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TMI Blog2013 (9) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... ility extended to the manufacturer of the excisable goods under the provisions of Cenvat Credit Rules. The input service distributors of M/s. ONGC Ltd. are mentioned as under :- (a) Oil and Natural Gas Corporation Ltd. (Mumbai High Asset) (b) Oil and Natural Gas Corporation Ltd. (Regional Office) (c) Oil and Natural Gas Corporation Ltd. (Offshore Logistics) (d) Oil and Natural Gas Corporation Ltd. (Neelam Heera) (e) Oil and Natural Gas Corporation Ltd. (Drilling Services) (f) Oil and Natural Gas Corporation Ltd. (Engineering Services). 3. The appellants also have multi locational units for the manufacture of excisable goods and one such unit of appellants is registered with Central Excise, Mumbai-I Commissionerate. This unit manufactures/produces the exempted excisable goods such as natural gas and crude oil for which M/s. ONGC Ltd. held Central Excise registration issued by Mumbai-I Commissionerate. The crude oil and natural gas produced from the Oilfield of Mumbai Offshore were supplied to the refineries situated at different location. Oilfiel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation, a show cause notice dated 8-4-2010 was issued to the appellants as well as six input service distributors demanding the Cenvat credit of Service Tax amounting to Rs. 40,57,15,829/- under Rule 14 of the Cenvat Credit Rules read with Section 11A of the Central Excise Act and also demanding the interest as applicable under Rule 14 of the Cenvat Credit Rules, 2004 and it was also proposed to impose penalties under Section 11AC of the Central Excise Act read with provisions contained under Rule 15 of the Cenvat Credit Rules. These show cause notices were contested by the appellants and input service distributors and the case was adjudicated by the Commissioner vide impugned order disallowing the Cenvat credit of Service Tax amounting to Rs. 40,57,15,829/- under Rule 14 of the Cenvat Credit Rules read with Section 11A of the Central Excise Act and also imposing the equal amount of penalties on the appellants under Section 11AC of the Central Excise Act read with Rule 15 of the Cenvat Credit Rules and the interest was also demanded under Section 11AB of the Central Excise Act read with Rule 14 of the Cenvat Credit Rules. Various amounts of penalties were also imposed on al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ran Plant. 4.3 He pointed out that show cause notice alleges that since Uran Plant and Mumbai Offshore units are having different registration, credit is not admissible to them. He submitted that under Cenvat Credit Rules there is no restriction about use of input services outside the factory. Restriction is only in respect of inputs which are to be used in the factory. 4.4 He submitted that Commissioner denied the Service Tax credit in respect of services availed prior to registration as input service distributor. In this case ISD registration was done in early 2009 and only after the registration Cenvat credit of Service Tax was availed by them. He submitted that there is no restriction in Cenvat Credit Rules, 2004 denying credit in respect of services used prior to date of registration. Since the credit was availed only after date of registration the finding of Commissioner denying Cenvat credit is unsustainable. 4.5 Learned Sr. Advocate submitted that since credit was rightly availed by Uran Plant, there is no case of charging of interest and imposition of penalty. Appellants had no intention to wrongly avail and utilise the credit of input services therefore no penalty is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributed to services used in unit exclusively engaged in the manufacturing of exempted goods shall not be distributed. Since in the present case, the goods manufactured at Mumbai Offshore are exempted from the Excise duty, the Service Tax paid on the services used in the manufacture of these goods cannot be distributed by the ISD. He further pointed out that the part of crude oil is cleared by M/s. ONGC to independent buyers and such buyers cannot avail any credit of Cenvat credit on procurement of crude oil because the crude oil is an exempted product. If the Cenvat credit on these input services is allowed to Uran Plant, this will lead to discrimination vis-à-vis the independent buyers. Thus, any interpretation allowing of Cenvat credit to the Uran Plant and not to independent buyers is not permissible on principle of equity. He submitted that the Commissioner has passed a legal order denying the credit of Service Tax paid on the input services and therefore, appeal is liable to be dismissed. 6. After hearing both sides, we find that issue involved in these appeals is denial of Cenvat credit of Service Tax paid by various ISDs on input services used in or in relation to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secondly Crude Oil produced at Mumbai Offshore is a saleable commodity and is being sold by M/s. ONGC to its buyers. Thirdly before Uran Plant came into existence, entire Crude Oil manufactured at Mumbai Offshore was sold by M/s. ONGC. We also find that Crude Oil is defined under the Oil Industry (Development) Act, 1974 as under :- "Crude Oil means petroleum in its natural state before it is refined or otherwise treated but for which water and foreign substances have been extracted." We also note that M/s. ONGC are paying cess on the Crude Oil produced at Mumbai Offshore. Therefore, we are of the view that Crude Oil used in Uran Plants and other units to manufacture other value added final product cannot be termed as semi-stabilized/semi-finished goods. 6.3 This is one of the contentions of the appellants that Crude Oil manufactured by them at Mumbai Offshore is not exempted product as they are paying Cess leviable under Oil Industry (Development) Act, 1974. We find that the term 'exempted goods' is defined under Rule 2(d) of Cenvat Credit Rules, 2004 according to which "exempted goods" means 'excisable goods' which are exempt from the whole of duty of excise leviable thereon, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of exemption specified in the notification of Govt. of India, Ministry of Finance (Deptt. of Revenue) No. 214/86-C.E., dated 25-03-1986 published in Gazette of India vide No. GSR 547(E), dated 25-03-1986 and received on or after 10th September, 2004. Under Notification No. 214/86 goods manufactured by the job worker are exempted. Under Rule 3(1) credit of Service Tax paid on input services used in manufacture of goods by job worker will be available to manufacture of final product. Since Mumbai Offshore unit is not a job worker under Notification No. 214/86, ONGC Uran unit is not entitled to CENVAT credit of Service Tax paid on input services used in Crude Oil manufactured by Mumbai Offshore. 6.7 We also note that under Rule 6(1) of the Cenvat Credit Rules Cenvat credit shall not be allowed on such quantity of input services which is used in the exempted goods except in the circumstances specified in Rule 6(2). Under Rule 6(2) if a manufacturer manufactures both exempted goods and dutiable goods and he maintains separate records of input services gone into dutiable goods/exempted goods, the credit in respect of input services gone into dutiable goods will be admissible. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; xxx xxx (3) [Emphasis supplied] 8. This Rule allows credit on inputs used in manufacture of intermediate products described in Column 3 of the Table provided the intermediate products are received by the manufacturer for use in or in relation to the manufacture of final products described in the corresponding entry in Column 4 of the Table. Explosives, limestone and cement are admittedly covered by Columns 1, 2 and 3 respectively of the Table. 11. The question whether it was necessary for inputs to be used within the factory premises where the manufacture as defined in Rule 57AB of final products takes place for the purposes of availing of credit, came up before a Bench of three Judges in the case of Jaypee Rewa Cement v. CCE (supra). As in this case, in that case the input in question was explosives which were used in quarrying limestone used in the manufacture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 993 (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 after processing. In this case court held that machinery, vehicles and barges used for carrying the ore from mining site to place of processing are to be considered as goods for use in processing of ore for sale. Facts of this case are distinguishable from the present case as Crude Oil/Natural gas manufactured at Mumbai Offshore are excisable goods at the process platform itself. 6.12 Appellants also relied on the decision of Tribunal in case of Brooke Bond India Ltd. - 1991 (55) E.L.T. 342 in which Tribunal allowed the credit of duty paid on paper bag used for manufacture of printed paper bags which in turn used in packing tea. Ratio of this decision is also not applicable to the present case as printed paper bags and packing tea were used in the same factory whereas Crude Oil and value added product are manufactured at Mumbai Offshore and Uran Plant. 6.13 Similarly, ratio of Tribunal's decision in case of Lupin Laboratories Ltd. - 1994 (71) E.L.T. 914 is also not applicable as goods in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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