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M/s Pipavav Shipyard Ltd. Versus Commissioner, Central Excise & Service Tax, Bhaavnagar

2015 (8) TMI 58 - CESTAT AHMEDABAD

Denial of CENVAT Credit - Appellants fabricated a Dry Dock for manufacturing ship and repair service - Credit on input services, input and capital goods used for fabrication of the Dry Dock, amongst others - Held that:- CENVAT Credit availed on input service, input and capital goods for setting up Dry Dock would be allowed for providing output service namely repair/refit service. This is also covered in the inclusive part of the definition of ‘input service’. Hence, the finding of the Adjudicati .....

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Even if different phrases are used under different rules of CENVAT Credit Rules, they have to be read in a harmonious manner.

Cross utilisation of credit of input and input service - input service credit was denied mainly on the basis that the input service credit availed on the input services was shown in ER-1 return instead of ST-3 returns. - Held that:- The restriction on utilisation of CENVAT Credit stipulated relates only for specific type of duties i.e. education cess on excisa .....

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Dock and which can be treated as capital goods. The case law relied upon by the learned Authorised Representative is in context of excisability of goods, and the Tribunal already considered in earlier decision. - credit allowed.

Denial of cenvat credit on the basis of document issued by the ISD (Input Service Distributor). - Held that:- As per CENVAT Credit Rules, the Appellants are eligible to avail the credit on the invoices issued by the ISD. There is no reason to deny the credit o .....

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facts of the case, in brief, are that the Appellant, a 100% Export Oriented Unit (EOU) was granted permission for manufacturing ship building and the services of ship repairs/refit within the private bonded warehouse as per Letter of Permission (LOP) issued by the Development Commissioner, Kandla. The Appellants fabricated a Dry Dock for manufacturing ship and repair service. The Appellant is registered with Central Excise authorities for manufacturing of ships and also registered with the Serv .....

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ods for the period October 2010 to February 2011. It has been alleged that the final product ship is classifiable under Central Excise Tariff Heading 8901 chargeable to Nil rate of duty and therefore, there are not eligible to avail the CENVAT Credit for manufacturing of the exempted final product in contravention of Rule 6(1) of CENVAT Credit Rules, 2004. It has further been alleged that the Appellant availed the CENVAT Credit wrongly on the basis of ISD invoices, issued by their Head Office Mu .....

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cture of exempted final product, ship. It is submitted that the Appellant utilized the credit of input service for outward service viz. ship repairing. That the Appellant a 100% EOU exported the ship under bond. Rule 6(1) would not apply as per provision of Rule 6(6)(d) of the said Rules, 2004. He referred to the decision of Hon ble High Court and Board s Circular. It is further submitted that they have paid the Service Tax on outward service of ₹ 26.07 Crores and utilized the input servic .....

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demand of CENVAT Credit on capital goods on the ground that the machinery assembled at the site, is covered in favour of the Appellant by the decision of the Tribunal in the case of Commissioner of Central Excise Vs JSW Ispat Steel Ltd - 2013-TIOL-1758-CESTAT-Mum. He further submits that denial of CENVAT Credit on the input availed on the basis of ISD invoice issued by Head Office, whose name was not mentioned in the LOP is not sustainable, as the Head Office is registered with Service Tax autho .....

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in their ER-1 return for manufacturing exempted final product Ship. Rule 6(1) of the Rules, 2004 provides no credit is to be allowed for exclusive exempted final product. It is further submitted that the Appellant is EOU and there is no requirement of furnishing Bond. So, Rule 6(6)(d) of the said Rules would not apply. It is submitted that the address of Head Office was not mentioned in the LOP and therefore, the CENVAT Invoice issued by the Head Office as ISD cannot be accepted. He also submit .....

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er 100% EOU scheme for manufacturing of Ship Building, Ship Repairs/Refit. It was permitted on the condition that the Appellant shall export the entire production excluding reject and sales in the Domestic Tariff Area as per the provisions of EOU scheme, amongst others. By letter dt.08.01.2008, the Joint Development Commissioner, Kandla Special Economic Zone, authorized the Appellant for manufacturing further items namely, Ship, Vessels, Hulls, Offshore Structures includes FPSO, Rigs, Platforms .....

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ock is the heart of the shipyard used in ship building and repair service. The Hon ble Supreme Court in the case of Scientific Engineering (P) Ltd Vs Commissioner of Income Tax, Andhra Pradesh, (1986) 1 SCC 11 observed that a Dry Dock since it fulfilled the function of a plant must be held to be plant. The every part of this Dry Dock plays an essential part with which, the operation is performed. In the case of Commissioner of Income Tax Vs Anand Theatres, (2000) 5 SCC 393, the Hon ble Supreme C .....

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output service, 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 from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, .....

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n or in relation to manufacture of final product and inclusive part of the definition, services used in relation to setting up, modernisation, renovation or repair of a factory, premises of a provider of output service or an office relating to such factory or premises etc. The expression any service read with for providing an output service would cover wide encompass of the definition of input service. The Honble Supreme Court in the case of Indian Chamber of Commerce (AIR 1976 SC 348) observed .....

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ng of the Adjudicating authority, is that the Appellant is exclusively engaged in the manufacture of exempted final product Ships and CENVAT Credit on input, capital goods is inadmissible, cannot be sustainable. 8. The learned Authorised Representative contended that there is no requirement of furnishing the bond by an EOU and it does not cover under Rule 6(6) of the Rules. CBEC by Circular No.928/18/2010-CX, dt.28.06.2010, clarified that a 100% EOU are required to export the goods under bond in .....

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orted. As against this, the phrases used in the CENVAT Credit Rules, permitted credit on service used whether directly or indirectly, in or in relation to the manufacture of final product or for providing output service . The field formation tend to take the view that for eligibility of refund, the nexus between input or input services and the final product/services has to be closer and more direct than that is required for taking credit. It has been clarified that the input services should be d .....

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vocate relied upon the decision of Hon ble Karnataka High Court in the case of Commissioner of Customs, Banglore Vs ANZ International - 2009 (233) ELT 40 (Kar.) where the appeal of the Revenue was dismissed. It has been held that a 100% EOU is entitled to take CENVAT credit on the duty of the inputs procured indigenously and when they are not in a position to utilise the same, they are entitled for the benefit of refund under Rule 5 of the Rules. In the present case, the Appellant stated that th .....

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arise or not for our consideration in this Appeal. The CESTAT, having regard to the undisputed fact that the respondent is 100% Export Oriented Unit (for short ECU ) in respect of which, benefit of CENVAT Credit Rules, 2004 is available for the inputs which will be used for manufactured goods of 100% export. Therefore, the Tribunal has applied Rule 6(6) and recorded the reasons stating that there is a provision of exporting the goods under bond. In the case of 100% EOUs, the input can be import .....

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ondent has availed the Cenvat credit facility. They were not in a position to utilize the credit, they applied for refund of the Cenvat credit availed by them. The reason is that all their products were exported and there was no domestic clearance. Therefore, in terms of Rule 5 of the Rules, they are riglitiy entitled for the refund of the duty paid to the department. The learned counsel for the appellant has pointed out that in the case of Sterlite Opitcal Technologies Ltd. v. CCE, Aurangabad - .....

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under Rule 5 of the Rules. Therefore, the orders impugned in the Appeal before the CESTAT held to be bad in law and the same were set aside. Therefore, we do not find that no substantial question of law does arise in this Appeal for our consideration to answer the same in favour of the Revenue. Accordingly, the appeal is devoid of merits and therefore it must fail and is dismissed. 10. In the case of Commissioner of Central Excise Vs M/s Drish Shoes Ltd - 2010 (254) ELT 417 (H.P.), the Hon ble .....

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xempted goods even if such goods are exported. In that case, the Respondent was engaged in the manufacture of finished leather and it had exported the manufactured leather. The Hon ble High Court held that an assessee manufacturing the goods chargeable to Nil rate of duty is eligible to avail CENVAT Credit paid on the inputs under the exception clause contained in Rule 6(6) of the said Rules, used in the manufacture of such goods, if the goods were exported. In view of the above discussion, the .....

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t availed on input services in their ER-2 return indicating that those services have been used by them in or in relation to manufacture of final products whether directly or indirectly. Had those services been used for providing output services , the Noticee would have shown the CENVAT Credit of Service Tax paid on such input services in their respective ST-3 returns. As already discussed, the criteria to qualify the services used as input service are different in case of Manufacturer and Outp .....

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ce obtained registration from the Central Excise authority as well as Service Tax authority and required to file ER-1 and ST-3 returns separately. In some cases, these returns are filed in different jurisdictions the CENVAT credit on input, capital goods and input services which are used in manufacturing of goods or providing output service is available in a common pool and can be used for payment of excise duty or service tax. Ultimately, the CENVAT Credit taken during the period shown in ER-1 .....

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, 1944 is sufficient for the purpose of extending credit on lubricants under Rule 57A of the said Rules. In the case of Commissioner of Central Excise, Coimbatore Vs Lakshmi Technology & Engineering Indus. Ltd. - 2011 (23) STR 265 (Tri-Chennai), the Tribunal held that the manufacturer entitled to use the credit from a common pool to which different categories of specified excise duties, customs duty and service tax allowed to be taken as credit. Similarly, a provider of taxable service is al .....

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se of Commissioner of Central Excise, Salem Vs Thangavel & Sons (P) Ltd. - 2014 (7) 895-CESTAT Chennai, the Tribunal held that the Respondents are not only the manufacturers of excisable goods, but also the provider of output service and both the activities are carried out in the same premises. Respondents are eligible for availment of input credit, they can utilise the CENVAT credit available with them either for payment of excise duty on the final products or for payment of service tax on .....

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the ground that it was shown in the ER-1 return. 14. The Adjudicating authority denied CENVAT Credit on capital goods, being inadmissible used in immovable property come into existence. We find that the Tribunal in the case of Commissioner of Central Excise Vs JSW Ispat Steel Ltd - 2013-TIOL-1758-CESTAT-Mum observed that merely because various machineries and equipments, appliances and parts have been assembled at site to set up the Oxygen plant and such plant being an immovable property, it wil .....

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