TMI Blog2013 (9) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... dit Rules and maximum penalty under Rule 15(3) - As regards imposition of penalty on ISDs penalty was proposed under Rule 25/26 of Central Excise Rules but in the Order-in-Original penalty was imposed under Rule 15 of Cenvat Credit Rules - Penalty needed to be set aside on this ground alone - Penalty had been imposed under Rule 15(4) of the Cenvat Credit Rules - Rule 15(4) as it existed during the relevant period pertains to imposition of penalty on output service provider - Accordingly, penalties imposed on ISDs were set aside - Appeal Partly allowed. - E/1267-1273/2011 - A/1043-1049/2012-WZB/C-II(EB) - Dated:- 29-11-2012 - Shri S.S. Kang and Sahab Singh, JJ. Shri V. Sridharan, Advocate, for the Appellant. Shri K.L. Goyal, Commissioner (AR), for the Respondent. ORDER These are seven appeals filed by M/s. ONGC Ltd. One appeal is filed by M/s. ONGC Ltd., Uran Plant (appellants) and six other appeals by Input Service Distributors of ONGC (hereinafter referred to as ISDs) having the different registration numbers and addresses. 2. The appellants are engaged in the manufacture of excisable goods falling under Chapter 27 of the Central Excise Tariff Act, 1985. Raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 used by the appellants from the Oilfield of Mumbai Offshore were though excisable goods under Section 2(d) of the Central Excise Act, 1944, but the tariff rate for the crude oil was Nil and for the natural gas the rate of 16% was exempted vide Sr. No. 30 of the Notification No. 4/2006, dated 1-3-2006. It is the contention of the department that since both these products were exempted as far as the duty of excise is concerned, the Cenvat credit availed and utilized by the appellants was not admissible to them. 3.1 As per Notification No. 27/2005-Service Tax, dated 7-6-2005, the input service distributor has to obtain the registration within a period of 30 days of commencement of business or 16th day of June, 2005, whichever is later. The input service distributors of the appellants have obtained registration in the first quarter of 2009, hence the credit availed of the tax paid on services by the input service distributors for period prior to the date of registration as input service distributor is not admissible under Rule 3(i) of the Cenvat Credit Rules because both the Rules 3(2) and 3(3) of the Cenvat Credit Rules are applicable to only inputs lying in stock and not to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dutiable product and therefore credit of Service Tax paid on services used in the manufacture of Crude Oil is admissible to them. He submitted that various duties have been specified in Rule 3(1) of the Cenvat Credit Rules, 2004 in respect of which credit is admissible and Rule 6(1) of Cenvat Credit Rules denies credit in respect of Service Tax paid on input services if used in the exempted goods. Since the appellants are paying Cess, NCCD, Education Cess or SHE the Crude Oil cannot be treated as exempted goods under Rule 6 of Cenvat Credit Rules and therefore credit of Service Tax paid on input services is admissible to them. 4.2 Learned Sr. Advocate further argued that Crude Oil and Natural gas are intermediate product as Mumbai Offshore is part of Uran Plant and therefore Rule 6(1) will not apply in this case. He stated that Crude Oil and Natural gas are necessary inputs for the final products manufactured at Uran Plant. Without Crude Oil and Natural gas Uran Plant cannot function. He submitted that Mumbai Offshore is a captive mine and since all the Crude Oil and Natural gas produced at Mumbai Offshore (except minimal quantity of 6% from process platform which are sold to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. v. UOI - 1993 (67) E.L.T. 34 (S.C.) (iii) Brooke Bond India Ltd. v. Collector of Central Excise - 1991 (55) E.L.T. 342 (iv) Lupin Laboratories Ltd. v. Collector of Central Excise - 1994 (71) E.L.T. 914. 5. Learned Commissioner (A.R.) appearing for the Revenue submitted that the products manufactured at Mumbai Offshore are crude oil and natural gas and these are exempted from the duty. Therefore, the CENVAT Credit of Service Tax distributed by the ISD to their Uran Plant on such services rendered in relation to the manufacture of the exempted goods manufactured in Mumbai Offshore is not admissible. He further submitted that under Rule 6(1) of the Cenvat Credit Rules, Cenvat credit is not admissible on such quantity of input services which is used under the provisions of exempted services/exempted goods except in the circumstances specified in sub-rule (2). Therefore, the credit availed by M/s. ONGC on input services used by them cannot be passed on to Uran Plant as these services were used in the exempted crude oil/natural gas and there is no nexus between the services and the manufacturing activity carried out at Uran Plant. He further contended that under Rule 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transported through pipelines or in any other manner. c. Gradual decompression ensures that the escaping gas do not carry with it liquid hydrocarbons which have higher market value. d. During the separation process, a substantial quantity of dissolved/associated gases is separated from the liquid hydrocarbons. These are collected and de-moisturized for making them fit for transportation through pipelines. If the gases contain moisture, they would corrode the pipelines. e. Apart from the dissolved/associated gases water contained in material extracted from the wells also is separated to a great extent. The resulting fluid largely comprises heavier hydrocarbons (Cs onwards). However, being at the pressure of 3 K.G. per sq. cm. At the point of leaving the last Separator (Separator No. II), it still contains substantial quantities of associated/dissolved light hydrocarbons (CI to C4). It may be described as semi-stabilized as it is stable enough to be transported to the Uran Plant through pipelines. 6.2 Appellants contend that what they produce at Mumbai Offshore is semi-stabilized/un-stabilized state and had to be stabilized before its actual sale or use in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the argument of the appellants that Mumbai Offshore is an integral part of Uran Plant and Crude Oil/Natural gas being intermediate products, they are entitled to Cenvat credit of Service Tax paid on input services even if intermediate product is exempted. We find that contention of the appellants that Mumbai Offshore is an integral part of Uran Plant as Crude Oil is transferred to Uran Plant for the manufacture of value added product is not acceptable as Crude Oil manufactured at Mumbai Offshore is a saleable commodity and in fact is being sold partly at Mumbai Offshore. 6.6 We find that Rule 3(1) of Cenvat Credit Rules reads as under :- 3(1) A manufacturer or producer of final product or a provider of taxable service shall be allowed to take credit (hereinafter referred to CENVAT credit) of duty paid on - .. .. .. (i) any input or capital goods received in the factory of manufacturer of final product or premises of the provider of output service on or after 10th day of September, 2004 and (ii) any input service received by the manufacturer of final product or by provider of output service on or after 10th September, 2004. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE, Jaipur v. J.K. Udaipur Udyog Ltd. - 2004 (171) E.L.T. 289 (S.C.) held that Jaypee Rewa did not apply to Cenvat Credit Rules. The Court in the case of Vikram Cement held that Jaypee Rewa would continue to apply. Paras 7, 8, and 11 of the Judgment are reproduced below :- 7. Then comes Rule 57J which, insofar as it is material, reads :- Rule 57J. Credit of duty in respect of inputs used in an intermediate product. - (1) Notwithstanding anything contained in these rules, the manufacturer shall be allowed to take credit of the specified duty paid on inputs described in column (2) of the Table below and used in the manufacture of intermediate products described in column (3) of the said Table received by the said manufacturer for use in or in relation to the manufacture of final products described in the corresponding entry in column (4) of the said Table. The manufacturer of final products shall take credit under sub-rule (1) only if the intermediate products are manufactured in a factory as a job work in respect of which the exemption contained in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 214/86-Central Excises, da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at even in respect of inputs used in the manufacture of intermediate product which product is then used for the manufacture of the final product. The manufacturer would be allowed credit on the duty paid in respect of the input. On the explosives a duty had been paid and the appellants would be entitled to claim credit because the explosives were used for the manufacture of the intermediate product, namely, limestone which, in turn, was used for the manufacture of cement . 6.10 In the case of Vikram Cement (supra) explosive, limestone and cement were figuring in the table of Rule 57J as input, intermediate product and final product. In the instant case before us, there is neither such table of input services, intermediate products and final product nor Mumbai Offshore is a job worker under Notification No. 214/86. Therefore, decision of Vikram Cements (supra) is distinguishable from facts of present case. 6.11 Sr. Advocate also relied on the decision of Apex Court in case of Chowgule Co. - 1993 (67) E.L.T. 34 (S.C.). In this case court was examining provisions of Sections 8(3)(b) and 13 of Central Sales Tax Act, 1956. Sales Tax is leviable on point of sale and ore is sold aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-2010 incorporating input services in Rule 15(1) and 15(2) of Cenvat Credit Rules, 2004. Therefore, penalty under Rule 15(1) and 15(2) is not imposable. Similarly, under Rule 15(4) penalty is imposable on output service provider. Therefore, penalty is imposable only under Rule 15(3) of Cenvat Credit Rules and maximum penalty under Rule 15(3) is Rs. 2000/- only. We therefore, find considerable force in the submissions of the appellants and reduce the penalty imposed under Rule 15 of the Cenvat Credit Rules to Rs. 2000/- on the appellants. 7.3 As regards imposition of penalty on ISDs, we find that in show cause notice penalty was proposed under Rule 25/26 of Central Excise Rules but in the Order-in-Original penalty is imposed under Rule 15 of Cenvat Credit Rules. Penalty needs to be set aside on this ground alone. Penalty has been imposed under Rule 15(4) of the Cenvat Credit Rules. Rule 15(4) as it existed during the relevant period pertains to imposition of penalty on output service provider. Accordingly, penalties imposed on ISDs are set aside. 8. In view of the above, appeal filed by ONGC Uran Plant is partly allowed. Appeals filed by ISDs are allowed. (Pronounced in Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
