Pradeep Jain - Chartered Accountant

PJ/Case Laws/2009-10/36

Case Laws

Prepared By:

CA Pradeep Jain,

Sukhvinder Kaur, LLB

SERVICE TAX SECTION:

Case: Saturday Club Ltd v/s Asstt. Commr., Service Tax Cell, Calcutta

Citation: 2005 (180) ELT 0437 (Cal)

Issue: - Whether service tax can be demanded from Member’s club for providing service to its own members?

Brief Facts: - Petitioner is a well known club in the city of Calcutta. Petitioner has given the club premises to its members for use as mandap. Department initiated proceedings against the petitioner for recovery of service tax on the service of ‘Mandap Keeper’ provided by the petitioner-club to its members. Against the said proceedings the petitioner approached the High Court by filing the writ petition praying for a declaration that the petitioner-club is not a mandap keeper within the meaning of Chapter V of the Finance Act, 1994 and is not liable to pay any service tax.

Petitioner’s Contentions: - Petitioner contended that it is a member’s club and not a proprietary club. Therefore, it is not supposed to pay service tax for using the space as mandap as per requirements of the members. It is governed by its own Memorandum and Articles of Association as well as rules and bye-laws connected therewith. Giving of service tax for using the club premises as mandap cannot be held to be a service or different from its usual services to the members so that service tax can be imposed. It is contended that a club is an agent when the members of the club are principal. Petitioner relied upon the judgment given in Harbour Division-II, Madras v/s Young Men’s Indian Association Madras and Ors [1970 (XXVI) Sales Tax Cases 241], Commissioner of Income-tax v/s Darjeeling Club Ltd [1985 (153) ITR 676], Commissioner of Income-tax v. Bankipur Club Ltd [1997 (226) I.T.R. 97], Chelmsford Club v. Commissioner of Income-tax [2000 (243) ITR 89].

Petitioner also contended that it is nobody’s case that if any outside ‘mandap keeper’ is carrying out a business in a premises of another he is supposed to pay service tax and will raise a bill along with the service tax upon the owner. There is no dispute to that extent. But here the case is different. In the instant case, whether there should be collection of service tax by a owner of the property if he voluntarily allows any of his known persons to use his premises for the purpose of carrying out the marriage or other ceremony or not. There cannot be any applicability of service tax in between themselves since there is no question of transfer of property amongst them.

Respondent’s Contention: - Revenue contended that providing ‘mandap’ by a club as a ‘mandap keeper’ cannot be the usual course of business activities under the objects of the Memorandum of Association of club. Reference was made to the relevant clause of the Articles of Association it was said that the club is charging more as against rental and other costs and even thereafter they are levying payable sales tax. Therefore, the club authorities are using the space as against the consideration and thereby making profit out of it which cannot be called as a usual privilege to the members. Many of the clubs accepted the imposition of the service tax and only a few are opposing the same. The privileges of the club members are restricted by way of payment of membership amount. The judgments relied upon by the petitioner are not in connection with the service tax but payability of income or sales tax. Reliance was placed on the judgments given in Tamil Nadu Kalyana Mandapam Owners’ Association v. U.O.I. [2001 (133) ELT 0036 (Mad.)] and Commr. of C.Ex., Jamshedpur v. Tata Iron & Steel Co. (Tube Division) [2001 (133) ELT 0235 (Tri. - Kolkata)].

Reasoning of the Judgment: - The High Court held that law is well-settled by now that in between the principal and agent when there is no transfer of property available, question of imposition of service tax cannot be made available. If the club space is allowed to be occupied by any member or his family members or by his guest for a function by constructing a ‘mandap’ the club cannot be called as ‘mandap keeper’ because the club is allowing his own member to do so who is, by virtue of his position, principal of the club. If any outside agency is called upon to do the needful it may raise a bill along with the service tax upon the club and the club as an agent of the members, is supposed to pay the same. The authority cannot impose service tax twice once upon the people carrying out the business of ‘mandap keeper’ as well as the members’ club for the purpose of using the space for constructing or using it as ‘mandap’. Therefore, apart from any other question possibility of double taxation cannot be ruled out.

The High Court further held that if a person being an owner of the house allows another to occupy the house for the purpose of carrying out any function in that house it will not be construed as transfer of property. But if such person calls upon a third party ‘mandap keeper’ to construct a ‘mandap’ in such house then in that case such ‘mandap keeper’ can be able to raise bill upon the user of the premises along with the service tax. Therefore, it cannot be held that members’ club is covered by the Finance Act, 1994 for imposition of service tax to use its space as ‘mandap’.

The High Court further held that Income-tax is applicable if there is an income. Sales tax is applicable if there is a sale. Service tax is applicable if there is a service. All three will be applicable in a case of transaction between two parties. Therefore, principally there should be existence of two sides/entities for having transaction as against consideration. In a members’ club there is no question of two sides. ‘Members’ and ‘club’ both are same entity. One may be called as principal when the other may be called as agent; therefore, such transaction in between themselves cannot be recorded as income, sale or service as per applicability of the revenue tax of the country. Hence, entire proceedings initiated against the petitioner are quashed.

Decision: - Writ Petitions disposed off.

Comments: - This is very good decision. But the Government has added a new service under club membership. It has not been decided whether this decision will hold good for such new levy.

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Case: Grand Ashok v/s CST, Bangalore

Citation: 2009 (92) RLT 73 (CESTAT-Ban)

Issue: - Whether service tax will be applicable on the sale of food/beverages on which sales tax/VAT has been levied and paid?

Brief Facts: - Appellants are engaged in the activity of providing in-flight catering services. They were paying the service tax on the amount collected towards handling and transportation charges. Revenue demanded service tax by contending that the appellant were providing the service of outdoor catering. The Adjudicating Authority confirmed the demand under proviso to Section 73 (1) of the Finance Act, 1994 alongwith interest under Section 75. Penalties were imposed under Section 76, 77 and 78.

The Commissioner (A) relied upon the judgment given in M/s Saj Flight Services (P) Ltd v/s Superintendent of Central Excise [2006 (4) STR 432] wherein it was held that service of food and beverages to passengers during flight would definitely come within the ambit of Service Tax under the category of 'Outdoor Caterers'. Reliance has also been placed on the Circular dated 25.7.1997 and has given abatement of 50% on the gross amount received by the appellant vide Notification No.2/2004 ST and computed the Service Tax. It was also held that appellant would not be entitled for the benefit of Notification No.12/2003 dated 20.6.2003.

Therefore, the appellant approached the Tribunal.

Appellant’s Contentions: - Appellants contended that they are only engaged in the supply of food, which is sale of goods and subjected to Sales Tax. The service is very incidental and the dominant activity is only sales, therefore, they would not be liable to any Service Tax at all. Reliance has been placed on the judgments given in Northern Indian Caterers (India) Ltd. v/s Lt. Governor of Delhi [1980 (45) STC 212 (SC)] to support their contention that sale of packaged goods is sale of goods. Their activity was not liable to service tax at all and they would not fall under Outdoor Catering service. The appellant are challenging the inclusion of cost of food and beverages supplied to the airlines in computing the service tax liability. Reliance has been placed on the case of BSNL Ltd. [2006 (2) STR 161 (SC)] and Idea Mobile Communication Ltd. Appellant also contended that the Adjudicating Authority had not accepted their point that they would be entitled for abatement towards the cost of the food/beverages supplied. Appellants have also claimed that they have acted under bona fide belief that they had no liability to pay service tax on the cost of food/beverages supplied by them. Therefore, longer period cannot be invoked against them.

Respondent’s Contentions: - Revenue relied upon the judgment given in M/s Saj Flight Services (P) Ltd v/s Superintendent of Central Excise [2006 (4) STR 432] wherein it was held that service of food and beverages to passengers during flight would definitely come within the ambit of Service Tax under the category of 'Outdoor Caterers'. Reliance has also been placed on the Circular

Reasoning of the Judgment: - The Tribunal found that the appellants had entered into a contract with their customers for supply of food/beverages to the airlines. The appellant were paying value added tax (VAT) under the State laws. The Tribunal held that the Commissioner (A) had not properly considered the import of Article 366 (29A) (f) which provides for Sales Tax on the food supplied by any caterer. Once in a contract there are components of services and supply of goods and the Service Tax can be only on the service component and where the goods are involved and where sales tax is paid, then simultaneously Service Tax cannot be demanded. It was also held that in Imagic Creative Pvt. Ltd. v/s Commissioner of Commercial Taxes [2008 (9) STR 337 (SC)] it was held that "Payments of Service Tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of Service Tax and the Sales Tax as envisaged in a composite contract as contradistinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy.” Thus, it is clear that the department cannot charge Service Tax on the cost of the food/beverages supplied to the airlines. These costs are separable and can be identified. The Commissioner ought to have given them the benefit of Service Tax Notification No.12/2003.

Thus, the Tribunal held that the appellant would be liable to pay service tax under the category of outdoor caterer service. That service tax cannot be leviable on the sale of foods/beverages on which VAT has been paid. Considering the bona fides of the appellant, invocation of longer period and imposition of penalties is not justified. Impugned order set aside.

Decision: - Appeal allowed with consequential relief.

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Case: Commissioner of Central Excise, Vapi v/s ITW India Ltd.

Citation: 2010 (17) S.T.R. 587 (Tri-Ahmd.)

Issue: - Whether the Service Tax Credit of input services is available when name and address of head office or branch office is mentioned in invoices? Whether credit on mobile phones is admissible?

Brief Facts: - The respondent has taken credit of input service but the address mentioned on invoice is of Centralized registered place Silavasa and they have also taken service tax credit of mobile phones. The Adjudicating Authority confirmed the demand. Thereafter respondent filed appeal against this order before Commissioner (Appeal). The Commissioner (Appeal) has held that respondent is eligible to Service tax credit even if the bills are input services were in the name of place Silavassa and passed the order in favour of Respondent. Revenue has challenged the order and filed appeal before Hon’ble Tribunal.

Reasoning of the Judgment: - The Tribunal held that the matter is no longer res integra considering the decisions given in case of Electro Steel Casting v/s CCE [2001 (136) ELT 929 (Tri-Kolkata)]. The Tribunal held that it is well settled that substantive benefit of credit cannot be denied on the ground that invoices bear the name and address of the head office or any other branch office.

Wit regard to service tax credit in respect of mobile phones, the Tribunal further held that the issue is no longer res integra in view of the decisions in Indian Rayon & Industries Ltd. v/s CCE [2006 (4) STR 79] and CCE v/s Excel Crop Care Ltd. [2008(12)S.T.R. 436 (Guj)].

Decision: - Revenue’s appeal rejected.

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Case: M/s Secure Meters Ltd. v/s CCE Jaipur-II

Citation: 2010-TIOL-416-CESTAT-DEL

Issue: - Whether Service Tax Credit can be availed if service providers are not registered at the time of providing service but subsequently they get themselves registered and service tax is paid on supplementary invoices?

Brief Facts: - Appellants are providing the taxable services and some other services for which they are registered with the Jurisdictional Central Excise Authority. They received the services of erection, installation & commissioning and of technical testing from M/s Mother Power House Ltd. and Vision Tech during the period from December 2003 to December 2004. These service providers were not registered at the time of providing service. However subsequently they took service tax registration and paid service tax on supplementary invoices. On the basis of these supplementary invoices the appellant took service tax credit. The department contended that since at the time of providing the service the said companies were not registered with the service tax, the credit on the basis of supplementary invoices issued subsequently was not available to the appellant. Demand with interest was confirmed and penalties were imposed. Impugned order was upheld in appeal. Hence appellant is before the Tribunal.

Appellant’s Contentions: - There was no dispute on the fact that the taxable services in respect of which service tax credit has been taken, had been received by the appellant and have been used for payment of service tax on the output services. No provision of law supported that credit of service tax cannot be availed if the assessee is not registered at the time of providing service and service tax is subsequently paid on supplementary invoices.

Reasoning of the Judgment: - The Tribunal held that there was no dispute that the input services had been used by the appellant for providing output services which are taxable. In view of this, it is not correct to deny the service tax credit on the basis of supplementary invoices just because at the time of receipt of the input services the input service provider were not registered and had not mentioned service tax registration no. in the invoices. When the receipt of input services is not disputed the credit of service tax on input services even if paid subsequently under supplementary invoice cannot be denied.

Decision: - Appeal allowed with consequential relief.

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CENTRAL EXCISE SECTION:

Case: Reva Electric Car Co. (P) Ltd v/s Commissioner of C. Ex., Bangalore

Citation: 2010 (251) ELT 450 (Tri-Bang)

Issue: - Whether refund of unutilised credit can be claimed under Rule 5 when the goods are being exported under rebate under Rule 18?

Brief Facts: - Appellant are manufacturers of electric cars which are being cleared for export under bond. For the period 13.01.2005 to 16.09.2005, they filed for refund of unutilised cenvat credit under Rule 5 of the CCR, 2004 read with Notification No. 11/2002-CE(NT) dated 01.03.2002. The claim was rejected by the Adjudicating Authority on the ground that the claim was not in accordance with the provisions of Rule 5 of the CCR, 2004 read with Notification No. 11/2002-CE (NT). The said order was upheld by the Commissioner (A) in appeal. Appellant is thus before the Tribunal.

Appellant’s Contentions: - Appellant contended that their claim was rejected only on the ground that the provisions of Rule 5 are clear to the effect that refund of input cenvat credit can be claimed only when the final product is exported under bond or letter of undertaking and not otherwise. Appellant have submitted that the very same issued was raised in CCE v/s Indo Dane Textile Industries [2007 (213) RLT 117 (Tribunal)] wherein it was held that “The basic requirement for refund under Rule 5 is that the inputs should be used in the final products and such final products should be cleared for export or used in the intermediate products cleared for export as provided thereunder.” Rule 5 itself states that cenvat credit in respect of inputs used shall be allowed to be utilised by the manufacturer towards payment of excise duty on any final products cleared for home consumption or for export on payment of duty. It is not the purpose if Rule 5 to deny refund even in the cases in which the question of execution of bond cannot arise, when the inputs are used in the final products which are cleared for export or used in the intermediate products cleared for export. It is submitted that credit was availed in inputs used in the goods exported and used the credit for payment of duty on the final products including exports (for which rebate is claimed). It is submitted that there is an accumulation of credit because the duty payable on final products is 8% whereas inputs suffer duty @ 16%. AS there is no other manner the adjustment is possible, the refund claim is made.

Respondent’s Contentions: - Revenue contended that the provisions of Rule 5 are very clear. Proviso to the rule clearly states that refund of cenvat credit shall be allowed only if the manufacturer or provider of service does not claim drawback or rebate of duty under the Central Excise Rules, 2002 in respect of such duty. But the appellant has claimed rebate of the central excise duty made on the final products, which were exported on payment of duty.

Reasoning of the Judgment: - The Tribunal held that Rule 5 allows refund of cenvat credit when goods are cleared for export under bond or letter of undertaking are used in the intermediate products cleared for export. It is clear mandate of the Rule that the cenvat credit taken on inputs should be utilised for the payment of duty of excise on any final products which were cleared for home consumption or for export on payment of duty or on the service tax on output services, and where for any such reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to the safe guards. The proviso to the Rule clearly mandates that no refund shall be allowed under if the manufacturer or output service provider avails of drawback or claims rebate of duty under CER, 2002.

In the present case, the appellant have claimed rebate of duty under the Central Excise Rules, 2002. Thus, the appellant are not eligible for the benefit of refund of the cenvat credit which remains unutilised. It was further held that in the case of CCE v/s Indo Dane Textile Industries (relied upon by the appellant) it was held that unutilised cenvat credit of additional excise duty is allowed to be given as a refund of the cash as the final product does not suffer any additional duty of excise when they were being exported. It was held in this case that since there was no duty of additional excise duty payable on the final products, the refund could not have been claimed on the inputs as the final product does not suffer additional duty of excise.

Thus, the Tribunal held that the present case is totally different from the case of Indo Dane Textile Industries. Impugned order is correct and legal.

Decision: - Appeal rejected.

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Case: - CEE JEE Lubricants v/s Commissioner of C. Ex. & Customs, Cochin

Citation: - 2010 (251) ELT 439 (Tri-Bang)

Issue: - Whether re-refining of lubricating oil amount to ‘manufacture’ attracting levy of duty?

Brief Facts: - The appellants were engaged in the process of re-refining the lubricating oils and marketing the same in the name of “Jeezol”. The appellants were procuring/purchasing used rubber processing oil and lubricants from the market and refining the same. The Department contended that the said process undertaken by the appellants amounted to manufacture and chargeable to duty under chapter heading 27101980 of the Central Excise Tariff Act, 1985. Show cause notice was issued under Section 11A demanding the duties. The Adjudicating Authority held that the said item was dutiable. Consequently, it was held that in the financial year 2006-07 the value of clearances needed to be included in the gross value and vide another order confirmed the demand denying SSI exemption to appellant. Appellant has challenged the impugned order.

Appellant’s Contention: - Appellant contended that the issue is now squarely covered by various decisions given in CCE, Chennai-I v/s Metropolitan Transport Company [2008 (224) ELT 603 (Tribunal-Chennai)], Mineral Oil Corporation v/s CCE, Kanpur [1999 (114) ELT 166 (Tri)], Timken India Ltd v/s CCE, Jamshedpur [2004 (175) ELT 630 (Tribunal-Kolkata)].

Respondent’s Contention: - Revenue contended that appellants have not denied the fact that they are refining the used/waste oil procured by them from the market. The process of refining, the moisture, carbon and other impurities contained in the used oil are removed and the resultant re-refined oil/reprocessed oil is packed in the containers and sold as “Jeezol” to Lubricant’s dealers and directly to the industrial customers. This act will be covered under the Chapter Note 4 of Chapter 27 and this will amount to manufacture. The said product became marketable after the treatment was rendered by the appellant to the same.

Reasoning of Judgment: - The Tribunal held that the Adjudicating Authority had taken only the ground that the used oil which was unfit for use as lubricating oils were made fit for use by the appellant by refining or reprocessing the same and hence, characteristic and use has changed. Thus, the note to Chapter 27 was attracted and the said activity was manufacture.

The Tribunal held that the issue has been squarely covered by the decision given in CCE, Chennai-I v/s Metropolitan Transport Company wherein the Tribunal had relied upon the judgment given in Mineral Oil Corporation’s case wherein it was held that such reclamation of transformer oil from used (waste) transformer oil did not amount to ‘manufacture’ so as to attract levy of duty of excise.

The Tribunal held that in view of the above-mentioned judgments, impugned orders are unsustainable and therefore are set aside.

Decision: - Appeals allowed with consequential relief.

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Case: - Kirloskar Oil Engines Ltd v/s Commissioner of Central Excise, Nasik

Citation: - 2004 (178) ELT 0998 (Tri-Mumbai)

Issue: - When show cause notice is issued on the basis of a balance sheet, then can charge of suppression of facts be levied against the assessee?

Brief Facts: - M/s Prasant Khosla Pneumatic Ltd was amalgamated with M/s. Kirloskar Oil Engines Ltd. w.e.f. 1-4-1998. M/s Prasant Khosla Pneumatic Ltd. had received certain components under Chapter X procedure without payment of duty and these components were to be used in the manufacture of ‘MAN’ diesel engine. Over a period of time, these components became obsolete and could not be utilized and became unusable for the intended industrial purpose. Their value was also written down in the balance sheet in July 2000. The appellant applied for remission of duty on these obsolete components under Rule 196B read with Rule 173P of the Central Excise Rules. But no action was taken by the jurisdictional Commissioner on this application. On 02.10.2001 after waiting for a period of more than one year, they disposed of the said components and paid duty under protest. The Department came to know about the said obsolete goods at the time of scrutiny of the balance sheet for the year 1997-1998 which indicated that the value of the goods was written down by the appellant. In 2000, the Department initiated penal proceedings against the appellants. It was alleged that the appellant had suppressed the material facts and therefore, extended period of limitation was invoked against them attracting provisions of Sections 11AB and 11AC. The appellant are challenging the invocation of provisions of Sections 11AB and 11AC.

Appellant’s Contention: - The Appellant contended that they had informed about the obsolete components to the department but no action was taken by them. It is submitted that appellant were filing RT returns and other returns in respect of various components and the return for the quarter ending 30.06.2000 showed number of components lying in the stock. This was also noted by the Adjudicating Authority. It was submitted that since the balance sheet of the appellant were publicly available documents, then allegation of suppression of such information cannot be imposed on them. They have relied upon the judgment given in Hindalco Industries Ltd. v/s C.C.E, Allahabad [2003 (161) ELT 346] and Bharat Heavy Electricals Ltd. v/s C.C.E, Bangalore [2002 (050) RLT 0208 (CEGAT - Bangalore)].

Respondent’s Contention: - Respondent contended that the appellant should have declared obsolete non-moving items to the department which came to the notice of the departmental officer at the time of scrutiny of balance sheet for the year 1997-1998 which indicates that the appellant had written down the value of the goods as they had become obsolete. They have, therefore, suppressed this fact from the department, as they have not made any remark in the RT-11 returns regarding the components being obsolete especially when their balance sheet was showing the fact regarding written down value of the goods/inputs under Schedule 17.

Reasoning of Judgment: - The Tribunal found that in July 2000, appellants had applied for remission of duty and they waited for a considerable period of more than one year for the permission to come from the jurisdictional Commissioner. However, on 2-10-2001 after waiting for a considerable period, they disposed of their components which were received under Chapter X procedure and paid duty under protest. The Tribunal further found that these obsolete items were lying in their factory because Prasant Khosla Pneumatic Ltd., which was amalgamated with KOEL had stopped manufacture of ’MAN’ diesel engine during 1994. Thus, the judgment of Hindalco Industries Ltd. is fully applicable as this demand has been raised on the basis of information appearing in the balance sheet. The Tribunal also held that since the balance sheet of appellants was a publicly available document, the allegation of suppression of such information is not sustainable. Therefore, extended period cannot be invoked under proviso to Section 11A (1). The provisions of Section 11AC for imposition of penalty and the provision of Section 11AB for demanding duty are not applicable to the facts of this case.

Further, It was held that the inputs were still lying in the factory when the show cause notice for demanding duty was issued to them, though the components were written off in the books of account. In such a situation, credit cannot be denied on the presumption that input cannot be used when there was no time limit for consumption. In this connection reliance is placed on the judgment of Bharat Heavy Electricals Ltd. There is no evidence of suppression of facts and therefore, no penalty can be imposed under Section 11AC and no interest can be demanded under Section 11AB. Impugned order demanding penalty under Section 11AC and demanding interest under Section 11AB are set aside.

Decision: - Appeal allowed.

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Case: - M/s Adwaith Steels Ltd. v/s Commissioner of Central Excise, Coimbatore

Citation: - 2010-TIOL-442-MAD

Issue: - Whether the job worker can avail Modvat Credit on inputs used in processing of goods on job work basis?

Brief Facts: - Appellants are doing jobwork for the main manufacturer and clearing the goods to him without payment of duty. Appellant has been denied Modvat Credit in respect of inputs used in processing of the impugned goods on job work basis and cleared without payment of duty to the main manufacturer who has cleared the final goods on payment of duty.

Reasoning of Judgment: - The Tribunal held that the matter is no longer res integra considering the decisions given in case of CCE, Rajgad v/s M/s. Mahalaxmi Seamless Ltd. [2009-TIOL-1033-CESTAT-MUM] and the decision of larger bench in the case of Sterlite Ind. Ltd. v/s CCE [2005 (183) ELT 353 (Tri-LB)]. It is also noticed that the appeal against the decision of Sterlite Ind by the department before the High Court was rejected on 13.08.2008. Impugned order set aside.

Decision: - Appeal allowed with consequential benefit, if any, to the appellant.

Comments: - The decision of sterlite has upheld by High court also.

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Case: M/s A Habeebur Rahman Sons vs. CCE, Chennai

Citation: 2010-TIOL-441-CESTAT-MAD

Issue: - Whether Cenvat credit can be denied if credit is taken after a long period and if the invoices do not contain details of payment of duty?

Brief Facts: - Appellants are manufacturers of hand made branded biris. Cenvat Credit was disallowed to them on the ground that credit was taken on the invoices which did not contain details of payment of duty and that the credit in respect of inputs was not taken immediately on receipt of inputs in their factory. Penalty of Rs.10000 was also imposed by the Assistant Commissioner. The Commissioner (A) disallowed the credit on the ground of delay in taking the credit only and no findings were given on the second issue for denying credit that the documents on which credit was availed did not contain the details of payment of duty. Appellant has therefore, come before the Tribunal.

Reasoning of the Judgment: - The Tribunal found that the goods received on 06.06.05 were accounted in RG 23 A-I register on 29.06.05, goods received on 29.06.05 were accounted on 02.07.05 and goods received on 22.07.2005 and 23.07.05 were accounted on 13.08.05, while credit in RG 23 A Part-II register was taken on 31.03.2006 for all goods.

The Tribunal took into account the decisions in Comandel Fertilizers Ltd. v/s CCE [2009 (239) ELT 99] and Shyam Forgings v/s CCE [2008 (221) ELT 309] that although the rule prescribes that credit should be taken immediately, no outside limit was prescribed and therefore credit cannot be denied even if it is taken after a longer period. The Tribunal also held that the facts of the case JV Strips Ltd v/s CCE [2007 (218) ELT 252] relied upon by the Revenue were distinguishable from the facts of the appellant’s case. Thus, it was held that credit cannot be denied on the ground of delay in taking credit. However, as no finding was given on second issue, the matter is remitted back to the lower authorities for fresh decision on the said issue.

Decision: - Appeal allowed by way of remand.

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Case: - Sudhir Forging v/s Commissioner of Central Excise, Ludhiana

Citation: - 2010 (251) ELT 478 (Tri-Del.)

Issue: - Whether the job worker can avail Cenvat Credit on its own inputs used in processing of goods on job work basis? Whether a person who is manufacturing goods on jobwork basis and is also manufacturing goods for himself can be said to be a jobworker?

Brief Facts: - The appellants were engaged in manufacturing of rough steel forging for themselves and also for a principle manufacturer on job work basis under Notification no. 214/86-C.E. The appellant used their own Furnace oil, RFO, and LDO for manufacturing goods on job work basis and on which they took Cenvat credit. They were receiving the inputs-alloy steel rounds from the principal manufacturer. The Adjudicating Authority held that appellant were not eligible for taking Cenvat Credit on Furnace oil, RFO and LDO used for job work. The Adjudicating Authority confirmed the demand alongwith interest and penalty under Rule 15 of Cenvat Credit Rules 2004. Thereafter, appellant filed appeal against this order before the Commissioner (Appeal). The Commissioner (A) upheld the order of the Adjudicating Authority. Appellant has challenged the impugned order before the Tribunal.

Appellant’s Contention: - Appellant contended that the very same issued was decided by the Larger Bench in the case of Sterlite Industries (P) Ltd v/s CCE, Pune [2005 (183) ELT 353 (Tri-LB)]. They also relied upon the judgments given in CCE, Raigad v/s Mahalaxmi Seamless Ltd [2009-TIOL-1033-CESTAT-MUM], Samsung India Electronics Ltd & Ors v/s CCE, Noida [2006 (205) ELT 884 (T)], Bharat Fritz Wernere Ltd v/s CCE, Bangalore-II [2005 (191) ELT 1099 (Tri-Bang)], CCE, Bangalore-II v/s South India Wire Products P. Ltd [2008 (228) ELT 290 (Tribunal)] and Shree Venkatesh Steel Ltd v/s CCE, Mumbai [2007 (219) ELT 529 (Tribunal)]. It was submitted that the judgment given in Mahalaxmi Seamless Ltd’s case was based on the judgment of Mumbai High Court in respect of appeal filed by the Department [2009 (244) ELT A89 (Bom)] wherein the Mumbai High Court with regard to the judgment in Sterlite Industries case observed that the judgment is based on the law laid down by the Apex Court in the case of Escorts Ltd v/s CCE, Delhi [2004 (171) ELT 145 (SC)] and hence no question of law arises in Revenue’s appeal.

Respondent’s Contention: - Revenue contended that the judgments cited by the appellant are not applicable to them as the applicant cannot be said to a jobworker as he is also manufacturing goods of their own while a jobworker is a person who manufactures purely on jobwork basis. In that situation, the provisions of Rule 6 (2) become applicable and in respect of rough steel forgings cleared at nil rate of duty, the appellant should have reversed the proportionate credit. It is contended that all the judgments are prior to issue of Notification No. 27/05-CE dated 06.05.05 by which the exclusion of fuel inputs from the operation of Rule 6 (2) has been removed and if cenvated fuel inputs are used for dutiable as well as exempted goods, either separate accounts are required to be maintained, and if such separate accounts are not maintained, proportionate credit in respect of exempted goods is to be reversed. It is also contended that the appellant has paid certain amount demanded from them which shows that they have accepted that they are not eligible for this credit. Since the appellant have wrongly taken cenvat credit and have not reversed it, penalty has been rightly imposed.

Reasoning of Judgment: - The Tribunal held that the matter is no longer res integra and has been decided in favour of the assessee in the decisions given in case of Sterlite Ind. Ltd. v/s CCE [2005 (183) ELT 353 (Tri-LB)]. It is also noticed that in the appeal against the decision of Sterlite Industries by the department before the High Court was rejected on 13.08.2008. The correctness of the decision of the Larger Bench in the case of Sterlite Industries has been upheld by the Mumbai High Court. The Tribunal further held that just because the appellant in addition to manufacture of rough forgings on job work basis, is also manufacturing rough forgings for themselves, they do not cease to be jobworker. Ratio given in the Sterlite Industries case is squarely applicable in appellant’s case. Impugned order set aside.

Decision: - Appeal allowed.

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