TMI Blog2010 (3) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. Ms. Joy Kumari Chander, JCDR, for the Respondent [Order per M.V. Ravindran, Member (J)]. - These two appeals are directed against Order-in-Original No. 40/2007-08 (RS) dated 5-9-2008/ and 10/2008-09(RS) dated 25-11-2008. 2. The issue in both the appeals being common and in respect of the very same assessee, they are being disposed of by this common order. 3. The relevant facts that arise for consideration are as follows: M/s. Rashtriya Ispat Nigam Ltd., Visakhapatnam Steel Plant, Visak hapatnam (hereinafter referred to as 'Appellants') are engaged in the manufacture of various iron and steel products falling under Chapter 72 and by-products falling under Chapter Nos. 26, 27, 28, 29, 31 and 33 of the Central Excise Tariff Act, 1985. The Appellants sell their final products at the factory gate as well as at various Branch Sales Offices (BSOs) located all over the country. The Appellants avail the credit of duty paid on inputs and capital goods and credit of the service tax paid in terms of the Cenvat Credit Rules, 2004. The Appellants avail the services of Clearing and Forwarding Agents for receiving their final products at various BSOs, stocking therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to business' has not been defined in the Rules. Such art expression is also not defined in the Central Excise Act 1944 and in the Finance Act, 1994 It is submitted that Section 37 of the Income Tax Act, 1961 contains the term- 'wholly and exclusively for the purpose of the business or profession', and the same has been the subject matter of detailed scrutiny by the courts in various decisions. Section 37 of the Income Tax Act, 1961 was the subject matter of litigation due to the following reasons: (i) Necessity of the expenditure; (ii) Reasonableness of the expenditure; (iii) Purpose of the expenditure; and (iv) Nexus of the expenditure with income A.3 In all the cases involved, the courts discussed the basic principle of 'commercial expediency'. The courts laid down the law that if an expenditure is commercially required to be incurred with a view to benefit the trade and to facilitate the carrying on the business, such expenditure will be allowed as deduction under Section 37 of the Income Tax Act, 1961. In this regard, reliance is placed on the following judgments: (i) CIT v. Malayalam Plantations Ltd. 53 ITR 140 (S.C.) (ii) CIT v. Mysore Iron 115 ITR 219 (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner accepted the above contention of the Appellants but however denied the credit on the ground that the activities on the ground that activities undertaken at BSOs are outside the ambit of 'input service'. C. Extended Period of Limitation Is not Invokable. C. I It is submitted that the Appellants submitted the ER-I returns regularly to the department. The finding of the Ld. Commissioner that the Appellants are non-cooperative is incorrect. The Appellants furnished the in formation as and when called by the department. Therefore, it is incorrect to say that the Appellants did not cooperate with the department and contravened the provisions. The proceedings were initiated based on the returns and the information furnished by the Appellants and there is no suppression on the part of the Appellants to invoke extended period of limitation. It is well settled that suppression or fraud cannot be alleged when the assessee filed monthly returns regularly, extended period cannot be invoked. Reliance is placed on the following decisions: Sarabhai M. Chemicals v. CCE -2005 (179) E.L.T. 3 (S.C.). Gopal Zarda Udyog. v. CCE 2001 -(128) E.L.T. 409 (Tri-Del.). C. 2 Further the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken reasonable steps. There is no dispute that the C F Agents have not paid service tax. The Appellants have rightly availed the credit of service tax paid on C F Agents service following the Rule 9. Further, as submitted above, they had not contravened any of the provisions of the Rules. There fore, imposition of penalty of Rs. 10,000/- and Rs. 2000/- is incorrect and liable to be set aside". 7. Learned JCDR on the other hand would submit that the activity of straightening, bending and cutting after clearance of the goods from the factory premises would not amount to manufacturing of any new product, as has been held by the Tribunal in the appellants' own case vide Final Orders Nos. 1320 1321/04 dated 30th July 2004 [2005 (179) E.L.T. 65 (T)]. It is her submission that the goods are cleared from the factory gate on payment of central excise duty on completion of the manufacture and merely an act of cutting and bending, what was cleared from the stockyards would not amount to manufacture and hence any services rendered for the purpose of cutting, bending and straightenting should not be considered, as in relation to the manufacturing of final products. It is her submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting bending and straightening, to their clearing and forwarding agents. It is also undisputed that the said activity of cutting, bending and straightening of the rebar coils are not done to entire clearances made from factory. 11. On perusal of the records, we find that the appellants are billed by the Clearing and Forwarding agents for bending and cutting in the form of bending and cutting charges. On perusal of the specimen invoice produced for the relevant period, issued from the Branch Office of the appellants, we find that such cutting and bending charges are included in the value of the goods sold by the appellants to their purchases and have also paid applicable CST S.T. From the mere perusal of the said specimen invoices, it is clear that the appellants have been doing this only on the specific request of his customers, due to the business requirement. We find that these invoices are not disputed by the revenue. 12. On this factual matrix, we find that the provisions of Rule 2(l) of Cenvat Credit Rules are very important which we may read: (l) "input service" means any service, - (i) used by a provider of taxable service for providing an output service, or (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich in turn is destination based consumption tax in a sense that it is on commercial activities and is not a charge on the business but on the consumer. Just as excise duty is a tax on value addition on goods. Service tax is on the value addition by rendition of service. See All India Federation of Tax Practitioners v. Union of India -2007 (7) S.T.R. 625 (S.C.) = (2007) 7SCC 527. 2. Credit has been denied on the ground that the advertisements do not relate to concentrates manufactured by the Appellants. It is not disputed that the advertisement expenses incurred by the Appellant form part of the sale price of the concentrates on which duty has been paid. 3. The relevant rule which is under consideration is Rule 2(l) of the Cenvat Credit Rules, 2004 (hereinafter referred to as the said Rules) which define' the word input service as under: (l) "input service" means any service,- (i) used by a provider of taxable service for providing an output Sevice; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax, 1955 1 SCR 952 "some real, substantial and systematic or organised course of activity or conduct with a set purpose." The term "business" therefore, particularly in fiscal statutes, is of wide import. 26. The definition of input service employs the phrase activity relating to business. The words relating to further widens the scope of the expression activities relating to business. This is in view of following observations of Supreme Court in Doypack Systems (P) Limited v. Union of India - 1988 (36) E.L.T. 201 (S.C.), interpreting the expression in relation to: 48. The expression in relation to (so also pertaining to), isa very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which, might both have a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Aziz (A.I.R. 1968 Madras 79, 81 paragraphs 8 and 10, following and approving Nitai Charon Bagchi v. Suresh Chandra Paul (66 C.W.N. 767), Shyam Lat v. M. Shayamlal (AIR 1933 All. 649) and 76 Corpus Juris Secundum 621. Assuming that the investments in shares an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of services. Therefore, for our understanding, broadly services fall into two categories, namely, property based services and performance based services, Property based services cover service providers such as architects, interior designers, real estate agents, construction services, mandapwalas etc. Performance based services are services provided by service providers like stock brokers, practising chartered accountants, practising cost accountants, security agencies, tour operators, event managers, travel agents etc. 20. On the basis of the above discussion it is clear that service tax is VAT which in turn is both a general tax as well as destination based consumption tax leviable on services provided within the country. 34. It is therefore, clear that the burden of service tax must be borne by the ultimate consumer and not by any intermediary i.e. manufacturer, or service provider. In order to avoid the cascading effect, the benefit of cenvat credit on input stage goods and services must be ordinarily allowed as long as a connection between the input stage goods and services is established. Conceptually as well as a matter of policy, any input service that forms a part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above benefit, exemption or concession, then credit of the input service would be available. This would be so even if the assessee does not satisfy other limb/limbs of the above definition. To illustrate, input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal. This would follow from the observation of the Supreme Court in Kerala State Co-operative Marketing Federation Ltd. and Ors. v. Commissioner of Income-tax - 1998 (5) SCC 48, which is as under: 7. We may notice that the provision is introduced with a view to encouraging and promoting growth of co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also laid down by their Lord- ships, in the said paragraph that each limb of the definition of the input services can be considered as an independent benefit or concession exemption. It is undisputed in this case that the appellant undertook straightening, bending and cutting of the rebar coils on specific request of their customer. Since this would be in relation to business, in addition to the activities relating to the manufacture, the appellants' action of availing Cenvat credit on the service tax paid by the C F Agency on such activities cannot be considered as irregular. 14. As regards the decision relied upon by the learned JCDR in the case of Chemplast Sanmar Ltd. (supra), we find that the said decision has not considered the law as has been laid down by the Hon'ble High Court of Bombay nor was the judgment cited before the Bench. Since there is a pronouncement of law on the specific rule, i.e. Rule 20) of the Cenvat Credit Rules, the decision of the Hon'ble High Court of Bombay will prevail over any decision of the Tribunal. 15. Accordingly in view of the foregoing reasoning, we hold that the impugned orders are liable to be set aside and we do so. The impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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