TaxTMI 
TaxTMI 
2024 (11) TMI 717
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.... (Rupees Eighty one lakhs forty four thousands three hundred seventy two only) already reversed by the party towards demand being confirmed at (1) above. 3 I impose a penalty of Rs 10,00,000.00 (Rupees Ten lakhs only) on M/s Pepsico India Holdings Private Limited, A-36, UPSIDC, Sathariya Industrial Area, Jaunpur-222202 under Rule 15 (1) of Cenvat Credit Rules, 2004." 2.1 Appellant is engaged in manufacturing of branded Aerated Water falling under Chapter heading 22021010 of Central Excise Tariff Act,1985, They are availing Cenvat credit on input/ capital goods and input services used in or in relation to manufacture of their final products. 2.2 The Officers of Anti- Evasion branch of Central Excise Commissionerate, Allahabad visited the premises of the party on 21.09.2012 and checked the Cenvat Credit records / documents related to Cenvat credit availed by the party on Inputs, Capital goods and Input services. The Finance Manager of the firm, Shri Rakesh Agrawal provided the hard copies of electronic records and informed that the unit had commenced production only in the month of March' 12. The statement of Shri Rakesh Agrawal, Finance Manager of M/s Pepsico Indi....
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..... On going through the details of Agreement, letter of intent (LOI) and particulars mentioned on invoices issued by the service providers, it appears that these services fall under excluded category i.e. related to setting up of factory or construction of building or structure and most of Cenvat credit on input service pertains to setting up factory prior to March, 2012. • By a written submission dated 05.10.12 it was informed that credits of Rs 16,23,863/- and Rs.7,67,657/- wrongly taken on input service and inputs respectively has been reversed. • From the records of the appellant it appeared that they have taken inadmissible credit amounting to Rs. 78,30,344.81 on various input services such as Civil Engineering, transportation, security Agency, Man Power Supply etc. provided by various service providers viz. M/s M.R. Warerkar & Associates, M's Pest control pyt Ltd., M/s A.G.Developers Pvt. Ltd.,M/s Johnsons Controls (I) Pvt Ltd., M/s Shiv Shakti Fiber Udyog, M/s Khuntia Brothers, M/s Esskey Industrial and M/s Ranjeet Engineering etc. The credit against these services either relate to setting up of factory or construction of building, which is not a....
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....s per invoice No.172/22.10.11 Entry No. Invoice No./date Particular of work 171 172/ 22.10.11 Sub-soil investigation by hand boring of 150 mm dia size, collection of disturbed and undisturbed samples etc. including report recommendation of foundation, depth and allowable bearing capacity. These activity appeared to fall under the category of industrial construction used for building, which is not admissible as per Rule 2 (l) of the Cenvat Credit Rules, 2004 • Appellant took input service credit of Rs.1,99,279.17 against invoices of M/s A.G. Developers PVT Ltd. for construction of flooring in Plant of the party. This activity appeared to fall under the category of construction of building, which is not admissible as per Rule 2() of the Cenvat credit rules'2004 and therefore the inadmissible credit availed on the service appeared liable to be recovered from the party. • Appellant took input service credit of Rs.83,368.98 on erection work of polycarbonate False Ceiling for the plant. This service has been provided by M/s Shiv Shakti Fibre Udyog, Faridabad under letter of intent (LOI) vide REF/Sathariya/CSD/2010/62/Rev-00 dated 1....
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....have been carried out as are pre-requisite for construction of plant and as such appeared to fall under the category of construction of building, and therefore the credit of service tax paid on these services appeared to be not admissible as per Rule 2(l) of the Cenvat Credit Rules, 2004. • Appellant took input service credit of Rs.1,32,915.45/- against invoices showing work as equipment hiring and construction of Chimney at the plant of the party. Invoices issued by Ms Krishna Traders show services as DG rent, operating charges whereas invoices of M/s Sonu Builders show construction of chimney. These activities relate to setting up of factory and construction work. As such the party appeared not entitled for credit on such nput service as per Rule 2(l) of the Cenvat Credit Rules, 2004. • Appellant took input service credit of Rs.11,97,166.83 against invoices showing work construction and line fabrication by Ms Ranjeet Engineering Works and Ms Esskay industrial. In case of M/s Ranjeet Engineering Works, the invoices/bill depicts description of work as crane charges, man power, unloading or shifting of various machineries at Allahabad warehouse etc. These a....
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....oices issued by their head office. As such the credit taken on non specified document Rule 9(1)(e) of the Cenvat Credit Rules, 2004 appeared not admissible to them. 2.4 During investigation, the party agreed to reverse inadmissible credit taken against the input service invoices issued by M/s Phenix Infra, M/s M.R. Wareker, M/s Khuntia Brothers and M/s A.G. Developers. They reversed the inadmissible credit as detailed below: (i) Sept'12 Rs 23, 91193.24 (Rs.767329.99 +1623863.25) (ii) Dec' 12 Rs.1818931.42 (iii) Jan' 13 Rs. 705878.21 (iv) Feb' 13 Rs. 243489.81 Total Rs.51,59,492.68 2.5 Thus revenue authorities were of the view that appellant has taken credit against input/ input service, wrongly in contravention of provisions of Rule 2,3,4 & 9 of the Cenvat Credit Rules, 2004. For said contravention appellant was liable for penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 2.6 A show cause notice dated 22.03.2013 was issued to the appellant asking them to show cause as to why :- (i) Cenvat credit taken on input and input services wrongly to the tune of Rs 85,98,001.81 (Rupees Eighty Five Lac Ninety....
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....2 (8) TMI 468- CESTAT Kolkata] Affirmed by the Hon'ble Calcutta High Court as reported at [2023 (5) TMI 92- Calcutta High Court] • Godavari Power & Ispat Ltd. [2023 (11) TMI 719- CESTAT New Delhi] • General Motors India P Ltd. [2023 (9) TMI 713-CESTAT Ahmedabad] • Simbhaoli Sugars Ltd. [2024 (5) TMI 618- CESTAT Allahabad] • Jaypee Rewa Plant [2018 (9) TMI 633- CESTAT New Delhi] • Mangalam Cement Limited [2023 (4) TMI 601- CESTAT New Delhi] • Cenvat Credit on Manpower Supply services and project management services is admissible; • Mangalam Cement Limited [2023 (4) TMI 601 CESTAT DELHI] • Unique Chemicals [2019 (8) TMI 200 CESTAT Ahmedabad] • Hindalco Industries ltd. [2023 (4) 601 CESTAT New Delhi] • Credit on Anti termite Treatment services is admissible; • Hindustan Petroleum Corpn Ltd. [2017 (47) STR 136 (T-Hyd)] • Hindustan Petroleum Corpn Ltd. [2019 (5) TMI 1088 CESTAT Hyd] • Cenvat Credit on Security Services is admissible; • Triveni Engineering & Industries Ltd. [2017 (3) GSTL 140 (T-ALL)] ....
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.... "The issue in the present case relates to denial of Cenvat Credit amounting to Rs 85,98,001 availed on input and input services for carrying out revival and renovation activities in the manufacturing plant on the ground of being used for setting up of factory prior to commencement of commercial production and falls under the excluded category of construction of building." 3.3 Authorized Representative re-iterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Impugned order records the findings as following: DISCUSSION AND FINDING: 36. I have gone through the Show Cause Notice dated 22.03.13, the party's defence reply dt. 36. 16.04.14 and the record of personal hearing held on 17.04.14. Having complied with the requirements of natural justice, I now proceed to adjudicate the case. 37. The Show cause notice intends to deny cenvat credit taken by the party on inputs and input services, in total amounting to Rs. 85,98,001.00. On persuasion during investigation, the party have&n....
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.... (B) Any goods used for- (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of any taxable service specified in sub-clauses (p), (zn), (zzl), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act. In light of the above provisions of law, I hold that all the chemicals on which input credit has been taken by the party, were admittedly used by the them in the flooring of the plant, which without doubt is liable to be treated as having been used in construction of building, which fals under the excluded category. Thus, I deny the credit of Rs.7,67,657/- taken by the party on the aforesaid chemicals. 39. On proceeding further, I find that the aforesaid credit of Rs.7,67,657/- taken by the party is the only credit taken by them on inputs. The other credits taken by the party which are covered in the instant SCN, are of service tax paid on input services Since it is relevant, the provisions of "Input service" under Rule 2(l) of CCR, 2004 as they existed....
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....ce' means any service- a. used by the provider of taxable service for providing output service; or b. used by a manufacturer whether directly or indirectly in relation to manufacture of final product and clearance of final product upto the place of removal. And includes services in relation to Modernization or renovation or repairs of the premises of provider of output service or an office relating to such premises, Advertisement or sales promotion Market research Storage up to the place of removal Procurement of inputs Accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking credit rating, share registry, security, business exhibition, legal service) Inward transportation of inputs or capital goods and Outward transportation up to the place of removal." But excludes- (A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred to as specified ser....
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....ng work undertaken by Ms Rao Engineering Enterprises. As per agreement, M/s M.R. Wareker & Associated Pvt. Ltd had undertaken the work such as Architectural, civil, PEB, statutory apparel, MEP Services. Similarly, Ms Rao Engineering Enterprises had undertaken the flooring work which includes mobilization of men equipments to site, shifting of equipments from one site to another, carrying out dynamic core penetration test and geo-technical consultancy services. Clearly, the services provided by the service provider are covered under Architect Services [Section 65 (105) (p) ]/ Commercial or Industrial Construction Service [(Section 65 (105) (zzq) ] and have been used for "construction of building". However, as already discussed in para-40 earlier, such services when used for construction of building are barred for the purposes of credit, as these services are not covered under the definition of "input service". In the defence reply, the party has not contested the allegation thereby admitting the non-admissibility of the credit taken on this count. Thus, in the l....
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....sed in para-40 earlier, such services when used for construction of building are barred for the purposes of credit as these services are not covered under the definition of "input service". In the defence reply the party has not contested the allegation thereby admitting the non-admissibility of the credit taken on this count. Thus, in the light of definition of input service under Rule 2 (l) as quoted earlier and the discussions above, I hold that the credit of Rs. 83,368.98 availed by the party is irregular and is liable to be reversed/ recovered from the party. 44. Sanitary work for extension of the factory building:- As per facts of the case, input service credit of Rs.4,08,831.85 has been taken by the party against invoices issued by M/s Khuntia Brothers. Description of work as mentioned in the invoice is as under:- "such type of material supplied for the work of sanitary and drainage work, -- Demolishing of bituminous concrete, WBM, soling stone and plain cement concrete, stacking of serviceable material and disposal of unserviceable mat....
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.... of the party, their plant was nonoperational for almost four years from December 2007 to February, 2012. It could recommence manufacture only from March, 2012. In order to revive and recommence operations, they undertook various activities and availed input services and took credit thereon total amounting to Rs. 85,98,001/-. The party in their defence reply has already accepted that the credits so taken were inadvertent and as such reversed to the extent of Rs, 81,44,372/-. Naturally, the reversed credit includes the credit taken on the aforesaid Project Management Consultancy Service', Thus, the non-admissibility of the credit has already been admitted by the party. Further, on going through the scope of work as mentioned in the agreement which the party entered into with the service provider, I am clear that the service provided is covered under Architect Services for construction of building and thus clearly not eligible for credit being under the excluded category of input service defined under Rule 2(l) of CCR, 2004. The ratio of the case law cited by the party is not app....
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....has contested the allegation on the ground that the Pest Control Services are considered a prerequisite to health and safety standards at the plant and thus cannot be considered to be related to construction of building I have examined the contention of the party. On going through the description of work mentioned on invoices, I find that the treatment undertaken by the party has been clearly termed as pre-construction anti-termite treatment, which clearly brings the service under the ambit of Commercial or Industrial Construction Service [(Section 65 (105) (zzg)] which when used in construction of building is not covered under the definition of input service under Rule 2(l) of CCR, 2004. This irregular availed credit is liable to be recovered / reversed by the party. 47. Construction and Line Fabrication As per facts of the case, the party have taken input service credit of Rs.11,97,166.83 against invoices showing description of work as construction and line fabrication, issued by Ms Ranjeet Engineering Works and Ms Esskay Industrial. It has been alleged in the SCN that these a....
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....f the case, the party have taken input service credit of Rs.2,96,573.82 on services of man power supply provided by M/s Aqeel Enterprises and M/s ADECCO INDIA. These services were availed during the period when the factory had not started manufacturing operation M/s Aqeel Enterprises and M/s ADECCO INDIA have provided manpower to M/s Pepsico India Holdings (P) Ltd. during project work i.e, setting up of the factory and other services like loading charges at Allahabad guest house/ warehouse at Kaushambi, leaning charges, transport charges, other work expenses, Trailer freight charges etc. It has been alleged in the SCN that credit o input services are available only when such input services are used by the manufacturer in or in relation to the manufacture of final products. As the alleged credit on manpower supply service was taken during the period when manufacturing of final products had not commenced, the credit is inadmissible In their defence reply the party had contested the allegation submitting therein that while they agree that the manpower services were availed for revival and renovation of....
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.... factory had not started manufacturing operation. M/s Security and Intelligence Services Ltd. and M/s Ravi Securities have provided security services from Jan'11 to Feb' 12, during the period of setting up/ renovation of the plant. It has been alleged in the SCN that credit on input services are available only when such input services are used by the manufacturer in or in relation to the manufacture of final products. As the alleged credit on security service was taken during the period when manufacturing of final products had not commenced, the credit is inadmissible. In their defence reply the party has contested the allegation submitting herein that the security service has been specifically enlisted as eligible input service under the definition of input services under Rule 2(l) of CCR, 2004. They further contended that the definition of Input service provided under Rule 2(l) of the CCR Rules, nowhere lays down a specific restriction that no Cenvat credit can be availed on services availed prior to manufacture of final products. I have examined the contention o....
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....ule 91) (e) of the Cenvat Credit Rules, 2004 and not GRs (Goods Receipts) on which the party has taken credit. Since the relevant condition is not fulfilled in this case, the credit of Rs.60,543.21 availed is irregular, being in contravention of the provisions of law and is liable to be recovered from the party. 52. Equipment Hiring and Construction of Chimney As per facts of the case, the party have availed input service credit of Rs.1,32,915.45 on the equipment hiring service provided by M/s Krishna Traders and construction of chimney undertaken by M's Sonu Builders. Invoices issued by M/s Krishna Traders show services as DG rent, operating charges whereas invoices of M/s Sonu Builders show the description of the work as construction of chimney. It has been alleged in he SCN that these activities relate to setting up of factory and construction work and as such are not entitled for credit as input service defined under Rule 2(1) of the Cenvat Credit Rules, 2004 The party has contested the allegations on the ground that the services availed by the....
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.... of Chimney Rs.1,32,915.45 Total Rs.85,98,00181 I hold that the aforesaid credits taken by the party are liable to be recovered from them under the provisions of Rule 14 of the CCR, 2004 read with Section 11 A (1) of the Central Excise Act. Further, hold that the credit of Rs.81,44,372.12, already reversed by the party is liable to be appropriated against the demands being confirmed. 54. Demand of Interest:- In the Show Cause Notice, interest has also been demanded under the provisions of section 11 AA of Central Excise Act, 1944. The party has, however, contested that as the credits availed by them total amounting to Rs. 85,98,001.00 have never been utilized and that since they have already reversed substantial amount of cenvat credits taken on various inputs / input services, no interest is payable under Section 11 AA. I have examined the issue. I find that Rule 14 of CCR, 2004 providing for recovery of irregular cenvat credit and interest thereon, has been amended w.e.f, 1,4.2012 vide Notfn. No. ....
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....ntions, I hold that the party are liable for imposition of appropriate penalty under the provisions of Rule 15(1) of Cenvat Credit Rules, 2004 The party have submitted that no penalty should be imposed upon them, as the credit taken by them was out of a bonafide mistake, as they generally believed that the aforesaid credits were admissible to them. They have further stated that they took the aforesaid credit without any willful intention to defraud the revenue or to contravene the provisions of law. They have also cited some Tribunal / Court judgments wherein it has been held that no penalty should be imposed for technical or venial breach of legal provisions or when the breach flows from bonafide belief I find that there are basic and fundamental contradictions in the stand being taken by the party. On one hand they are saying that they had taken the aforesaid credit on bonafide belief that they were eligible for the same and as soon as they came to know of these mistakes they reversed bulk of the credit. On the other hand, they are still insisting that the recovered credits be allowed to be re-credited by them. Obviously there is a ....
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....s stated that the issue involved is in respect of the denial of CENVAT Credit in respect of input and input services, prior to the commencement of commercial production of the unit. To ascertain the factual status we had directed the appellant to file ER-1 returns filed by them for the period commencing from 2007 to 2012 when as claimed by them the unit was under renovation. All the returns were filed online during the period of dispute on ACES, and if the appellant claim is worth consideration then the their would have been no difficulty for producing the copies of returns filed during this period when the production in the unit as claimed by appellant was stopped due to labour unrest. However appellant has produced only copies of ER-1's return for the months of September 2011, October 2011, November 2011, December 2011, February 2012 and March 2012. No explanation for non production of the returns for the period 2007-2011 is coming forth. Further in the table below we have tabulated the details as claimed by the appellant for taking the credit S No Nature of Input/ Input Services Cenvat Credit availed 'Rs Documents Issued by Credit Availed....
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.... 1621561 0 0 0 0 0 0 Credit Taken (Inputs) 0 0 0 0 0 0 0 Credit Taken (Capital Goods) 0 0 0 0 0 0 0 Credit Taken (Imported Capital Goods) 0 0 0 0 0 0 0 Credit Taken on Input services 0 0 0 0 0 0 0 Credit Utilized 0 0 0 0 0 0 0 Closing Balance 1621561 0 0 0 0 0 0 October 2011 Opening Balance 1621561 0 0 0 0 0 0 Credit Taken (Inputs) 0 0 0 0 0 0 0 Credit Taken (Capital Goods) 0 0 0 0 0 0 0 Credit Taken (Importe d Capital Goods) 0 0 0 0 0 0 0 Credit Taken on Input services 0 0 0 0 0 0 0 Credit Utilized 0 0 0 0 0 0 0 Closing Balance 1621561 0 0 0 0 0 0 November 2011 Opening Balance 1621561 0 0 0 0 0 0 Credit Taken (Inputs) 0 0 0 0 0 0 0 Credit Taken (Capital Goods)....
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....n filed for that month. The return for the month of March 2012 would have been filed in the Month of April 2012, and the normal period for making the demand would be one year from the date of filing the return. The Show Cause Notice has been issued to the appellant on 22.03.2013 well within the normal period of limitation. The Show Cause Notice has been issued without invoking the extended period of limitation. Had appellant claimed any credit in any month prior to this month the same would have been reflected in the ER-1 return for that month. The submission made by the appellant on limitation only shows the ill intention of the appellant to mislead the bench. Thus the decision relied upon by the appellant on the ground of limitation do not support the case of appellant as we find that the show cause notice has been issued to them within normal period of limitation and extended period has not been invoked for making this demand. 4.7 It is also observed from the impugned order that credit has not been sought to be denied for the reason that the credit is in respect of inputs and input services received by the appellant prior to the commencement of production. We have repro....
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....2004. The said services are - outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees such as Leave or Home Travel Concession. The amendment indicates when such services are used purely for personal use for consumption of any employee, the Cenvat credit cannot be allowed. On perusal of the records, we find that the appellants have been taking a consistent stand that in their case Outdoor Catering services, Club or Association service, Health and Fitness Services are three services on which Cenvat credit from 1-4-2011 is sought to be denied relying upon the said amendment to Rule 2(l) of the Cenvat Credit Rules, 2004, which is incorrect as these services are utilized for the business meetings held at various places including AGM." 8. The close analysis of Para 6.3 shows that the bench has been moved by the fact that on the amendments indicates 'when such services are used primarily for consumption of its employees, CENVAT credit cannot be allowed.' The above reference could be held good only with reference to the servic....
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....d and after the amendment to the provisions of Rule 2(l) defining the 'input service' and the amendment to the provision of Rule 2(l) defining the 'input service' came into effect w.e.f., 1-4-2011. The definition of 'input service' post amendment contains exclusion clause and exclusion clause was effected w.e.f. 1-4-2011. Clause (c) of the said exclusion clause specifically excludes the services provided in relation to 'outdoor catering' services. It is certainly not in dispute that said services prior to 1-4-2011 have been held to be covered by the definition of 'input service', however, after the amendment came into force in the light of specific exclusion clause, 'outdoor catering' service is not at all covered under the definition of 'input service'. 16. Heavy reliance has been placed upon a judgment delivered by the Madras High Court in the case of Ganeshan Builders Ltd., (supra). In the aforesaid case, there was an insurance in existence and it was not an insurance in individual worker's name. The Madras High Court has held that the insurance policy was assessee's specific and not employee's specific and as there was a mandatory duty casted upon the assessee to....
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.... justified in dismissing the appeal preferred by the assessee. 21. A Taxing Statute has to be strictly construed and in Taxing Statute one has to look merely at what is clearly said. Justice G.P. Singh in his land mark work on Principles of Statutory Interpretation, 14th Edition under the heading Strict Construction of Taxing Statute, has observed as under : "General Principles of strict construction A taxing statute is to be strictly construed. The well-established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALS-BURY and LORD SIMOND, means : "The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words" (Re, Micklethwait, (1885) 11 Ex 452, p.456. In a classic passage LORD CAIRNS stated the principle thus : "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently....
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.... "2. The statutory provision - Rule 2(l) defining "Input Service" post 1-4-2011 is very clear and the out-door catering services when such services are used primarily for personal use or consumption of any employee is held to be excluded from the definition of "Input Service". 3. In that view of the matter, it cannot be said that the High Court has committed any error in denying the input tax credit and holding that such a service is excluded from input service." Thus in view of the above decisions the goods or services which have been excluded by way of exclusion clause in the definition, could not have been said to be covered by the definition, by referring to the main clause of the definition. As observed in case of Solar Industries all such decisions which have held so are per incuriam and have no precedent value. 4.11 Admittedly in their appeal, at B.8 appellant while putting up the case for allowing the credit in respect of chemicals as input has stated "B.8 The Appellants submit that these chemicals were used for the proper construction of floor area which is essential for the purpose of proper installation of plant & machine....
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....ce or an office relating to such factory or premises. ..." Thus the activities of Modernization or renovation or repairs of a factory will be covered by the inclusion clause of the definition and those in relation to the setting up of the factory will be covered by the exclusion clause. It is settled law that the while interpreting a Fiscal Statute the statute should be interpreted strictly on the basis of the words used in the statute. Hon'ble Supreme Court has in case of Dilip Kumar & Company [2018 (361) E.L.T. 577 (S.C.)] observed as follows: "19. The well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the Courts to adopt any other hypothetical construct....
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....tti voluntatis quaestio". Following such maxim, the Courts sometimes have made strict interpretation subordinate to the plain meaning rule [Mangalore Chemicals case (Infra para 37).], though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory." 4.13 Board has issued the Circular dated 29.04.2011, clarifying the matter, stating as follows: S No Issue Clarification 4 Is the credit of input services used for repair or renovation of factory or office available Credit of input services used for renovation or repair of factory or office is allowed. Services used in relation to renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input service. 4.14 We have seen the decisions relied upon by the appellant in the submissions made before us. We find the real test which is laid down in all the decisions is to determination whether the activities ....
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....n notification, should the benefit of such ambiguity go to the subject/assessee or should such ambiguity should be construed in favour of the revenue, denying the benefit of exemption to the subject/assessee? There are catena of case laws in this area of interpretation of an exemption notification, which we need to consider herein. The case of Commissioner of Inland Revenue v. James Forrest, [(1890) 15 AC 334 (HL)] - is a case which does not discuss the interpretative test to be applied to exemption clauses in a taxation statute - however, it was observed that 'it would be unreasonable to suppose that an exemption was wide as practicable to make the tax inoperative, that it cannot be assumed to have been in the mind of the Legislature' and that exemption 'from taxation to some extent increased the burden on other members of the community'. Though this is a dissenting view of Lord Halsbury, LC, in subsequent decisions this has been quoted vividly to support the conclusion that any vagueness in the exemption clauses must go to the benefit of the revenue. Be that as it is, in our country, at least from 1955, there appears to be a consistent view that if the words in a taxing statute (....
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....nd, therefore, sale of those goods made to any Departments of the Government of India, which came to be charged with the duty of purchasing those goods should also come within the purview of the exemption. The Court while repelling the aforesaid interpretation, reasoned as under : "We are unable to accept this line of reasoning. This interpretation will unduly narrow the scope and ambit of the exemption by limiting it to sales of only those goods as, at the date of the Act, used to be sold to those two departments and sales of other goods even to those two departments, however necessary for the prosecution of the war, would not get benefit of the exemption. Such could not possibly be the intention of the Legislature as expressed by the language used by it in framing the Section." 31. The aforesaid placitum is suggestive of the fact that the Courts utilized the rule of strict interpretation in order to decipher the intention of the Legislature and thereafter provide appropriate interpretation for the exemption provided under the provisions of the Act which was neither too narrow nor too broad. It may be noted that the majority did not take a narrow view as to what ....
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....ed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, thought at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the noncompliance of which would not affect the essence or substance of the notification granting exemption." 39. The Constitution Bench then considered the doctrine of substantial compliance and "intended use". The relevant portions of the observations in paras 31 to 34 are in the following terms - "31. Of course, some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in there nature, on the other, must be kept clearly distinguished... Doctrine of substantial compliance and "intended use" 32.....
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....bsp; 34. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential." 43. There is abundant jurisprudential justification for this. In the Governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from i....
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.... Central Government notification of March, 1975. While considering the issue, this Court pointed out the strict interpretation to be followed in interpretation of a notification for exemption. These observations are made in para 17 of the judgment, which read as follows : "How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. It is, however, necessary to bear in mind certain principles. The notification in this case was issued under Rule 8 of the Central Excise Rules and should be read along with the Act. The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is as i....
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....pirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question'. Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit." 46. The above decision, which is also a decision of twoJudge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case (supra) deduced as follows : "Do not extend or widen the ambit at stage of applicability....
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....010 PEPSI L 0 0 0 0 0 Home Clearance December 2011 22021010 PEPSI L 0 0 0 0 0 Home Clearance February 2012 22021010 PEPSI L 0 0 0 0 0 Home Clearance March 2012 22021010 PEPSI L 0 134745 68208 66537 17974568 Home Clearance From the table above which has been made on the basis of the ER-1 returns filed by the Appellant and made available to us it is evident that there was no manufacturing activity undertaken by the appellant till month of March 2011. In absence of any evidence to effect that appellant was undertaking any manufacturing activities during the period prior to March 2012, we are constrained to agree with the findings recorded in the a impugned order for denying this credit. We also observe that appellant has during the Month of February 2012 and March 2012 have taken huge amount of CENVAT Credit against capital goods both imported and indigenously procured. We have detailed the said credit in table in para 4.5....