TMI Blog2011 (7) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... dantly 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. Benefit of cenvat credit denied - decided against the assessee. - E/3282 of 2009 - - - Dated:- 14-7-2011 - Shri Justice R.M.S. Khandeparkar, Shri Rakesh Kumar, JJ. Appearance: Shri A.R.Madhov Rao, Advocate for the appellants Shri R.K. Verma, Authorized Departmental Representative (DR) for the Revenue Per Shri Justice R.M.S. Khandeparkar: Heard at length the Advocate for the appellants and the DR for the respondent. The present appeal arises from order dated 30.9.2009 passed by the Commissioner, Faridabad. By the impugned order, the adjudicating authority has disallowed the appellant cenvat credit amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suant to the Resolution passed under Section 21 of the Companies Act, 1956 and approved by the Central Government in terms of Certificate dated 16.10.2006 issued by the Registrar of the Companies. He further submitted that the name of company was changed, but the company remained the same and there is no dispute raised in that regard. He further submitted that the credit is sought to be denied in relation to 5 invoices on two grounds. Firstly, the invoices were in the name of M/s Evergreen Autocomp (India) Pvt. Ltd. and now in the name of the appellant company. Secondly, the invoices were issued prior to registration of the company with the Central Government. 5. As regards the first ground for disallowance of the credit, the learned Advocate submitted that in fact, the appellants had claimed credit on the basis of 12 invoices and all those 12 invoices were issued in the name of M/s Evergreen Autocomp (India) Pvt. Ltd.. While the credit was allowed in relation to 7 invoices, the same was disallowed in relation to 5 invoices. Once the credit was allowed in relation to 7 invoices issued in the name of Evergreen Autocomp (India) Pvt. Ltd. though the claim is made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the period prior to 28.11.2006. The show cause notice was issued on 26.2.2009 beyond a period of one year. The extended period of 5 years was sought to be invoked alleging suppression of facts with intent to evade payment of duty. He further submitted that the appellants had made it known to the Department under letter dated 10.5.2007 that they wanted to avail the credit of service tax paid in respect of input services on the strength of invoices in question. According to the learned Advocate for the appellants the required informations were available with the Department as early as on 10.5.2007, and therefore, allegation of suppression of fact is thoroughly unjustified and for the same reason there was no case for invocation of extended period of limitation. For the same reason, according to the learned Advocate, there is no case for imposition of penalty or demand of interest. 8. The DR on the other hand submitted that taking into consideration the provisions of Cenvat Credit Rules, 2004, Central Excise Rules, 2002 and Service Tax (Registration of Special Category of Persons) Rules, 2005, the appellants were admittedly not registered with the Excise Department prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at credit can be extended to any person who is neither registered with the Central Excise Department nor with the Service Tax Department. The statutory provisions specifically require registration of input service distributor for availing credit of the input services and to utilize the same in setting up of a factory and in that regard, reference is made to the of Service Tax (Registration of Special Category of Persons) Rules, 2005. Reference is also made to the definition of the expression 'input service distributor' and Rule 7 of the Cenvat Credit Rules in support of the said finding. 12. In terms of Cenvat Credit Rules, Rule 3 thereof enumerates duties, taxes and cess in respect of which credit can be availed by the manufacturer or producer of the final product or provider of taxable services. Rule 4 of the said Rules deals with the subject of conditions for allowing the cenvat credit. Rule 6 deals with the subject of obligation of manufacturer of dutiable and exempted goods and the provider of taxable and exempted services. Rule 7 speaks of manner of distribution of credit by input service distributor. Rule 9 enumerates document and accounts which are to be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the expression 'commencement of business'?. 14. Undisputedly, in the matter in hand, we are concerned with sub-rule (1) of Rule 3 of the said Rules. The contention of behalf of the appellants is that the said provision essentially applies after the commencement of business with grace period of 30 days provided for completion of registration proceeding once the business commences. In case of manufacturing activity, it is the contention of the appellants that their business does not commence unless the process of manufacturing commences. As the appellants had not commenced such business, they had no obligation to comply with the requirement of Rule 3 at the relevant time and therefore, on that ground, the credit could not be denied. 15. In Western India Vegetable Products Ltd. the Bombay High Court was dealing with the matter arising 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 compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deducted as being the amount laid out in setting up a new unit. The said claim was disallowed by the Wealth Tax Officer on the ground that the unit was set up prior to the date on which the Wealth Tax Act came into force i.e. from 1st April 1957. The question before the Hon'ble Supreme Court was therefore, whether the assets of Rs.1,43,277/- were exempt under Section 5(1)(xxi) read with the second proviso thereunder. The High Court had answered the question in favour of the company and therefore, the Department was in appeal. 17. The Apex Court after considering the Section 5(1)(xxi) and the rival contentions in respect thereof observed thus. "The High Court held that unless 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in particularly Section 69 thereof could be obtained. Being so, the payment of service tax is directly related to the requirement of registration in terms of Section 69 read with Section 94 of the Finance Act, 1994 and the Rules have been framed in exercise of powers conferred thereunder. It cannot be disputed that cenvat credit can be availed in relation to service tax paid in accordance with and in compliance of the statutory provisions, which itself makes registration obligatory. In other words, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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