Pradeep Jain - Chartered Accountant

PJ/Case Laws/07-08/04

PJ/Case laws/07-08/04 Date: 23-07-2007

CASE LAWS

1.) The appellant is a manufacturer of Cement. The dispute was regarding the availment of CENVAT Credit on the service tax paid on the outward freight. The appellant used to sale the goods on the FOR destination basis i.e. he has to bear the transportation expenses of cement sold by him. He paid the service tax on the said freight and claimed input service credit in such respect. The assessing authority rejected such claim of CENVAT credit on the ground that the credit is available only in respect of inward transportation (inputs) or outward transportation of the final product upto the place of removal.

The appellant’s contention on the view was that, the general definition provided that “any service used by the manufacturer in relation to clearance of final product from the place of removal is eligible for input service credit”. Moreover he argued that the mention of “outward transportation upto the place of removal” in the inclusion clause of the definition does not have any effect on the main definition as an inclusion clause cannot restrict the scope of the main definition in the statue.

On the other hand the respondent contended that the transportation and clearance are entirely different activities and one cannot take place of another. Hence, cost of transportation cannot form the part of clearance. Furthermore, they viewed that the inclusion clause casts its shadow on the main definition also and this makes it necessary that the joint consideration of the main definition and its inclusion clause should be made {with ref: Reserve Bank of India Vs. Peerless Co.}.

Finally the adjudicating authority rejected the appeal on the ground that the statue is to be read as a whole and when these are read together, it becomes clear that transport service credit cannot beyond transport upto the place of removal. Hence the appeal was favoured in the hands of respondent.

[2007-TIOL-539-CESTAT-DEL]

2.) The respondent in the present case was engaged in the activity of manufacture as well as they are output service providers. The respondent used the CENVAT credit for payment of service tax on GTA.

The revenue challenged this in CESTAT on the ground that under CENVAT Credit Rules, 2004 output service provider is eligible to take credit of service tax paid but as in the current case the actual service provider is the transporter and not the party concerned. Thus, the party not being the service provider is not entitled to avail credit, which can be availed by the actual service provider only. The revenue was also of the view that as the respondent is manufacture as well as the service provider the CENVAT Credit of manufacturing amount cannot be used for discharging service tax liability on deemed service provider.

The adjudicating authority dismissed the appeal on the ground that the definition of provider of taxable service includes a person liable for paying Service Tax and there is no restriction on utilization of Credit of duties with reference to the present case.

[2007-TIOL-555-CESTAT-DEL]

3.) The appellant is M/s Foster Wheeler Energy Ltd. who entered in an agreement with M/s Petronet LNG Ltd. (PLL) for project management consultancy in relation to setting up and operating the LNG terminals. Under the agreement the appellant was required to advise and assist in relation to the execution of the project and in the agreement the provisions for the onshore and offshore services were clearly mentioned. The issue under this case can be bifurcated into two parts.

Firstly, issue regarding the categorization of the “service rendered”. Here the assessing authority held that the services so provided by the appellant fall within the ambit of Consulting engineering and the appellant was liable to pay service tax along with interest thereon. But the appellant contended that the services so provided by them were not confined to engineering services and was more of the nature of consultancy advisory management services. Hence, looking collectively the service so rendered does not fall within the category of engineering services.

In reply to the above contention the respondents view was that the service so rendered by the appellant required the minimum qualification of engineering and work experience in the same field. Thus the appellant rendered engineering consultancy services in specified fields. Thereby the service tax is attracted on such service rendered by the appellant under the category of engineering services.

Secondly, issue was that the services rendered by the appellant outside India i.e. offshore services would attract service tax or not? The appellant view was that the agreement clearly specifies which services are onshore and which service are offshore. Moreover the services rendered outside India are taxable w.e.f 18/04/2006 and not for the earlier period. Thus tax should not be leviable.

After having an all round analysis the adjudicating officer held that the services rendered by the appellant was covered under the category of engineering services and the category of offshore services were not taxable for the period prior to 18/04/2006.

The Board is very keen to levy the service tax on the services rendered by person residing outside India. The receiptent is liable to pay the tax on such amount. This intention was reflected in various amendments in Rules and regulations in Service tax law to make it operative. But it was challenged in Court on one ground or the other. The latest provision came into effect from 18.04.2006. This method of levy of tax was called “Reverse charge method”. The tribunal has held the service tax is payable in this case from 18.04.2006 only.

[2007-TIOL-785-CESTAT-AHM]

4.) The issue is regarding the admissibility of CENVAT Credit on the capital goods “Bagasse Bailing Machine”. The appellant (Commissioner of Central Excise, Pune-II) denied the CENVAT Credit on the capital goods used by the respondents on the ground that the goods so used cannot be considered as parts and components of goods falling under Chapter 82, 84, 85 or 90 or pollution control equipments but are structural constructional material and are not covered under the definition of capital goods. Thus, CENVAT Credit is not allowed on such goods. Whereas the respondent contended that as per the decision of Tribunal in the case of Simbhaoli Sugar Mills Ltd. v. CCE – 2001 (135) E.L.T. 1239; the items used for fabricating support structures for installation of manufacturing equipments are held as components and accessories for said equipments and hence are eligible for availment of CENVAT Credit. Hearing both the sides the adjudicating authority held that the CENVAT Credit is allowed on the said item and the appeal was dismissed.

[2007 (213) E.L.T. 305 (Tri. Mumbai)]

5.) The issue is regarding the availment of CENVAT Credit of the capital goods which were not originally consigned to the appellant although such goods were installed in there factory. The appellant with the aim of expansion of his business purchased some of the machineries from M/s General Electrical Company. Some of the machines so installed by the appellant were procured by the M/s General Electrical Company on behalf of the appellant i.e. the duty paying document was in the name of M/s General Electrical Company. The Revenue held that as the duty paying document was not of the name of the appellant the CENVAT Credit is not allowed. But the appellant contended that the Rule 57G and Rule 57T (providing that the capital goods should be originally consigned to the assessee in the duty paying document) have been amended there by now the credit shall not be denied on the ground that any of the duty paying documents does not contain all the particulars. The CESTAT in this matter allowed the appeal on the ground of the contention provided by the appellant.

[2007 (213) E.L.T. 243 (Tri. Del) ]

6.) The issue is regarding the availability of CENVAT Credit on “Jointing sheets”. Here the Revenue appealed the CESTAT that CENVAT Credit should not be allowed on the Jointing sheets as these do not fall under the definition of capital goods. But the respondent (Aditaya Cement) contended that such sheets were used for sealing of joints in the machine. Hence these sheets should be considered as the integral part of the machine and thus eligible for the credit. Looking to the merits of the facts represented by the respondent the appeal was rejected.

[2007 (213) E.L.T. 304 (Tri. Del.)]

7.) The respondents (Mahavir Dyeing & Finishing Industries) are the manufacturers of man made knitted fabrics. On 19-2-2003 the Central Excise officers visited the factory and found the excess stock in the factory. The assessee (one of the partners) was not able to submit the reason for such excess stock. Later on the assessee submitted the evidence in support of their contention that fabrics in question were sent to them for washing and stain removing to three different parties. But the Revenue held that the contention of the assessee is only an after thought and penalty should be imposed for such default. The adjudicating officer held that the evidence so produced by the assessee is sufficient and thereby the appeal was dismissed.

[2007 (213) E.L.T. 264 (Tri. Del.)]

8.) The appellant Santoshi Enterprises is an SSI unit enjoying Exemption under Notification No. 8/2002-C.E. (N.T.). During the visit to the factory by the Central Excise Officer it was found that the stock in hand was short and thereby an excess CENVAT Credit was availed. Moreover the said officer found rejected inputs lying in their production floor and was not used in the manufacture of the finished goods. Furthermore, it was found by the officer that the appellant was availing the CENVAT Credit on the inputs, procured prior to the crossing of the SSI exemption limit but used in the manufacture after the crossing of the said limit. The adjudicating officer in the said case gave the decision that the demand of duty on the short inputs and the rejected inputs were proper but the appellant will continued to be allowed to take CENVAT Credit on inputs purchased during the exemption period. Thereby the appeal was disposed off.

[2007 (213) E.L.T. 254 (Tri. Del.)]

9.) The appellant is Temple Packing Pvt. Ltd. engaged in the manufacturing of printed cartoons. During the visit by the Central Excise Officer it was found that some of the inputs were short and the appellant had availed the MADVAT Credit on the same. The appellant contended on the view that the short goods were stored in the nearby premises on account of paucity of space. The adjudicating officer held in this matter that the intention of the appellant was not to avail wrong credit but this was being done due to paucity of space and hence, only nominal penalty should be imposed. Thereby the appeal was set aside.

[2007 (213) E.L.T. 268 (Tri. Mumbai)]

10.) The appellant is Jai Bhawani Concast Pvt. Ltd. engaged in the manufacturing of M.S.Ingots and S.S. Ingots. The appellant were working under the compounded levy scheme. The appellant had cleared the goods on payment of duty in the month of September. Later in the month of March he noticed that the duty so paid by him in the month of September should have been paid under section 3A and not under section 3. Accordingly, the appellant debited duty under section 3A in PLA in respect of the clearance of the goods in September. Simultaneously the appellant took the credit of the amount erroneously debited in September.

A show cause notice was issued alleging that the MODVAT availed was without having any proper duty paying document as prescribed under Rule 57G of the Act. Thus the adjudicating officer demanded the duty and imposed penalty on the appellant.

The appellant contended on the issue that the duty erroneously debited in Modvat account in September was detected in the month of March and he thereby paid duty in PLA and re-credited the duty in the same month.

After having a bird eye view on the matter the decision was given that the appellant paid the duty from RG 23 A part II at the time of clearance of goods and if such payment was made erroneously, they cannot be re-credited on the same RG 23 A part II. Hence the appeal was rejected.

[2007 (213) E.L.T. 195 (Tri. Del.)]

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