TaxTMI 
TaxTMI 
2020 (2) TMI 691
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....hich are embedded to earth cane be treated as excisable goods within the meaning of Capital Goods defined in Cenvat Credit Rules, 2004 and the Cenvat Credit availed of Inputs/Capital Goods like HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode and services used for fabrication of these crane is admissible to the respondentassessee? (b) Whether invoices issued for distribution of Service Tax paid by office, other than one that of office of manufacturer or producer or provider of output service as an Input Service Distributor for distribution of Service Tax, is eligible for Input Service Credit and Input Service credit can be availed on such invoices? (c) Whether Cenvat Credit of Input, Input Service or Capital Goods shown/declared in Monthly Return (ER2) filed before Central Excise officer (incharge over factory) is admissible and qualifies as Cenvat Credit for the output service provider when same is not shown/declared in ST3 Return to be filed before the jurisdictional Service tax authorities considering that criteria to qualify the same for such credit are different for Manufacturer or Output Service Provider? (d) Whether Cenvat Credit ....
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....purpose of heavy, medium and light lifting and transporting of the constructed blocks or even lifting of the entire vessel. These cranes are used in the ship building and repairing. They are huge in height and length and are required to be erected/ fabricated at the sight. They run on tracks fitted to the ground, in and around the Dry Dock. 6.3 The respondent had also to construct a Dry Dock, which is a rectangular deep basin dug into the shore of a water body, provided with removable gate or enclosure on the side facing water, and which can be flooded to allow the ship or other watercraft to be floated in or out, and which can be drained to allow a ship/watercraft or partially constructed vessel to come to rest on a dry platform where the construction, maintenance and/or repair thereof can be undertaken. 6.4 For the purpose of constructing/fabricating the above referred cranes, the respondent had to purchase items such as the HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding electrode and also availed of services. Likewise, for constructing the Dry Dock, the respondent purchased various items such as steel items, cement etc. and availed of services. All the items purc....
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..... Accordingly, the impugned order is set aside. The appeal filed by the Appellant is allowed with consequential relief. The application filed by the Appellant for extension of stay order is dismissed as infructuous." 6.9 On the first substantial question of law as suggested by the Revenue, the Tribunal recorded the following findings: 14. The Adjudicating authority denied CENVAT Credit on capital goods, being inadmissible used in immovable property come into existence. We find that the Tribunal in the case of Commissioner of Central Excise Vs. JSW Ispat Steel Ltd. 2013TIOL1758CESTATEMum observed that merely because various machineries and equipments, appliances and parts have been assembled at site to set up the Oxygen plant and such plant being an immovable property, it will be preposterous to deny the CENVAT Credit on these individual machineries/equipments/appliances. The Hon'ble Andhra Pradesh High Court in the case of Commissioner of Central Excise VisakhapatnamII Vs. Sai Sahmita Storages (P) Ltd. 2011 (270) ELT 33 (A.P.) held that storage and ware housing service could not have been rendered without creating a ware house and consequently the credit of TMT bars....
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.... authorities." 12. CBEC vide Circular F.No.381/23/2010/862, dt.30.03.2000, clarified that cross utilization of credit of input and input service. A manufacturer who is also providing a taxable service obtained registration from the Central Excise authority as well as Service Tax authority and required to file ER1 and ST3 returns separately. In some cases, these returns are filed in different jurisdictions the CENVAT credit on input, capital goods and input services which are used in manufacturing of goods or providing output service is available in a common pool and can be used for payment of excise duty or service tax. Ultimately, the CENVAT Credit taken during the period shown in ER1 or ST3 return could be same. It is clarified that if these returns are being filed separately the Service Tax Commissioner, while undertaking service tax audit, the officers should verify the said return also for confirming the correctness of such credit. 13. The Larger Bench of the Tribunal in the case of Commissioner of Customs & C.Ex., MeerutI Vs. Modi Rubber Ltd. 2000 (119) ELT 197 (TriLB), held that the declaration filed by the Assessee in terms of Rule 57Q of Central Excise Ru....
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....nufacturing of Ship Building, Ship Repairs/Refit. It was permitted on the condition that the Appellant shall export the entire production excluding reject and sales in the Domestic Tariff Area as per the provisions of EOU scheme, amongst others. By letter dt.08.01.2008, the Joint Development Commissioner, Kandla Special Economic Zone, authorised the Appellant for manufacturing further items namely, Ship, Vessels, Hulls, Offshore Structures includes FPSO, Rigs, Platforms etc. The jurisdictional Central Excise & Customs authority on 06.08.2007, granted permission to manufacture the goods and to render the services of repair within the private bonded Warehouse. The Appellants also executed a bond with Deputy Commissioner of Central Excise. They have obtained Central Excise registration under the Central Excise Rules on 06.09.2007 and also applied for registration as a service provider, which was granted on 08.02.2008. 6. The case of the Appellant is that Dry Dock is the heart of the shipyard used in ship building and repair service. The Hon'ble Supreme Court in the case of Scientific Engineering (P) Ltd. Vs. Commissioner of Income Tax, Andhra Pradesh, (1986) 1 SCC 11 obse....
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....purpose of. CBEC Circular No.120/01/2010ST, dated 19.01.2010, clarified that the definition of input service qua a manufacturer and provider of output service. In our considered view, CENVAT Credit availed on input service, input and capital goods for setting up Dry Dock would be allowed for providing output service namely repair/refit service. This is also covered in the inclusive part of the definition of input service. Hence, the finding of the Adjudicating authority, is that the Appellant is exclusively engaged in the manufacture of exempted final product Shipsand CENVAT Credit on input, capital goods is inadmissible, cannot be sustainable. 6.13 So far as the Rules6( 6) of the CENVAT Credit Rules, 2004 is concerned, the Tribunal recorded the following findings: 8. The learned Authorised Representative contended that there is no requirement of furnishing the bond by an EOU and it does not cover under Rule 6(6) of the Rules. CBEC by Circular No.928/18/2010CX, dt.28.06.2010, clarified that a 100% EOU are required to export the goods under bond in terms of customs and excise notifications. CBEC by Circular No.120/01/2010ST, dates 19.01.2010, in the context of the proble....
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....estion of law would arise or not for our consideration in this Appeal. The CESTAT, having regard to the undisputed fact that the respondent is 100% Export Oriented Unit (for short EOU) in respect of which, benefit of CENVAT Credit Rules, 2004 is available for the inputs which will be used for manufactured goods of 100% export. Therefore, the Tribunal has applied Rule 6(6) and recorded the reasons stating that there is a provision of exporting the goods under bond. In the case of 100% EOUs, the input can be imported free of duty and they can obtain indigenously also free of duty. When duty is paid on the inputs, then the appellants are entitled for the CENVAT credit facility under the Rules Cenvat Credit Rules. There is nothing in the Rules which prohibits 100% EOUs availing Cenvat Credit. Rule 5 of the said Rules provides for refund of Cenvat credit availed by the exporter where they do not utilize the goods as inputs for manufacture of 100% export. The case on hand is the precise case wherein the respondent has availed the Cenvat credit facility. They were not in a position to utilize the credit, they applied for refund of the Cenvat credit availed by them. The reason is that all ....
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....is that there is no requirement of furnishing of Bond by 100% EOU, is not admissible." SUBMISSIONS ON BEHALF OF THE APPELLANTS: 7. On the first substantial question of law, the submissions of Mr. Dhaval Vyas, the learned standing counsel appearing for the appellants are under: 7.1 The Capital goods is defined as; Capital Goods means - (A) following namely: ( i) to (viii). The word goods followed by comma, and followed by the word namely, which indicates that the goods mentioned after the term namely are the specific instances which would fall as the capital goods under the definition. The definition as such is exhaustive. 7.2 The cranes stand alone may be the Capital Goods under Rule 2(a) of the Rules, 2004. However, the cranes in the case on hand are rooted and embedded in the RCC Structure (of the Dry Dock) and as such forms part of the functions performed at the Dry Dock. A Dry Dock by its multifunctional capacity fulfills the function of a plant. 7.3 The cranes are fabricated by assembling materials at the factory of the respondent. The respondent has sought to avail credit on the materials (input) and services (input services) received for assembling/ fabricatin....
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....estion of law, the submissions of Mr. Vyas are as under: 9.1 The respondent had filed 3 ER 2 returns before the jurisdictional excise authorities inter alia, availing credit against the input, input services and capital goods received for the manufacturing of a Ship, chargeable with NIL duty and therefore, are Exempted Goods U/r.2(d) of the Rules, 2004. 9.2 The CESTAT has held "we agree with the submission of the Ld. Authorized Representative to the extent that the inputs exclusively used in the manufacture of ship, the appellants are not eligible to avail Cenvat Credit." The aforesaid finding binds the respondent (not challenged by the respondent). 9.3 The cross utilization of the credit from the common pool as held by the CESTAT can be resorted provided the credit can be availed on such materials and services. The bar for availing the credit under the rules cannot be circumvented by resorting to cross utilization, as a credit can be cross utilized only if the credit can be availed under the Rules. 9.4 Upon verification of the records, it has been noticed by the Tribunal that the respondent had filed ST3 returns and had availed credit against the inputs, input credits ....
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....t', unlike the erstwhile rule, has not been included in the definition of Capital Goods under the Rules, 2004. The Dry dock cannot be read as a spare or accessory of a cranes to qualify as the Capital Goods. Therefore, credit cannot be availed citing the Dry Dock as the Capital Goods. 10.6 The respondent seeks to avail the credit of the tax paid for the materials i.e. angles, steel materials, etc. received by respondent for fabricating a RCC Dry Dock, citing the same as inputs. 10.7 The Rules, 2004 defined inputs to mean, all goods used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not. 10.8 The respondent contends that RCC Dry Dock would be akin to a plant. It has also been contended that the materials utilized for fabricating the Dry Dock are inputs, and therefore, the respondent can avail the credit under Rule 3. 10.9 The term Goods has not been defined under the Rules. The Supreme Court has explained the term Goods in context of the CEA, 1944 after taking into consideration the judgments rendered in the case of Mittal Engineering Works (P) Ltd., Quality Steel Tubes (P) Ltd., an....
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....to manufacture ships. According to Mr. Joshi, the HR plats, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode used in the fabrication of cranes, which are used for manufacturing ships, are goods used "in relation to the manufacture of final products whether directly or indirectly and/or whether contained in the final product or not." According to Mr. Joshi, they are "inputs" and the respondent is eligible to claim the CENVATE Credit on such goods. 13. Mr. Joshi in support of the aforesaid submission has placed reliance on the following case law: (a) CCE Vs. Solaris Chemtech Ltd. 2007 (214) ELT 481 (SC) (Para8) (b) Ramala Sahkari Chini Mills Vs. CCE, 2010 (14) SCC 744 (Para 1017) read with Ramala Sahkari Chini Mills Vs. CCE, 2016 (7) SCC 585 (c) CCE Vs. Parth Poly Woven, 2012 (25) STR 4 (Guj) (Para 1619) (d) CCE Vs. Inductotherm 2014 (36) STR 994 (Guj) (Para 1223) (e) CCE Vs. Dynamic Industries 2014 (307) ELT 15 (Guj) (Para 610) (f) Principal Commissioner Vs. Essar Oil Ltd., (2016) 41 STR 389 (g) Coca Cola Vs. CCE 2009 (242) ELT 168 (Bom) (Para 2339) (h) CCE Vs. Ultratech 2010 (20) STR 577 (Bom) (Para 2....
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....e goods also came to be verified. In the last, Mr. Joshi submitted that the contention canvassed on behalf of the appellant that no Cenvat Credit could be allowed to the respondent in respect of the inputs, capital goods and inputs service used to fabricate cranes and Dry Dock as the final products of the respondent are exempt from duty is without any merit. 18. In such circumstances referred to above, Mr. Joshi prays that there being no merit in the appeals preferred by the appellant, those be dismissed and the order passed by the Tribunal be affirmed. ANALYSIS: 19. Before adverting to the rival submissions canvassed by either side, we must look into few provisions of law: 20. The relevant provisions of the CENVAT Credit Rules, 2004 as this stood at the relevant point of time are as under: Rule 2(a) "capital goods" means: (A)the following goods, namely: (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act; (ii) pollution control equipment; (iii) components, spar....
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....cludes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; Rule 2(m) "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; Rule 3. CENVAT credit. (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed....
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....n terms of the para 8 of notification No. 22/2003Central Excise, published in the Gazette of India, part II, Section 3,subsection( i),vide number G.S.R. 265(E), dated, the 31st March,2003. paid on (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, including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a jobworker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547 (E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004. Explanation. For the removal o....
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....r premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made there under with intent to evade payment of duty. Explanation. For removal of doubts, it is clarified that supplementary invoice shall also include challan or any other similar document evidencing payment of additional amount of additional duty leviable under section 3 of the Customs Tariff Act; or (c) a bill of entry; or (d) a certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office; or (e) a challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii), (iv), (v) and (vii) of claus....
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....en and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit. (6) The manufacturer of final products or the provider of output service shall maintain proper records for the receipt and consumption of the input services in which the relevant information regarding the value, tax paid, CENVAT credit taken and utilized, the person from whom the input service has been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit. (7) The manufacturer of final products shall submit within ten days from the close of each month to the Superintendent of Central Excise, a monthly return in the form specified, by notification, by the Board: Provided that where a manufacturer is availing exemption under a notification based on the value or quantity of clearances in a financial year, he shall file a quarterly return in the form specified, by notification, by the Board within twent....
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....rer or output service provider. 24. Rule 2(k) of the Cenvat Credit Rules, 2004 defines the term "input". The said definition uses the words "used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not". These words are extremely wide and include not only the goods such as the raw materials used directly in the final product but also the goods which are used "in relation to the manufacture of final products whether directly or indirectly" which include all goods without which the manufacture of the final product would not be possible. The following judgments in regard to the wide definition of "input" and wide meaning of the words "whether directly or indirectly, in or in relation to the manufacture of final products" are relevant: (a) CCE Vs. Solaris Chemtech Ltd. 2007 (214) ELT 481 (SC) (Para8) (b) Ramala Sahkari Chini Mills Vs. CCE, 2010 (14) SCC 744 (Para 1017) read with Ramala Sahkari Chini Mills Vs. CCE, 2016 (7) SCC 585 (c) CCE Vs. Parth Poly Woven, 2012 (25) STR 4 (Guj) (Para 18) (d) Deepak Fertilizers Vs. CCE 2013 (32) STR 532 (Bom) (Para 5) 25. Mr. Jos....
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....elding Electrode used in constructing/fabricating cranes are not excisable goods, particularly when the excise duty was paid on them and the cenvat credit is sought of the same. 30. Rule 2(a) of the Cenvat Credit Rules, 2004 defines "capital goods" to inter alia mean goods falling under Chapter 84 of the First Schedule to the Central Excise Tariff Act, 1985 and also the components, spares and accessories of the goods falling under Chapter 84. 31. Cranes fall under Chapter 84 (Tariff Item 8426 thereof) of the First Schedule to the Central Excise Tariff Act, 1985 and are therefore, capital goods by virtue of Rule 2(a)(A)(i) of the Cenvat Credit Rules, 2004. 32. HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode are components of cranes since they are used in the fabrication of cranes. These items are therefore capital goods by virtue of Rule 2(a) (A)(iii) of the Cenvat Credit Rules, 2004. 33. Thus, the aforesaid items (i.e. HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode) being capital goods, the cenvat credit of excise duty paid thereon cannot be denied in view of Rule 3(1) read with Rule 2(a)(A) of the Cenvat Credit Rules, 2004. 34.....
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....s used in relation to setting up, modernization, renovation or repairs of a factory" as well as "services used in relation to.... activities relating to business". Therefore, services for setting up a factory and any activity relating to business are specifically included within the definition. The Cranes being part of the factory of the respondent where the ships are manufactured and their fabrication being an activity relating to respondent's business, services used for fabrication thereof would be covered within the meaning of "input services". Hence also, cenvat credit of service tax paid on such services availed by the respondent must be allowed. 39. Question No.2:Whether invoices issued for distribution of Service Tax paid by office other than that of manufacturer or producer or provider of output service as an Input Service Distributor for distribution of Service Tax is eligible for Input Service Credit and Input Service credit can be availed on such invoices? 40. It is the case of the department that in the Letter of Permission (LOP) issued by the Development Commissioner, Kandla SEZ to the respondent. It is the Ahmedabad office of the company which has been menti....
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....er the Service Tax Rules, 1994 towards the purchases of input services and issues invoice, bill or challan for the purpose of distributing the credit of service tax paid on said services to its various manufacturing units. There is no illegality in this whatsoever. 44. Question No.3:Whether Cenvat Credit of Input, Input Service or Capital Goods shown/ declared in Monthly Return (ER2) filed before Central Excise Officer (incharge of the factory) is admissible and qualifies as Cenvat Credit for the output service provider when same is not shown/ declared in ST3 Return to be filed before jurisdictional Service Tax authorities considering that criteria to qualify the same for such credit are different for manufacturer or Output Service Provider? 45. The case of the appellant is that the cenvat credit sought to be availed was reflected in the respondent's Monthly Return (ER2) filed before the Central Excise Officer but not in the respondent's ST3 Return to be filed before the jurisdictional Service Tax authorities. It is therefore contended that such credit should not be allowed to the respondent as an output service provider, since the criteria to qualify for cenvat credi....
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....to the case made in regard to the cranes. The appellant argues that the Dry Dock is a "concrete structure embedded to earth" and "immovable in nature" and therefore, it is not permissible to allow cenvat credit of the excise duty paid on items such as steel, cement, etc., purchased by the respondent for constructing/fabricating the Dry Dock and of service tax paid on services availed for the same. 51. The Rule3 of the Cenvat Credit Rules, 2004 allows a manufacturer of the final product or by the provider of taxable services to take cenvat service of duty of excise paid on any input or capital goods received in the factory or premises and service tax paid on any input services received by the manufacturer of final product or provider of output services. 52. The Rule 2(k) of the Cenvat Credit Rules, 2004 defines "input" to inter alia mean goods "used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not". As stated earlier, the aforesaid words quoted in italics have time and again been construed by the Supreme Court and other courts to be of very wide import and to encompass all the goods whether ....
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....bricating a Dry Dock, are clearly items used "in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not" and are therefore, "inputs" within the wide meaning of the said word as defined in the Rule 2(k) of the Cenvat Credit Rules, 2004 and therefore also, the Cenvat Credit of Excise Duty paid on the same cannot be denied. 57. Question No.5 or (e):Whether the Tribunal is justified in accepting the photocopy of the invoices as an admissible evidence/ record and remanding the proceeding back to the adjudicating authority for considering the issue afresh? 58. The CESTAT has observed that the Adjudicating Authority had held against the assessee on the basis of a report of the Superintendent which was not disclosed to the assessee and hence, the matter was remanded so that the said report could be provided to the assessee before taking a decision. The CESTAT directed the Adjudicating Authority to take appropriate decision afresh after providing the report and considering the assessee's submission. 59. We also do not find any merit in the submission canvassed on behalf of the appellant that no Cenvat Credi....
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....sions of the Central Excise Rules, 2002; or (vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or. (vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under subsection (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied, (a) against International Competitive Bidding; or (b) to a power project from which power supply has been tied up through tariff based competitive bidding; or (c) to a power project awarded to a developer through tariff based competitive bidding, in terms of Notification No.12/2012Central Excise, dated the 17th March, 2012; 61. First, it may be noted that the language used in Rule 6(1) is "used in the manufacture of exempted goods" as against the language used in the definition of "input" as contained in Rule 2(k) which contains the words "used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or....