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TMI Blog2011 (7) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... uts as well as on the capital goods in terms of Cenvat Credit Rules, 2004. The appellants set up their new factory by awarding the contract of construction thereof to M/s Taisei Corporation. The appellants registered themselves with Central Excise Department on 28.11.2006 for manufacture of automobile components. During the period from January 2007-08, the appellants availed cenvat credit amounting to Rs.1,27,17,506/- on service tax paid on the construction services on the strength of 12 invoices issued by the contractor M/s Taisei Corporation. Out of 12 invoices, 5 invoices involving cenvat credit of Rs.63,32,281/- were issued prior to 28.11.2006 and remaining 7 were issued after 28.11.2006, the date on which the appellants were registered with the Central Excise Department. In other words, the credit arising out of 5 invoices issued prior to 28.11.2006 was available with the appellants prior to the date of their registration with the Excise department. All those facts are not in dispute. 3. The Show cause notice dated 26.2.2009 came to be issued proposing to disallow the credit of Rs.1,27,17,506/- availed by the appellants o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellants sufficient proof was produced that there was no change in the name of company but only the name of the company was changed and this aspect was not in dispute. 6. As regards the second ground for disallowance of credit, the learned Advocate submitted that there was no need for the appellants to register at the relevant time taking into consideration the provisions relating to availment for availing credit. The provisions of registration are comprised under Rule 9 of the Central Excise Rules, 2002 or in terms of the provisions of Service Tax (Registration of Special Category of Persons) Rules, 2005 were not applicable at the relevant time in the facts of the case. However, further he submitted that there is no provision in law which requires that in order to avail cenvat credit on input services, the manufacturer is necessarily required to register under Central Excise Rules. He further submitted that the provisions of Service Tax (Registration of Special Category of Persons) Rules, 2005 have absolutely no application in the matter in hand. The registration thereunder is required to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail credit. Referring to Rule 3(2) and 3(3), it was sought to be contended that the said Rules clearly disclose the intention of framers of the law that unless the manufacturer is a registered body with the Department, it cannot avail the credit. In this regard, attention was sought to be drawn to the discussion and findings by the Commissioner on these aspects. 9. Undoubtedly, the credit in relation to the 5 invoices has been disallowed essentially on two grounds. Firstly, on the ground that the invoices were found issued in the name of Evergreem Autocomp India Pvt. Ltd. and secondly, on the ground that they were issued prior to the registration of the appellant company with the Excise Department. 10. The Commissioner in the impugned order has observed that 'since M/s Evergreen Autocomp India Pvt. Ltd. failed to get itself registered under Service Tax (Registration of Special Category of Persons) Rules, 2005, the assessee cannot avail the cenvat credit on the strength of invoices which were issued in the name of M/s Evergreen Autocomp India Pvt. Ltd. and therefore, cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istribution of credit by input service distributor. Rule 9 enumerates document and accounts which are to be taken into consideration while deciding the issue regarding availment of credit. Undoubtedly, none of these provisions speaks of the requirement of registration either under Excise Act and Rules made thereunder or in terms of Service Tax (Registration of Special Category of Persons) Rules, 2005. However, in relation to the input service distributor as well as any provider of taxable service whose aggregate value of taxable service in a financial year exceeds nine lakh rupees, the said Service Tax Rules make specific provision regarding requirement of registration. Rule 3(1) thereof provides that such service provider shall make an application to the jurisdictional Superintendent of Central Excise in such a form as may be specified by Notification, by the Board for registration within a period of 30 days of the commencement of business or 16th day of June, 2005 whichever is later. Rules came into force with effect from 16.6.2005. The sub-rule (3) of Rule 3 thereof provides that the provision of sub-rule (2) to (8) of Rule 4 of the Service Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising under Income Tax Act, 1922. Therein, the Hon'ble High Court was dealing with issue as to whether the mere fact that first transaction of purchase of raw materials which took place in September 1946 was by itself a justification for holding that expenses made from April 1946 were not for the purpose of business of the company. In that case, it was not disputed that business was carried on in the relevant previous year which was the financial year 1946-47 but the important question was that from which date were the expenses of such business were eligible for deduction and for that purpose Section 2(11) of Income Tax Act, 1922 was required to be considered and that Section defined the term 'previous year' and for the purpose of a business the 'previous year' was to begin from the date of the setting up of a business. In that context, the Bombay High Court held that 'Therefore, it is only after the business is set up that the previous year of that business commences and in that previous year, the expenses incurred in the business can be claimed as permissible deductions'. In other words, the observation about differentiation between the&n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a factory is erected and plants and machinery installed therein , it cannot be said to have been set up. The resolution of the Board of Directors, the orders placed for purchasing machinery, licence obtained from the Government for constructing the machinery are merely initial stages towards setting up, however, necessary and essential they may be to further the achievement of the end. It is not however the actual functioning of the factory or its going into production that can alone be called setting up of the factory. The setting up is perhaps a stage anterior to the commencement of the factory. Thereafter, the High Court referred to a decision of the Bombay High Court in Western India Vegetable Product vs. Commissioner of Income Tax (I), and on its basis, concluded that the proper meaning to be assigned to the expression 'set up' in Section 5(1)(xxi) would be 'ready to commence business'. We are unable to agree with the learned counsel for the Commissioner that, in arriving at this view, the High Court committed any error. The unit cannot be said to have been set up unless it is ready to discharge the function for which it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to enable the party to avail cenvat credit in relation to service tax paid on service inputs, obviously , a person has to get registered in terms of the provisions of the Finance Act read with Rules framed thereunder. Therefore, it is abundantly clear that the expression 'commencing of business' would apply from the time the party seeks to pay service tax and avail credit in respect thereof in terms of the provisions of law. The term 'commencing of business' in Rule 3 therefore, cannot be understood in the manner whereby it will apply only to the cases where the actual manufacturing process would start. It would commence from the time the preparation commences for the establishment of manufacturing unit as the party is entitled to avail credit even prior to actual commencement of production. 20. It is also to be noted that a decision delivered in relation to the scope of interpretation of statutory provisions in one taxing statute cannot be blindly applied to the cases arising under different taxing statute. The applicability depends essentially on the similarity between the two provisions. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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