Whether benefit of conditional notification is to be compulsorily availed by the exporter?

PJ/Case law/2014-15/2206

Case:- PLUS PAPER FOODPAC LTD. Vs COMMISSIONER OF C. EX., THANE

Citation:- 2013 (30) S.T.R. 529 (Tri. - Mumbai)

Brief facts:- The appellant, M/s. Plus Paper Foodpac Ltd., Badlapur, Thane, were manufacturers of paper and paper products. They availed Cenvat credit of the Service Tax paid on CHA Services, Shipping Agent Services and Clearing & Forwarding agent services and courier agency services amounting to Rs. 71,126/-. The department issued a notice dated 18-4-2011 wherein they proposed to deny the Cenvat credit on the ground that the input services were availed in respect of an export transaction and vide Notification No. 17/2009-S.T., dated 7-7-2009, these services were exempted and therefore, the appellant should have availed the exemption rather than paying duty and taking Cenvat credit. The notice was adjudicated vide order dated 24-11-2011 wherein the Cenvat credit was disallowed on two grounds, namely, the benefit of Notification No. 17/2009 should have been availed and also on the ground that these services had no nexus with the manufacturing activity undertaken by the appellant and therefore, they were not eligible for the refund. Accordingly, the demand for Cenvat credit wrongly taken was confirmed along with interest thereon and an equivalent amount of penalty was imposed on the appellant. The appellant preferred an appeal before the lower appellate authority, who rejected their appeal.

Appellant’s contentions:- The ld. Counsel for the appellant submitted that there was no condition stipulated in Notification No. 17/2009 that it should be availed compulsorily and uniformly by the exporter. There was no bar in the said notification preventing an exporter from availing Cenvat credit on Service Tax paid thereon and claiming refund later. In fact one of the conditions for availing the exemption was that Cenvat credit on Service Tax paid on input services should not have been taken under the Cenvat Credit Rules, 2004, which implies that the assessee can either avail the exemption under the notification or avail credit under the Cenvat Credit Rules.
As regards the contention of the Department, that the impugned services were not being eligible inputs services, he relied on the decision of this Tribunal in their own case vide Order No. A/112/12/SMB/C-IV dated 11-5-2012 wherein the issue was considered and it was held that the impugned services were eligible input services and the appellant were rightly entitled for Cenvat credit of the service tax paid thereon. Accordingly, the ld. Counsel pleaded for allowing their appeal.

Respondent’s contentions:- The ld. AR appearing for the Revenue reiterated the findings of the lower authorities.

Reasoning of judgment:- The Hon’ble judge carefully considered the rival submissions. As the issue lied in a narrow compass, he took up the appeal itself for consideration and disposal after dispensing with the requirement of pre-deposit of the dues adjudged.
Notification No. 17/2009 dated 7-7-2009, exempts the taxable services received by an exporter of goods and used by him for export of goods. This exemption was subject to certain conditions and one of the conditions stipulated was that no Cenvat credit of Service Tax paid on the specified service used for export of the said goods had been taken under the Cenvat Credit Rules, 2004. This condition clearly implied that in a case where the exporter avails Cenvat credit, he could not avail the benefit of exemption. There was no bar stipulated in the said notification that he could not avail Cenvat credit and the availment of Cenvat credit would be entirely governed by the terms and conditions of the Cenvat Credit Rules. The fact that input or input services, on which duty/tax had been paid, had been received and used in the manufacture of excisable goods which had been exported was not in dispute. In the show cause notice, the only ground taken for denying the credit was that benefit of Notification No. 17/2009 should had been compulsorily availed by the exporter manufacturer. The said notification being a conditional exemption notification, it was for the manufacturer to decide whether to avail the said exemption or not. Thus there was no merit in the department’s contention the appellant should had availed the benefit of Notification No. 17/2009.
As regards the other contention that the services in this case, namely, CHA service, C&F service, Shipping Agent’s services and courier service, were not eligible input services, this issue had been already considered and decided by this Tribunal in favour of the appellant in the order cited supra.
In view of the foregoing, the Hon’ble Judge set aside the impugned order and allowed the appeal with consequential relief, if any. Stay application was also disposed off.

Decision:- Appeal was allowed.

Comment:- The essence of this case is that when there are two options available with the assessee, it is entirely the will of the assessee to avail any one of them. As the condition in Notification No. 17/2009 dated 7-7-2009 clearly implied that in a case where the exporter avails Cenvat credit, he could not avail the benefit of exemption, it was clear that there is no bar stipulated in the said notification that Cenvat credit could not be availed. Also, the said notification being a conditional exemption notification, it was for the manufacturer to decide whether to avail the said exemption or not.

Prepared by: Ranu Dhoot

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PJ/Case law/2014-15/2206

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