2018 (9) TMI 295 – CESTAT CHENNAI – TMI – CENVAT Credit – input services – Department was of the view that the credit availed on the above input services is not eligible for the reason that the said input services are not used for providing output services – Scope of SCN – Held that:- In the instant case, what is alleged in the show cause notice is that as per Rule 2(l) of the CENVAT Credit Rules, 2004, input service means ‘any service used for providing output service’. As trading activity undertaken by the appellant is not taxable service, hence the appellant is not eligible to avail credit on the alleged / impugned input service. This being so, the appellants have clearly fallen foul of Rule 3 of the CENVAT Credit Rules, 2004 since that is the particular provision which lays down the types of duties or taxes or cesses suffered on input, input services etc. which alone can be availed as CENVAT credit.
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In the present case, only Rule 3 and Rule 6 has not been invoked. When credi
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ept penalty – appeal allowed in part. – Appeal No. ST/302/2011 – Final Order No. 42328 / 2018 – Dated:- 31-8-2018 – Hon ble Ms. Sulekha Beevi C.S., Member ( Judicial ) And Hon ble Shri Madhu Mohan Damodhar, Member ( Technical ) Shri Raghavan Ramabhadran, Advocate for the Appellant Shri A. Cletus, Addl. Commissioner (AR) for the Respondent ORDER Per Bench The appellants are engaged in providing consulting engineer service, transport of goods by road service, renting of immovable property service and intellectual property right service. During the course of audit, it was noticed that appellant had engaged into contracts for designing, supplying and supervising the erection and commissioning of Recovery Boilers. Such boilers are used for segregating and recycling the chemicals involved in paper pulp. The appellants received consideration for designing, supply and supervising the erection and commission of such boilers. The boilers consist of various components. The appellant get some of t
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VAT credit of service tax paid on input services such as:- (i) Commission paid to agents for procuring the project orders for supply of Recovery boiler (ii) Bank guarantee for advance of supply of materials / components – such advances were reduced proportionately from the invoices of the components and do not relate to rendering of registered taxable services (iii) Clearing and forwarding charges for imported goods (iv) Cargo handling charges (v) Metal testing conducted on the raw materials meant for manufacture of components (vi) Processing of components which does not amount to manufacture (vii) Technical testing and inspecting of components supplied / to be supplied to the paper mills (viii) Cargo contracts (ix) Insurance paid on materials / components lying with sub-contractors (x) Deputation of technical staff to job workers premises to assist / supervise the manufacturing process 2.1 The department was of the view that the credit availed on the above input services is not eligib
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uring the course of trading activity and since trading activity is not a taxable service, the appellants are not eligible to avail credit on the above input services. It also appeared that they are not providing exempted service to claim benefit under Rule 6 of CENVAT Credit Rules, 2004. Therefore, the appellants are not eligible for credit of service tax to the tune of ₹ 76,90,088/- relating to the period April 2007 to March 2008. 2.4 Thus, it was observed that they have contravened the provisions of Rule 3 of CENVAT Credit Rules and had availed ineligible input credit to the tune of ₹ 3,22,07,53/- for the period April 2007 – 2008. 2.5 During the said period, they had utilized credit of ₹ 35,91,928/- towards discharging service tax liability and such utilization resulted in short-payment to the tune of ₹ 35,91,928/-. 2.6 Show cause notice was therefore issued proposing recovery of wrongly availed CENVAT credit of ₹ 3,22,07,534/- and the short-paid duty fo
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certain components to the Recovery Boilers. The appellant procures raw materials for manufacture of such components and sends the same directly to the job worker. The job worker avails input credit of the raw materials supplied. Upon completion of the manufacture of Recovery Boilers, the job workers directly clear these to the customer and raise invoices on the appellant for the job charges and the excise duty component. The appellant has availed input service credit on various input services. The department now disputes the credit availed on input services. The sole ground for disallowing CENVAT credit as alleged in the show cause notice is that the entire credit availed by the appellant is attributable to trading activity and is therefore ineligible in terms of Rule 3 of CENVAT Credit Rules, 2004. He submitted that the department has proceeded on the wrong basis that the activity involved is trading. The ordinary meaning of the word trading as given in The Concise Oxford Dictionary
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ture and supply of recovery boiler and at no point of time, the appellant purchases the boiler as such and sells it to call it a trading activity. That therefore the entire premise on which the department has issued the show cause notice fails and therefore the disallowance of credit on the count that the appellant has used the input services for doing trading activity is without any basis. 3.3 It is also argued by him that trading is an exempted service with effect from 1.4.2011. The Hon ble High Court of Madras in the case of Ruchika Global Interlinks Vs. Commissioner of Central Excise – 2017-VIL-323-MAD-ST has held that trading is an exempted service prior to 1.42011 as well and that therefore Rule 6 is applicable for reversing the proportionate credit availed on trading. In the present case, show cause notice is not issued invoking Rule 6 to deny the credit. Instead department has invoked only Rule 3 of CENVAT Credit Rules, 2004. He submitted that the disputed input services are us
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upon the judgment of the Hon ble Supreme Court in the case of Ramala Shahkari Chini Mills Vs. Commissioner of Central Excise, Meerut – 2016 (334) ELT 3 (SC) to argue that the word includes used in the definition of input service cannot be interpreted in a restrictive manner. 3.4 The ld. counsel relied upon the decision rendered in their own case reported in 2017 (48) STR 261 (Tri. Chennai) wherein on similar set of facts, the input credit disallowed on Chartered Accountancy Service, Courier Agency Service, Manpower Supply Service, Telecom Service, Business Support Service,, Banking and Other Financial Service, Testing and Inspection Service were held to be eligible. 3.5 It is also argued by him that the demand to recover ₹ 35,91,928/- as short-paid duty on the ground that ineligible credit was utilized to pay service tax is a duplication of demand and hence unsustainable. In any case, the appellant has reversed the CENVAT credit of ₹ 3,22,07,534/- without utilization (as th
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and in para 6, the amount of such wrong credit has been proposed to be recovered under Rule 14 of the CENVAT Credit Rules, 2004. He explained that the services viz. commission paid to agents for procuring project order, Bank guarantee for advance, clearing and forwarding charges for goods, cargo handling services, technical testing etc. are services related to procurement of raw materials etc. But the appellant is not registered as a manufacturer and is not paying excise duty on the Recovery Boilers. So the appellant cannot avail credit as a manufacturer. They are registered as output service provider for Consulting Engineer Service. He adverted to the definition of Consulting Engineer and stated that it involves giving technical advice and has nothing to do with procurement of goods. So these input services cannot be said to be used for providing output service of Consulting Engineer Service. Instead, they are purchasing raw materials and selling it to job workers. These activities a
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,91,928/- has been utilized during the period April 2007 to September 2008 towards discharge of service tax liability which has also been sought to be demanded. 6.1 Ld. counsel has been at pains to convince us that these issues pertains to period prior to 1.4.2011 from which date trading was made a deemed exempted service. That nonetheless, even for the period of dispute the trading activity is required to be considered as an exempted service. To support this, he has relied upon the judgment of the Hon ble High Court of Madras in Ruchika Global Interlinks (supra) to contend that the trading activity can be categorized as exempted service even prior to 1.4.2011. From the perusal of the said judgment, we however find that the Hon ble High Court had only addressed the issue of apportionment as provided under Rule 6(3)(c) of the CENVAT Credit Rules, 2004. The Hon ble High Court had therefore found that before and after the amendment of Rule 2(e) of the Rules, exempted services meant those
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t service. This being so, the appellants have clearly fallen foul of Rule 3 of the CENVAT Credit Rules, 2004 since that is the particular provision which lays down the types of duties or taxes or cesses suffered on input, input services etc. which alone can be availed as CENVAT credit. From the facts brought out in the show cause notice, it is evident that the impugned input services listed out in para 3.0 and 4.0 have all been availed in spite of the appellant having been involved in trading activity. Thus, there cannot be any credit that could be availed by the appellant ab initio and hence there is no need to examine the applicability of Rule 6 of the CENVAT Credit Rules, 2004 to their case. In any case, trading activity has been made deemed exempted service only with effect from 1.4.2011 and therefore we are not able to appreciate the argument of the ld. counsel that as per the decision of Hon ble High Court in Ruchika Global (supra) trading is held to be exempted service even prio
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coming from the facts brought out in the order as to whether the input service was used exclusively for trading. There is no discussion in the said order as to disallowance of credit on account of credit availed on trading. On the other hand, the said decision has taken the view that the input services were essential to provide output service of consulting engineer and thus allowed the credit. Hence this case law is also of no help to the appellant. 6.4 In the event, we do not find any infirmity in that portion of the impugned order upholding the demand of wrongly availed credit to the tune of ₹ 3,22,07,534/- along with interest thereon. So ordered. 6.5 Coming to the demand of ₹ 35,91,928/- with interest in respect of alleged wrong utilization of CENVAT credit, since this being only a part of the total credit amount of ₹ 3,22,07,534/-, the demand of which has already been upheld supra, we find that it would cause double jeopardy, hence demand of ₹ 35,91,928/-, a
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