates any condition that the invoices issued under Rule 4(a) in respect of purchase of input service should pertain to period prior to the registration or after registration. Therefore it is clear that the purchase of input service by the office of the manufacturer maybe for the period prior to the reg....
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....ervice shall not be eligible to take credit of such additional duty; In view of above, a manufacturer of final product shall be allowed, credit of duty paid on inputs and capital goods as well as service tax paid on input service received by him. In the present case, services on which the Cenvat Credit was taken by the appellant have been admittedly received and used in or in relation to the manufacture of the dutiable final product which has been observed by the Hon'ble High Court also. Therefore, foremost condition is, input should be received by the appellant and same should be used in or in relation to the manufacture of their dutiable final product is not under dispute. Rule 9(1) of Cenvat Credit Rules provides documents on which the Cenvat Credit can be availed which is reproduced below: 9. Documents and accounts.- (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :- (a) an invoice issued by- (i) a manufacturer for clearance of - (I) inputs or capital goods from his factory or depo....
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...." has been substituted vide Notification No. 28/2005-CE(N.T.), dated 07/06/2005) (f) an invoice, a bill or challan issued by a provider of input service on or after the 10th day of, September, 2004; or (g) an invoice, bill or challan issued by an input service distributor under rule 4A of the Service Tax Rules, 1994 . Provided that the credit of additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be allowed if the invoice or the supplementary invoice, as the case may be, bears an indication to the effect that no credit of the said additional duty shall be admissible; [Inserted vide Notification No. 35/2007-CE(NT), dated 14-09-2007] From the above rule, it is observed that the appellant being manufacturer can avail the Cenvat credit on the, amongst documents, invoices issued by input service distributors under Rule 4A of Service Tax Rules, 1994. In the present case the appellant has availed credit on invoices issued by the input service distributors under Rule 4A, therefore the documents on which credit was taken is the documents covered under the above rule therefore invoi....
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.... 2008. The department was of the view that since the appellant registered themselves as input service distributor only from 04.10.2008 and not the taxes paid prior to 04.10.2008. Accordingly, a show-cause notice was issued and the appellant was denied credit amounting to Rs. 4,61,039/- on the ground that the services were received prior to 04.10.2008 and the taxes were also paid prior to that date and, therefore, the appellant could not have distributed the credit in respect of the taxes paid. ... 6.2 Input service distribution is a facility granted to a manufacturer/service provider who operates from a number of premises. There is no restriction under the CENVAT Credit Rules, 2004, with regard to the period for availing CENVAT credit of service tax paid. In other words, a manufacturer/input service provider can avail CENVAT credit of the service tax paid irrespective of any time limitation. The only condition to be satisfied is that they should have paid the service tax prior to availing the credit. So long as this condition is satisfied, there is no time limit prescribed in the Rule within which the CENVAT credit has to be taken. If that be so, there is no reaso....
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....overed by the definition of 'Input service' and if the appellant had obtained separate registration as 'input service distributor', there would have been no objection to availing Cenvat credit on the basis of invoices in the name of Zonal Audit Office and distributing the same to the branches of PNB. In the peculiar facts and circumstances of the case, when the Appellant, though not providing the banking/financial services, were registered as provider of banking service since 2004, they should be treated as registered as ISD also, as they were for all practical purposes, functioning as input service distributor and the availment of service tax credit and its distribution to various branches by issue of invoices were being reflected in the ST-3 returns being filed by them, which is what a registered Input Service Distributor would have done. I have gone through the judgments cited by the ld. D.R. but none of them are applicable to the facts of this case. I, therefore, hold that the Appellant could take the Cenvat credit and distribute the same by issuing invoices to their branches. The impugned order is, therefore, not sustainable. The same is set aside. The appeal i....
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....e registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathetically. Further, it is also noticed that appellant has not got any extra benefit by doing this. In fact from the statement of Shri Chandresh C. Shah, as explained that above Cenvat credit available to them, 20% of service tax payable only was paid and balance was paid in cash. In fact, proper distribution would have enabled them to utilize full credit. It would show that the exercise is totally Revenue neutral and no loss has been caused to the Revenue (infact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time and in the light of the decision cited by the learned counsel, the procedural irregularity has to be ignored and the demand confirmed has to be set-aside on this ground. In the result, demand for Cenvat credit of Rs. 1,07,07,142/- with interest and penalty equal to the same imposed under Section 11AC of Central Excise Act, 1944 are set-aside. Modern Petrofils Vs. Commissioner of Central Excise, Vadodara - 2010 (20) S.T.R. 6....
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....e penalty imposed is also set aside. In view of the above discussion, appeal filed by the Revenue is rejected and appeal filed by the party is allowed." 10. In view of the foregoing, since there was no provisions for distribution of the Cenvat Credit availed by the head office as ISD proportionately to various units (the provision is brought in the statute from 17.05.2012), I am convinced that the ratio of the decisions as cited herein above as the issue is in favour of the assessee. Accordingly, I set aside the impugned order and allow the appeal with the consequential relief, if any. 2010 (250) E.L.T. 352 (Kar.) COMMISSIONER OF C. EX., BANGALORE-I Versus RAJA MAGNETICS LTD 10. We have bestowed attention to the submissions made at the Bar and the grounds raised in the appeal. 11. While learned counsel for the appellant is correct in the submission that requirement of sub-rule [1] of rule 9 of the Central Excise Rules, 2002 should be necessarily complied and an embargo occurs under sub-rule [2] of rule 9 of the rules for claiming such Cenvat credit who has not complied with the requirement of sub-rule [1] of rule 9 of the rules, in the present....
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....low the credit on the basis of such defective documents, if the goods or services covered by such documents, have been received and accounted for in the books of accounts of the receiver. The submissions made by the appellant in this case is contrary to the provisions of law which require the Assistant Commissioner/Dy. Commissioner to verify whether input services have been received or not. This amounts to a submission that while formulating the Rules, the Government did not consider the practicability or otherwise of verification of receipt of input services. It is the duty of the executives to implement the provisions of rules and if there is any problem in implementing the rules, the rules have to be got amended but certainly the submissions like this not called for. In view of the fact that the ratio is covered by the decision of this Tribunal and I do not find anything wrong with the decision of the Commissioner in following the same and I also find the submission that why this decision is not applicable are not at all correct, I find no merit in the appeal filed by the Revenue and accordingly reject the same. 2013 (288) E.L.T. 291 (Tri. - Ahmd.) Doshion Ltd. Versus ....
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....12 (278) E.L.T. 492 (Tri.-Ahmd.), will directly cover the issue in the case in hand. 8. As regards the reliance placed by the learned Additional Commissioner (AR) on the Division Bench decision in the case of Hindustan Coca Cola and Beverages Pvt. Limited (supra), I find that the said order of the tribunal is an interim order while disposing the stay petition and it is not a final order. The orders which have been relied upon by the learned counsel as mentioned in hereinabove are the final orders and in respect of an identical issue. 9. In my view, the ratio laid down by this Bench in the case of Jindal Photo Limited will cover the issue in favour of the appellant herein. Accordingly, in view of the foregoing, in the facts and circumstances of this case, I find that the impugned order is liable to be set aside and I do so. In view of the above judgments, we find that in the case where credit was taken even without obtaining the input service distributor registration by head office and without following procedure laid down for said purpose, the credit has been allowed on the ground that registration and issuance of input service distributor invoices is procedura....