Pradeep Jain - Chartered Accountant

PJ/Case Laws/2009-10/28

Prepared by: - CA. Pradeep Jain

Sukhvinder Kaur

And Deepak Mohnot

Central Excise Section:

Case: - Commissioner of C. Ex., Nagpur v/s Simplex Mill Co. Ltd.

Citation: - 2007 (215) ELT 107 (Tri-Mumbai)

Issue: - Whether the manufacturer can be held liable for payment of duty in case of failure in export of goods when export was done through merchant exporter?

Brief Facts: - The respondent had manufactured and cleared the goods under bond for export through merchant exporter. But the merchant exporter has failed to export the said goods within given time limit of six months. The Revenue raised demand for duty with penalty against the assessee for failure in export. Duty demand was confirmed along with penalty on the respondent-manufacturer. The Commissioner (A) dropped the demand alongwith penalty observing that the liability to export the goods to be fastened to the merchant exporter but not the manufacturer. Aggrieved by the said finding the department is in appeal.

Reasoning of Judgment: - The Hon’ble Tribunal said that according to Notification No. 42/2001-C.E(N.T.) dt 26.06.2001 manufacturer of goods can export the goods through merchant exporter also. The manufacturer can not be held liable for payment of duty if the merchant-exporter had not fulfilled the condition mention the said notification. Further, it is settled law in Kishore Pumps Ltd V/s Comm of Central Excise, Pune [2004 (173) ELT 45 (Tri-Mumbai) that duty cannot be demanded from assessee manufacturer. Revenue’s appeal is without merit.

Decision: - Appeal rejected

Comments:- It is very good decision but the revenue authorities normally do not agree with such contentions. They normally issue show cause notice to the manufacturer even when the CT-1 certificate is given by the merchant exporter. Even we have received a such show cause notice.

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Case: - Indo-Nippon Chemicals Co. Ltd. v/s Commissioner of Central Excise, Vadodara

Citation: - 2009 (233) ELT 141 (Tri-Ahmd.)

Issue: - Whether separate penalty imposable, if less duty was deposited by the assessee on account of miscalculation?

Brief Facts: - Appellants are engaged in the manufacture of plasticizers (falling under sub-heading 2917.90) and were availing Cenvat Credit facility under Rule 3 of the Cenvat Credit Rule, 2002. The appellants were getting raw material ‘Phathalic Anhydride’ from a 100% EOU unit and had taken full credit of duty shown in the invoice. As per Rule 3(6)(a) of the Cenvat Credit Rules, 2002, they were entitled to take credit only to the amount limited to the amount calculated as per the prescribed formula i.e. 50% of {x multiplied by (l+BCD/100 multiplied by CVD/100}. During Audit, on being pointed out about the said fact, the appellants immediately paid the duty. The Adjudicating Authority imposed penalty under Section 11AC and also Rule 13 (1) of the Cenvat Credit Rules, 2002. In appeal, the Commissioner (A) set aside the penalty imposed under Section 11AC and reduced the penalty imposed under Rule 13(1). Appellant have further filed appeal before the Tribunal.

Reasoning of Judgment: - The Tribunal held that the appellant had immediately reversed the modvat credit amount, on being pointed out by the Audit. They also paid interest. It is not a case where modvat credit was availed in excess by any fraudulent mean. The same appears to be result of inadvertent mistake that had occurred on account of mis-calculation. Immediate reversal by the appellant reflects upon their bona fide. Further, the payment of interest was also penal in nature and was paid by the appellant. In view of this, it is not fit to impose separate penalty upon the appellant. Accordingly, the penalty imposed upon the appellant under Rule 13(1) is set aside.

Decision: - Appeal disposed off accordingly.

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Case: - Commissioner of C. Ex., Chandigrah v/s Swaraj Automotive Ltd

Citation: - 2010 (249) E.L.T. 412 (Tri-Del)

Issue: - Whether the duty is liable on scrap genereated from the repairing of goods?

Brief Facts: - Respondent is manufacturer of dies, jigs, fixtures and tooling etc. They removed the CI scrap of the same without payment of duty. The Adjudicating Authority gave the finding that the respondents cleared MS and CI scrap without payment of duty, which were generated during the manufacturing process. It was observed that these scraps were chargeable to duty or may be exempted if consumed captively in the factory premises and the scrap so generated classified under heading 7204.90. The Commissioner (A) set aside the orders of the Adjudicating Authority and observed that M.S and CI scrap generated during the manufacture of dies, jigs etc and removed without payment of duty in respect of the inputs on which no Modvat credit was availed by the respondents and would not be liable to duty. Revenue has come in appeal before the Tribunal.

Appellant’s Contentions: - Revenue demanded the duty on the removal on the basis of decision given by the High Court in UOI v/s Grasim Industries Ltd [2008 (229) ELT 328 (Raj)].

Respondent’s Contentions: - The respondent argued that the waste has been arising out of the processing of inputs in respect of which Cenvat credit has not been availed by them. Further, they submitted that the items were used in relation to repair and maintenance of work and factory, plant, up-keeping of office buildings. He also relied upon the decision of the Hon’ble High Court in the case of UOI v/s J.K. Industries Ltd [2008 (223) E.L.T. 342 (Raj.)].

Reasoning of Judgment: - The Tribunal held that the decision of the Rajasthan High court in the case of Grasim Industries Ltd. [2008(229) ELT]328 (Raj.)] submitted by the Revenue is applicable. The said decision provided that any process incidental or ancillary to the completion of a manufactured product also amounts to manufacture. It is not necessary that scrap should emerge in the process of manufacturer of excisable goods only, or in the process of the end-product only.

Further the Tribunal found that the facts and circumstances provided by the respondent in the case of J. K. Industries Ltd is not applicable in the case in hand as in there it was held that Rule 57AB and Rule 57S could be invoked only in case the waste material sold was the outcome of capital goods on which modvat credit had been availed by the assessee.

Further the Tribunal found out that there is a dispute on the use of the items as to whether the items were used in the manufacturing or repairing of the dies/jigs, fixtures, tooling etc.

On the whole, the Tribunal set aside the impugned orders and remanded the matter to the Adjudicating authority to decide afresh on the basis of use of item and in the light of the decision of the Rajasthan High Court in the case of UOI v/s Grasim Industries Ltd in accordance with law.

Decision: - Appeals allowed by way of remand.

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Case: - Ideal Components (P) Ltd v/s CCE, Delhi-III

Citation: - 2009 (95) RLT 374 (CESTAT-Del)

Issue: - Reversal of credit on depreciated value of capital goods permissible in case of inter-unit transfer of the capital goods.

Brief Facts: - Appellant has units in Gurgaon and Manesar. Certain capital goods were received at the Gurgaon unit, were used for a few years and then transferred to their Manesar Unit. The cenvat credit reversed at the time of removal was on depreciated value. Full credit was not reversed. The Original Authority held that the appellants were required to reverse the entire amount of credit which was initially taken. Demand of differential amount with interest was confirmed and equal penalty was also imposed. The said order was upheld by the Commissioner (Appeals). Hence, appellant have filed this appeal before the Tribunal.

Appellant’s Contentions: - Appellant submitted that manufacturers in respect of Gurgaon factory and Manesar factory are one and the same being the same legal entity. The capital goods were used for the intended purpose. It is submitted that the entire exercise was revenue neutral because even if the entire amount as reversed, the same was available as credit to the Manesar unit. Reliance has been placed on Pooja Forge Ltd v/s CCE, Faridabad [2006 (73) RLT 575 (CESTAT-Del)] wherein it was held that the movement of capital goods from one unit to another unit of the company for use in the manufacture of same final products does not involve any disposal or alienation of capital goods. It is therefore, submitted that demand was not warranted.

Respondent’s Contentions: - Revenue contended that the term removal “as such” has been interpreted by the Larger Bench of the Tribunal in the case of Modernova Plastyles Pvt Ltd v/s CCE, Raigad [2008 (89) RLT 214 (CESTAT-LB)] wherein it was held that reversal of credit in respect of the capital goods which are removed is a must whether the same are removed after use or without use. It was also submitted that adoption of depreciated value for the purpose of reversal of credit of capital goods removal is permissible only with effect from 13.11.07 after amendment of Rule 3(5) of the Cenvat Credit Rules.

Reasoning of Judgment: - The Tribunal held that the amendment dated 13.11.07 covers cases of removal of capital goods after use not only between the units of the same company but between any two companies. The submissions of the appellant that even if the entire amount is reversed, then also same was available as credit to the Manesar unit, merits consideration. The present case is squarely covered by the decision in Pooja Forge Ltd case. This is not case of non-reversal of credit. The issue is regarding quantum of credit to be reversed. Since it is a case of inter unit transfer adopting depreciated value (which is normal accounting method whether the goods are removed to another unit or not), there is no justification to confirm the demand and imposition of penalty.

Decision: - Appeal allowed with consequential relief.

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Case: - Commissioner of Central Excise, Pondicherry v/s Superfil Products

Citation: - 2009 (237) E.L.T. 551 (Tri-Chennai)

Issue: - Whether Interest will become payable only in respect of credit wrongly taken and utilized or on the total Credit wrongly taken, irrespective of the fact that it has been utilized or not?

Brief Facts: - The respondent is manufacturer of ‘nylon multifilament yarn’ and was taking Cenvat credit on inputs and capital goods and utilizing the same for payment of excise duty for clearance of his final products. The respondent was also sending some of the inputs for the purpose of getting the goods manufactured on job work basis. Respondent opted to avail exemption under Notification No. 30/2004 dated 09.07.2004. At that time there was some quantity of inputs lying in their own factory and in the premises of job workers lying un-cleared in stock on which some amount of credit was also lying in their account. Further, they admittedly took credit, inadvertently, on the basis of ineligible documents. Consequent to respondent opting out of the scheme and opting for exemption and for taking credit on ineligible documents, they were required to reverse the credit. There was no dispute about the credit that was to be reversed. The Original Authority also demanded interest on credit which was to be reversed. In appeal, the Commissioner (A) held that interest was not payable as the entire credit had been reversed on the mistake being pointed out by the Department without issue of show-cause notice. Revenue has come in appeal against the said order.

Appellant’s Contention: - Revenue contended that Rule 12 of the Cenvat Credit Rules is very that any wrongly taken credit even if not utilised has to be reversed along with interest. Consequent to amendment to Section 11AB with effect from 11.05.2001, the interest became payable even in cases of voluntary payment of the duty, whether it is short levied or short paid. Reliance was placed on judgment in Commissioner of Central Excise, Aurangabad v/s Padmashri V.V. Patil S.S.K. Ltd. [2007 (215) ELT 23 (Bom.)].

Respondent Contention: - Respondent submitted that there was sufficient balance available in their Cenvat credit account to reverse the ineligible credit and that there was no pecuniary benefit derived by them. They relied on the decision of the High Court of Punjab and Haryana in the case of Commissioner of Central Excise, Delhi-III v/s Maruti Udyog Ltd.[2007 (214) E.L.T. 173 (P & H)] in support of their contention that in the absence of utilization of Cenvat credit, the question of payment of interest does not arise and hence, the interest is not chargeable.

Reasoning of Judgment: - The Tribunal held that the credit available in the erstwhile statutory PLA or Cenvat account, does not earn any interest when they are lying unutilized in the accounts. The debit in their PLA/Cenvat accounts amounts to utilisation and payment of duty. If the wrongly taken credit is utilized, there is certainly undue advantage taken by the assessee in respect of such clearances. In a case, where the credit has been wrongly taken and not utilized, till the mistake is detected and reversed, there is no benefit accruing to the assessee. Under these circumstances, fixing the interest liability is not justified. Further, the wording of Rule 12 of the CENVAT Credit Rules “taken or utilized” may deserve to be interpreted only as “taken and utilized” is to be interpreted only as “taken and utilised”. Thus, interest will become payable only in respect of credit wrongly taken and which have been utilised.

It was further held that in a situation, where the assessee opts for an exemption and consequently adjustment requires to be made on the Cenvat account, it was not a case of credit taken wrongly but adjustment warranted in view of opting for an exemption in such a situation, it would be appropriate that a proper account of stock of the material involved and the credit available is taken. If sufficient credit was available on the date of opting out, then mere fact that the physical debiting took place at a later point of time does not involve any benefit to the assessee and no interest shall be payable.

It was further held that naturally, there is a time lag involved in quantifying the available stock and determining the amount of credit to be reversed. If the credit available was less than the credit that should be reversed, the balance requires to be paid in cash with interest due.

Matter remanded back for limited issue of deciding the actual quantum of interest, if any, payable in the light of the decisions cited above.

Decision: - Appeal allowed by way of remand.

Comments:- This is very good decision on interest. Even the appeal of Revenue before Apex court in case of Maruti Suzuki has been dismissed by the Apex Court. But the Board has issued a clarification that this decision related to ole rules and not applicable to new rules. But this decision relates to new rules also. But the department is insisting of payment of interest. We have also wrote an article on the same subject which was published in renowned periodical “Excise Law Time”.

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Case: - CCE, Surat v/s Ajay Prakash Dyg. & Ptg. Mills & Anr

Citation: - 2009 (95) RLT 384 (CESTAT-Ahmd)

Issue: - The concept on unjustenrichment is not applicable when the unit working under compounded levy scheme has processed the goods on job work basis.

Brief Facts: - Respondent are working under compound levy scheme and engaged in processing of fabrics on payment of job charges. The duty was included in the said charges. The job charges were determined by market forces. In the first round of litigation, the Tribunal had remanded the matter to the Commissioner (A) for de novo adjudication by holding that gallery portion should be excluded for determining the capacity of production, in terms of the Supreme Court’s decision in the case of SBPC. Accordingly, respondent filed refund claims. The refund claims for the period Dec 98 to Feb 99 were allowed but the refund claim for the period March 99 onwards were rejected by the Original Authority on the ground of unjust enrichment.

In appeal before the Commissioner (A), the order was passed in favour of the respondent. It was found by the Commissioner (A) that the duty paid on account of gallery portion was only a fraction (one-tenth) of the whole of duty payable under the compound levy scheme and that numerous manufacturers similarly placed had been paid refund of excess duty collected on account of gallery portion. The Commissioner (A) had held that as the job charges collected by the respondent were determined by market forces, there was very limited scope to apply doctrine of unjust enrichment to duty paid for the period March 99 onwards. The Commissioner (A) further held that with the CA certificate the assessee had discharged its onus. It was not proper to apply the doctrine of unjust enrichment. Reliance was placed on the decision of the Bombay High Court rejecting the Departmental appeal against the CESTAT order in CCE v/s Kumbhi Sakaji SSK [2007 (217) ELT 107 (Tri)]. In the said case, the Tribunal had held that when the assessee had submitted Chartered Accountant’s certificate and other relevant documents based on which both the lower authorities came to concurrent finding that the assessee had not passed on the incidence of duty to ultimate customers and when there was no contrary evidence, there was no reason to interference in the impugned order.

Revenue has come up in appeal against this decision.

Respondent Contention: - Revenue contended that a mere Chartered Accountant’s certificate was not sufficient to show that the duty burden has not been passed on to the customers.

Reasoning of Judgment: - The Tribunal found that the fact that the respondent was working under compound levy scheme and the fact that they were processing the goods on job work basis and were recovering only job charges are very relevant factors to show that duty, of which refund is being claimed, does not stand passed to the buyers. No infirmity in the order of the Commissioner (A).

Decision: - Appeals rejected.

Comments:- This is very important decision. We are also fighting the same issues before the tribunal. The gallery cases were decided in favour of assessee by Apex Court. The units who have not paid the duty were benefited from the same. But the units who have paid have to file refund. The department invoked concept of unjustenrichment. These cases are still pending. Now, with this decision, a hope has build that they will get the refund after fighting the cases for 10 years.

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Case: - Kundan Pestichem Pvt. Ltd. v/s CCE, Ahmedabad

Citation: - 2009 (95) RLT 503 (CESTAT - Ahmd.)

Issue: - Whether the interest amount is payable on the duty amount paid from Cenvat account? When the interest is not quantified in OIA then can it be adjusted from the rebate claim stands?

Brief Facts: - Appellants have preferred a rebate claim in respect of the goods exported by them. The said rebate claim was sanctioned by the Assistant Commissioner but adjusted against an outstanding amount, which according to the Assistant Commissioner, was pending as interest amount in respect of some earlier confirmed demand.

Originally, two orders were passed by the Additional Commissioner confirming demand of duties. In addition, confirmed the demands on the ground that the duty was required to be discharged in cash and not by making debit entries in Cenvat credit account, the Original Adjudicating Authority also observed that interest is to be recovered from the assessee on the delayed demand at prescribed rates, under Section 11AB of the Act. The said two orders were challenged by the appellants before Commissioner (Appeals), who have rejected the appeals. Thereafter, no appeal was filed by the appellant against the said order of Commissioner (Appeals).

Appellant’s Contentions: - The interest was required to be paid, even in terms of the said order, under Section 11AB. No amount of interest was quantified or finalized in the said order. In terms of the provisions of Section 11AB, the interest required to be paid by them is nil, as held by the Larger Bench in the case of Noble Drugs Limited v/s CCE, Nasik [2007 (215) ELT 0500 (Tri.-Larger Bench)] laying down that payment of duty from the Modvat credit account during the period of forfeiture would not attract any interest in terms of Section 11AB. It was also submitted that even if the said orders of lower authorities are held to be final order, the same are only to the effect that interest in terms of Section 11AB is to be confirmed. As per the law declared by the Larger Bench the interest in terms of the said Section would be Nil. As such, no interest liability stands arisen against the appellants, in which case the adjustment of the sanctioned rebate claim was not justified.

Respondent’s Contentions: - According to them, having not filed any appeal against the order of the appellate authority, the assessee is under a liability to pay the interest.

Reasoning of Judgment: - The Tribunal held that there is no dispute about the fact that in terms of the law declared by the Larger Bench in Noble Drugs Limited, no interest is required to be paid where duties actually paid from the Modvat credit account instead of paying in cash. The only factor which is coming in the way of appellants is that the earlier orders passed by the Assistant Commissioner and Commissioner (Appeals) were not challenged by them before higher appellate forum. However, the Tribunal found that the said orders do not confirm any quantum of interest and the same are to the effect that interest under the provisions of Section 11AB is to be paid. As such, when the appellant's interest liability in terms of the Section 11AB and in terms of the earlier orders is examined in the light of the Larger Bench judgment of the Tribunal, it transpires that no interest is required to be confirmed in terms of Section 11AB. In as much as even the earlier orders were for confirmation of interest in terms of Section 11AB, which is found to be Nil in terms of the Larger Bench judgment, it can safely be concluded that the interest required to be paid would be Nil. In such a case, the rebate claim sanctioned is required to be refunded instead of adjusting the same against the interest amount. Accordingly, Tribunal set aside the impugned order.

Decision: - Appeal allowed with consequential relief. Stay petition also disposed off.

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Case: - M/s Thiru Arooran Sugars Ltd. v/s CCE, Pondichery

Citation: - 2010–TIOL–116–CESTAT–MAD

Issue: - Whether the credit is allowed on transfer of unit when such credit was in dispute during the period of transfer and allowed later on?

Brief Facts: - Appellants had taken Credit on components and parts of boiler, turbine and pollution control equipment during the period 1995–2000. The Commissioner of Central Excise has disallowed this credit on the ground that, during the said period, the said components and parts of machinery were not available in the assessee’s factory at Achitpur. Prior to the above period, the assessee had their factory at Tirumandankudi, where they had been availing similar credit. In respect of such past availment of credit, a dispute had arisen between them and the department, which was ultimately resolved by the Commissioner (Appeals). He had held that the Components and parts were eligible for input duty credit and also that the said inputs had not been removed by the assessee out of their factory. It was categorically held by the Appellate Authority that the inputs had lost their identity through utilization in the cogeneration plant.

Appellant’s Contentions: - The appellant pointed out that the department had not challenged the finding of the Appellate authority which had become final. It was further argued that had the Department not disputed the entitlement to the impugned credit, the appellate would have availed it before shifting their unit and transferring the boiler, turbine, pollution control equipment. The lower appellate authority had allowed the credit relating to the earlier period and the same has no connection to the subsequent transfer of the boiler etc. or shifting of the unit. In fact, the lower appellate authority was very much in knowledge of such transfer and shifting which is recorded in his OIA under which the credit has been permitted. They further argued that the appellants have transferred their unit from Tirumandankudi to Achitpur but the ownership remained with the appellants and the asset and liabilities remain with them. Hence, the credit allowed by the lower appellate authority in the appeal proceedings, which has not been challenged by the Department, cannot be denied to the appellants.

Respondent’s Contentions: - He reiterates the findings of the Lower authority that the appellants are not entitled to the transfer of the credit in terms of Rule 8 of the CENVAT Credit Rules.

Reasoning of Judgment: - The Tribunal held that the present case is not one of the case which is sought to be covered under Rule 8 of the Cenvat Credit Rules. This is not a case where factory has been shifted at a time when there is unutilized credit lying unutilized shall be allowed to be transferred if the inputs and the capital goods are also transferred to the new site. Here, the transfer of the unit has taken place first and the Lower Appellate Authority had allowed the credit to the appellants at the later point of time. Rule 8 does not envisage such a situation nor does it provide for such a case. Moreover, here, the inputs were utilized long ago and only the credit in respect of those was disputed, which has been finally decided by the lower appellate authority, against which the department, has not filed any appeal. Since the inputs had been utilized earlier and there is nothing remaining to be transferred of the said inputs, for that reasons also Rule 8 cannot have any application here. The fact that the boiler etc. manufactured utilizing such inputs have been transferred later to a sister concern of the appellants has also no relevance because the credit in question is not related to the boilers but to the inputs used in such boilers. Normally, if the dispute was not raised in respect of inputs duty credit in the first place or if the appeal would have been decided in good time, the appellants would have utilized the credit for clearance of the finished goods instead of paying duty through cash. It is only because of the departmental action to unjustly deny the credit, the appellants were not able to utilize the same. To deny the appellants to utilize the credit even after the lower authority has allowed the same, would be grossly unfair and unjust and there is no provision in the rules for such denial. Impugned order set aside.

Decision: - Appeal allowed with consequential benefit to the appellants.

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Service Tax Section:

Case: - Cadila Healthcare Ltd v/s CCE, Ahmedabad

Citation: - 2009 (95) RLT 447 (CESTAT-Ahmd)

Issue: - Credit is admissible of service tax paid on Technical Testing and Analysis service, Courier service, clearing and forwarding agent service and on commission paid to foreign agent.

Brief Facts: - Appellants are engaged in the manufacture of medicaments falling under Chapter 30. They have availed cenvat credit of service tax paid on Technical and Analysis Services, Commission paid to the foreign agents, Courier Services and C & F Agent’s services. Revenue took the stand that credit on these services was inadmissible. The Adjudicating Authority accordingly ordered the recovery of cenvat credit taken on the said services and also imposed penalty of Rs. 10,000/-. Appellant has challenged the same.

Appellant’s Contentions: - Appellants have relied upon the definition of “input services” in Rule 2 (l) of the Cenvat Credit Rules, 2004. It is submitted that services on which tax has been availed and credit has been taken can be related to the activities listed in the definition. Reliance has been placed on the decision of Larger Bench given in ABB Limited Case [2009 (92) RLT 665 (CESTAT-LB)]. It is also submitted that there is no need for a particular service to be directly related for the manufacture, for the purpose of eligibility of service credit. Reliance has been placed on the judgments given in CCE, Mumbai v/s GTC Industries Ltd [2008 (89) RLT 197 (CESTAT-LB)], CCE, Rajkot v/s Rolex Rings P. Ltd [2008 (86) RLT 201 (CESTAT-Ahmd)], Manikgarh Cement v/s CCE & C, Nagpur [2008 (85) RLT 480 (CESTAT-Mum)], CCE & C, Guntur v/s CCL Products (I) Ltd [2009-TIOL-656-CESTAT-BANG], CCE, Hyderabad-IV v/s Deloitte Tax Services India Pvt Ltd [2008 (86) RLT 770 (CESTAT-Ban)], Millipore India Ltd v/s CCE, Bangalore-II [2009 (236) ELT 145 (Tri-Bang)], Aditya Birla Nuvo Ltd v/s CCE, Bhavnagar [2009 (91) RLT 761 (CESTAT-Ahmd)] and Sanghi Industries Ltd v/s CCE, Rajkot [2009 (234) ELT 367 (Tri-Ahmd)].

Respondent’s Contentions: - Revenue contended that the Technical testing and analysis services was rendered in respect of a product which was produced on the trial basis and has not been manufactures and sold at all. Therefore, credit taken in respect of this product can be used only in relation to the manufacture of that product and therefore credit is clearly not admissible. For other services, it is submitted that the same have to be considered in the light of the Larger Bench decision of the Tribunal.

Reasoning of Judgment: - The Tribunal held that the manufacturing process of medicaments is not comparable to other products. A medicine before its release in the market has to undergo several stages of testing and technical analysis etc and all the products may not reach to the customers as a commercial production as such at all. Even the trial manufacture and R & D conducted in respect of such drugs which did not reach to the market has to be considered as part of the manufacturing process and business activity. Therefore, Revenue’s view is not acceptable. Reliance placed by the Commissioner on the observations made in M/s Crompton Greaves Limited is misplaced as there were no detailed findings. The Tribunal further held that what is to be seen for considering the eligibility of service tax paid as cenvat credit is as to whether they are covered by the inclusive definition or not. It was held that definition was wide definition and in terms of the said definition, credit is admissible.

As regards C & F service, it was held that C & F has a definite role to play in promotion of sales by storing the goods and supplying the same to the customers, thus he is actually promoting the sales. The decision of Larger Bench in ABB Ltd case has made it clear that benefit of credit on service tax is admissible even where the services rendered is beyond the place of removal. The benefit of this judgment was not available with the Commissioner.

As regards Courier Services, The Tribunal held that the decisions given in Deloitte Tax Services (India) Pvt Limited [2008 (11) STR 266 (Tri-Bang)] and CCL Products (I) Limited [2009-TIOL-656-CESTAT-Bangalore] squarely covers the specific service and therefore is admissible.

The Tribunal further held that similarly, foreign commission agents services are also admissible, since it is a sale promotion. Without maintenance and repair or management, the factory cannot be run and therefore, service tax paid on these services is admissible. The credit of repair and maintenance of photo copier, Air Conditioner, Water Cooler etc. allowed in terms of the Apex Court in Hansraj Gordhandas v/s HH Dave. Impugned order set aside.

Decision: - Appeals allowed with consequential releif.

Comments:- Now, the credit of input service is allowed on almost all the services. Even the Coca Cola decision of High Court has allowed the credit on all business expenditures.

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Case: - H.E.G. Ltd v/s Commissioner of Central Excise, Raipur

Citation: - 2010 (17) S.T.R. 178 (Tri. Del.)

Issue: - Whether Cenvat Credit can avail on services namely-landline telephone, cleaning and maintenance etc.?

Brief Facts: - Appellant had availed Cenvat credit on input services namely landline telephone installed at the residence of staff, cleaning and maintenance of garden, Pandal and Shamiana services and group insurance of employee. The department has disallowed the Cenvat credit on these services. The Commissioner (A) observed that the landline telephones were installed at the residence of the staff, so denial of credit was correct. The Commissioner (A) observed that the cleaning and maintenance of garden and tank near power plant and gardening at transit house, which is at Bhilai. It was observed that specialized cleaning activity such as disinfecting, exterminating or sterilizing of object or premises in relation to agriculture, horticulture, animal husbandry or dairying are not under the purview of cleaning service and credit was not admissible. With regard to Group Insurance services, the Commissioner (A) allowed the credit relating to Insurance of cars & two wheelers which were owned by the appellants and were used in performing the business activities. But denied credit on personal insurance policy of the employees covered by the National Insurance Company.

Reasoning of Judgment: - The Tribunal held as under: -

In respect of Landline Telephone, the decision given by the Gujarat High Court in the case of CCE v/s Excel Crop Care Ltd [2008 (12) STR 436] was relied, in which it was held that the phones were not installed in factory premises, cannot be termed to be termed to be a ground of deny the credit. In the present case, there is no allegation that the landline was not used in relation to business activity. I find that the credit was denied on the ground of landline phone were installed at the residence of staff. Hence, denial of credit on landline telephone is not justified.

In respect of Cleaning and maintenance of garden, there is no dispute that the service tax was paid on “cleaning and maintenance of garden” service. The levy of tax cannot be disputed while availing Cenvat credit on input service at the receiver’s end. So, denial of credit on ground that they are not used in relation to manufacturing is not justified. But credit on “cleaning and gardening service” would be allowed, it is in relation to business activity.

In respect of Pandal and Shamiana services, the Tribunal relied on the judgment in CCE, Mumbai v/s GTC Industries Ltd [2008 (12) STR 468 (Tri-LB)] in which Larger Bench of Tribunal had held that employment of outdoor caterer for providing catering service has to be considered as an input service relating to the business and Cenvat credit in respect of the same will be admissible. As per appellant’s conteniotns, the Pandal and shamiana was arranged for the Managerial staff which was working during a strike by workers in order to safeguard the employees working inside the plant from any strike disturbances. Thus, the use of the said service was purely for business purpose. Therefore, the Tribunal found no reason to deny the credit on Pandal and Shaminana service.

In respect of Group Insurance Service, the Tribunal found that the Tribunal had allowed credit on Group Mediclaim policy and Workmen’s Accident Policy in CCE & C, Aurangabad v/s Endurance Systems India Pvt Ltd [2009 (237) ELT 204 (Tri-Mumbai)] and Millipore India Ltd v/s CCE, Bangalore-II [2009 (13) STR 616 (Tribunal)] Therefore, denial of the Cenvat credit is not justifiable as per the settled law.

Accordingly, the Original Authority directed to allow credit on Cleaning & Gardening services subject to verification was to whether services are rendered in relation to business activities. Penalties set aside.

Decision: - Appeals allowed in the above terms.

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PJ/Case Laws/09-10/28

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