TMI Blog2015 (8) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... should receive invoices under Rule 4(a) of the Service Tax Rules, 1994 towards purchase of inputs services and issues invoices for the purpose of distribution of credit of service tax paid on the said service to such manufacturer or producer or provider, as the case may be. The Rule 2(m) does not stipulates any condition that the invoices issued under Rule 4(a) in respect of purchase of input service should pertain to period prior to the registration or after registration. Therefore it is clear that the purchase of input service by the office of the manufacturer maybe for the period prior to the registration and because of this reason there is no prohibition in the above Rule 2(m) for distributing services and issuance of input service distribution invoices. - services on which the Cenvat Credit was taken by the appellant have been admittedly received and used in or in relation to the manufacture of the dutiable final product which has been observed by the Hon'ble High Court also. Therefore, foremost condition is, input should be received by the appellant and same should be used in or in relation to the manufacture of their dutiable final product is not under dispute. Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributors and we do not find any fault - Decided in favour of assessee. - Appeal No. E/1267/11-MUM - - - Dated:- 9-7-2015 - P K Jain, Member (T) And Ramesh Nair, Member (J),JJ. For the Appellant : Shri Gajendra Jain, Adv. For the Respondent : Shri Hitesh Shah, Commissioner (AR) ORDER Per: Ramesh Nair: This appeal is directed against Order-in-Original No. 01/CSP(01)COMMR/RGD/11-12 dtd. 06/05/2011 passed by the Commissioner of Central Excise, Customs Service Tax, Raigad, wherein Ld. Commissioner has passed following order: 1. I disallow the Cenvat Credit of Service tax amounting to ₹ 40,57,15,829/- distributed by Input Service Distributors on services rendered in relation to the manufacture of exempted goods manufactured on the oilfields of Mumbai Offshore availed during the period from 2008-09, 2009-10 (up to November 2009) and hereby order its recovery from M/s. ONGC Ltd, Uran Plant under Rule 14 of the Cenvat Credit Rules, 2004 read with the first proviso to sub-Section (1) of Section 11A of the Central Excise Act, 1944. 2. An amount of ₹ 27,79,30,282/- out of the above mentioned ₹ 40,57,15,829/- was found to have been availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAACO1598AST002 27.02.2009 2 Oil and Natural Gas Corporation Ltd. (Regional Office) AAACO1598AST036 09.03.2009 3 Oil and Natural Gas Corporation Ltd. (Offshore logistics) AAACO1598AST027 27.02.2009 4 Oil and Natural Gas Corporation Ltd. (Neelam Heera) AAACO1598AST013 04.03.2009 5 Oil and Natural Gas Corporation Ltd. (Drilling services) AAACO1598AST023 27.01.2009 6 Oil and Natural Gas Corporation Ltd. (Engineering Services) AAACO1598AST042 06.03.2009 The administrative divisions of the appellants after obtaining the registration distributed the credit of service tax paid input services to Uran factory of the appellants. The credit has been distributed by the ISD after taking an ISD registration. All the ISDs of the appellants before distributing the credit to Uran Factory intimated the Superintenden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the input services received by the administrative divisions prior to the registration as ISD but distributed by the ISD after taking registration. 3. Shri. Gajendra Jain, Ld. Counsel for the appellant made following submissions: (A) As regard eligibility of Cenvat Credit of service tax paid on input service received in off shore location for the production of crude oil has been decided by the Hon'ble High Court of Bombay in appellant's favour therefore in view of the findings by the Hon'ble High Court the eligibility of input service is not under dispute before the Tribunal. (B) The only issue before this Tribunal is whether the appellants are entitled to Cenvat credit of service tax paid on the eligible input services as held by Hon'ble Bombay High Court received by the administrative divisions prior to the registration as ISD but distributed by the ISD after taking registration, to Uran factory of appellants. The Cenvat Credit Rules do not prescribe any time limit for availing the credit of input services. Hence, the ISD can distribute the credit of service tax paid on input services prior to registration as ISD but distributed by the ISD after taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration. The Cenvat Credit Rules does not provide any time limit for availment of Cenvat credit. The Cenvat Credit Rules contains no express restriction on distribution of credit earned prior to taking the registration by the ISD also. Hence the ISD can avail credit of service tax paid on input services received prior to registration. (I) The Karnataka High Court in mPortal Wireless Solutions Vs. CST, Bangalore - 2012 (27) STR 134 (Kar.) held that the Registration with department is not a pre requisite for claiming the credit of service tax paid on input services. The Court held that there is no requirement of registration with department as a condition precedent for availing cenvat credit under Cenvat Credit Rules. The aforesaid decision was followed by the Tribunal in KPIT Cummins Info Systems Ltd. Vs CCE, Pune-I - 2013 (32) STR 356 (T). In the instant case, credit has been availed for input services received by the ISD prior to registration with the department. The Cenvat Credit Rules, 2004 does not provide for any such condition such condition for ISD to avail the credit. (J) The Tribunal in identical facts allowed the credit of service paid on input services rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (O.1) Once these core facts are established undisputed, credit cannot be denied to the appellants on mere procedural grounds. It is submitted that the administrative divisions of the appellants were not registered as ISDs at the time of receipt of input services, however, the same will amount to a procedural lapse at best. Reliance is also placed on the following judgment of the Hon'ble CESTAT, wherein it has been categorically held that non-registration of the ISD will not disentitle the recipient unit to avail credit: a) CCE Vs. Samita Conductors Ltd. 2012 (278) ELT 492 (T) b) Doshion Ltd. Vs. CCE 2013 (288) ELT 291 (T) c) Precision Wires India Ltd. Vs. CCE 2013 (31) STR 62 (T) d) Demosha Chemicals Pvt. Ltd Vs. CCE ST, Daman 2014 (34) STR 758 (T) (O.2) Hence, the appellants submit that non-registration of the divisions as an ISD cannot come in the way of taking of input service credit by the ISD before registration and distributing the same after registration. (P) The appellants in the rejoinder submits that they have not violated any procedural condition provided under law. The contention of the Ld. A.R. overlooks the fundamental differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys of the commencement of business or 16th day of June 2005 whichever is later. In view of the above provisions the appellant should have obtained registration prior to commencement of the business or 16 th day of June 2005 whichever is later but appellant failed to do so therefore credit which they passed on under input service distributor invoices is not correct and legal, therefore appellant is not entitled for the credit. He also referred to Rule 7of Cenvat Credit Rules, which provides, input services distributor may distribute Cenvat Credit in respect of service tax paid on the input service to its manufacture unit or unit providing outputs service. In view of this provisions, service tax paid on input services can be distributed in respect of service tax paid on input service. Since there is statutory provisions for distributing services, as in the present case, services which received prior to the registration cannot be distributed subsequently to the registration because the services received prior to the registration does not covered by the provisions of distribution of services. He submits that as per sub Rule (10) of Rule 9 of Cenvat Credit Rules, It is provided that inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Ltd. vs. Commissioner of Central Excise, Farudabad [2012(275) E.L.T. 128 (Tri.Del)] (b) Eagle Flask Industries Limited vs. Commissioner of C. Ex., Pune [2004 (171) E.L.T. 296 (S.C.)] (c) Balmer Lawrie Co. Ltd. vs. Commissioner of C. Ex. Kanpur [2000 (116) E.L.T. 364 (Tribunal)] Ld. A.R. further submits that in various judgments, the Hon'ble High Court held that for providing any benefit terms and conditions provided therefore is required to be complied with, in absence of compliance of the condition, benefit cannot be provided. Therefore, since in the present case law provides for registration and distribution of the input service by the input service distributor and in respect of service received by the input service distributor has not covered by the registration, therefore Cenvat Credit have been passed on without following the condition of registration. In support of this submission, he placed reliance on following judgments: (a) Indian Oil Corporation Ltd. vs. Commissioner of C. Ex. Vadodara [2012(276) E.L.T. 145 (S.C.)] (b) Commissioner of C. Ex. New Delhi vs. Hari Chand Shri Gopal [ 2010 (260) E.L.T. 3 (S.C.)] He submits that in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the submissions of the appellants and reduce the penalty imposed under Rule 15 of the CENVAT Credit Rules to ₹ 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 Rule 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 Rule. Rule 15(4) as it existed during the relevant period pertains to imposition of penalty or 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. The above order was challenged by the appellant before Hon'ble Bombay High Court wherein Hon'ble High Court has passed following order which is reproduced below: 2013 (32) S.T.R. 31 (Bom.) 13. The Appeal before the Court raises a question of construction of the Cenvat Credit Rules, 2004. Under Rule 3(1), a manufacturer or producer of final products or a provider of taxable service is allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de import. The service, in other words, need not be a service which is directly used by the manufacturer in the manufacture of a final product. The definition of input service comprehends within its sweep a service which is used by the manufacturer even indirectly, and in or in relation to the manufacture of a final product. Where the legislature or its delegate uses the expression in or in relation to , its object and purpose is to widen the scope and purview of the entitlement. When the words directly or indirectly and in or in relation to the manufacture of final products are used in conjunction that is indicative of the comprehensive sweep and ambit of the statutory provision. Rule 6(1) stipulates that no Cenvat credit shall be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, save in the circumstances which are mentioned in Rule 6(2). Rule 6(2) deals with a situation where inter alia a manufacturer manufactures both dutiable final products as well as exempted goods. In such a situation, in order to avail of Cenvat credit, the manufacturer is required to maintain separate accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the manufacture of exempted goods. But the point to note is that merely because the Appellant manufactures exempted goods, that would be no justification to disallow to it the benefit of availing of Cenvat credit on that quantity of input service which is utilised in or in relation to the manufacture of dutiable final products. As we have noted earlier, the definition of the expression input service is cast in broad terms. The expression input service means any service used by the manufacture, whether directly or indirectly or in or in relation to the manufacture of final products. It is impossible to accept the hypothesis that would assert, that input services that are utilized by the Appellant in or in relation to the process of manufacture that takes place at Mumbai Offshore is not a service that is used by the manufacturer in or in relation to the manufacture of dutiable final products. The dutiable final products that are manufactured by the Appellant at its Uran plant are fundamentally premised upon the manufacturing process which commences at Mumbai Offshore. There can be no manner of doubt that the input services which go into the process of production at Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Central Excise Rules, 1944 was to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. The Supreme Court held that Rule 57D(2) indicates that an intermediate product may also come into existence in the manufacture of a final product and even though no duty is paid on the intermediate product as it is exempted from whole of the duty, credit would still be allowed so long as duty is paid on the final product. Finally, it was held that the mere fact that the parts were cleared from one factory to another factory belonging to the Appellant would not disentitle the Appellant from claiming the benefit of Modvat credit. That was, therefore, a case where at the intermediate stage, the parts which constituted an input in the manufacture of tractors were exempted from excise duty. The final product, the tractor, was dutiable. The test which was laid down by the Supreme Court was that so long as the final product was dutiable, the assessee would be entitled to the benefit of Modvat credit. 16. The second decision of the Supreme Court to which a reference must also be made is that in Collector of Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been right in saying that the input must be raw-material consumed in the manufacture of final product, however, in the present case, as stated above, the expression used in Rule 57A uses the words in relation to the manufacture of final products . The words in relation to which find place in Section 2(f) of the said Act has been interpreted by this Court to cover processes generating been repeatedly held by this Court that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the final product. Therefore, the words in relation to the manufacture have been used to widen and expand the scope, meaning and content of the expression inputs so as to attract goods which do not enter into finished goods. In the case of M/s.J.K.Cotton Spinning and Weaving Mills, Co. Ltd. v. The Sales Tax Officer, Kanpur and another - AIR 1965 S.C. 1310, this Court has held that Rule 57A refers to inputs which are not only goods used in the manufacture of final products but also goods used in relation to the manufacture of final products. Where raw-material is used in the manufacture of final produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice which is used in the manufacture of the ultimate dutiable product. We accordingly answer question (a) in the negative. Taking into consideration of the facts and circumstances of the present case that though the crude oil may be exempted but the same is used in the further process as intermediate products in the appellant's own factory and the resultant final product is dutiable, the Hon'ble High Court held that the appellant are entitled for Cenvat credit. However, The Hon'ble High Court has remanded the matter only to decide the issue that whether the credit can be availed on the input service distributor's invoices issued in respect of service received by the input service distributor prior to the registration as input service distributor. Therefore in the present case the issue to be decided by us is whether the credit availed on the invoices of input service distributors received in respect of input services prior to the registration as input service distributors is admissible or otherwise. Before going into details, it is necessary to read relevant statutory provisions. Rule 2(m) of Cenvat Credit Rules, 2004 defines input service distributor as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007) ; [substituted vide Notification No. 27/2007-Central Excise (N.T.) dated 12-05-2007] (vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via); [Substituted vide Notification No. 10/2007-Central Excise (N.T.) dated 01-03-2007] (viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act [OMITTED -AS substituted by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 [16 of 19310, the force of law]: (In clause (viia), portion beginning with the words and figures as substituted by clause 72 and ending with the words the force of law has been omitted vide Notification No. 22/2005-Central Excise (N.T.), dated 13/05/2005) Provided that a provider of taxable service shall not be eligible to take credit of such additional duty; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of the Excise Act , or of the Customs Act, 1962 (52 of 1962) or the rules made there under with intent to evade payment of duty. Explanation. - For removal of doubts, it is clarified that supplementary invoice shall also include challan or any other similar document evidencing payment of additional amount of additional duty leviable under section 3 of the Customs Tariff Act ; or (c) a bill of entry; or (d) a certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office; or (e) a challan evidencing payment of service tax, by the person liable to pay service tax under sub-clauses (iii), (iv), (v) and (vii) of clause (d) of sub-rule (1) of rule (2) of the Service Tax Rules, 1994; or (In clause (e) the words, brackets and figures sub-clauses (iii), (iv), (v) and (vii) has been amended vide Notification No. 10/2006-CE(N.T.), dated 25/04/2006 (In clause (e) words , (iv) and (v) has been substituted vide Notification No. 28/2005-CE(N.T.), dated 07/06/2005) (f) an invoice, a bill or challan issued by a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore Cenvat credit, irrespective any discrepancy, if any found on the part of the input service distributor, Cenvat Credit to the appellant cannot be denied on the ground that input service distributor have received services prior to the obtaining registration as input service distributors. We have gone through the judgments relied upon by both sides. We find that identical issue has been dealt in the judgments of M/s. Dagger Forst Tools Ltd - E/1276/2012 (supra), wherein this Tribunal held as under The appellant M/s Dagger Forst Tools Ltd., have a number of manufacturing units at Thane, Ambernath and Aurangabad. Their office at Thane has registered themselves as input service distributor with effect from 04.10.2008. Thereafter, they distributed the credit of service tax paid on common input service such as Consultancy services, advocate services, house keeping, security etc., to their various units in proportion to the turnover of the unit. These services were received by them during the period February, 2008 to October, 2008. The department was of the view that since the appellant registered themselves as input service distributor only from 04.10.2008 and not the taxes pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78 (Tri. - Del.) PUNJAB NATIONAL BANK Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-I 5. I have considered the submissions from both the sides and perused the records. There is no dispute that the appellant are the Zonal Audit Head office of Punjab National Bank and though they are registered in respect of banking services since October 2004, they were actually responsible only for audit of the records of the Branches of PNB within their jurisdiction and it is the branches which were providing banking services and were individually registered for service tax payment. There is no dispute that the Appellant as Zonal Audit Office were not providing banking/financial services. The point of dispute is as to whether in this factual background, the appellant as Zonal Audit Office of PNB could take Cenvat credit on the basis of invoices issued in their name and distribute the same to the branches as input service distributor. In this case, there is no dispute that the services in question had been received and are covered by the definition of 'Input service' and if the appellant had obtained separate registration as 'input service distributor', there wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service tax paid in both the units. The Cenvat Credit availed by the appellant is exactly the amount which has been charged as service tax by the service provider. I find strong force to the contentions raised by the Ld. Counsel that the judgment / order of this bench in the case of Doshion Limited (supra) (para 5) and Modern Petrofils (supra) (para 4) are directly on the point wherein the bench has held as under: Doshion Limited Vs. Commissioner of Central Excise, Ahmedabad - 2013 (288) E.L.T. 291 (Tri.-Ahmd.): 5. We have considered the submissions made by both sides. We find considerable force in the arguments advanced by the learned counsel. The registered office and Vatva office both are located in the same place and appellant has simply utilised the credit at Vatva instead of distributing it to various units. As submitted by the learned counsel, during the relevant period, there was no restriction for utilisation of such credit without allocating proportionately to various units. The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to drop the demand cannot be found fault with. The Commissioner also has taken a view that merely because the appellants did not disclose to the department that they have availed credit on the basis of documents not prescribed under Rule 9(2) of Cenvat Credit Rules, 2004, it can be said that there was suppression of fact will full misstatement etc. He has relied upon the decision of the Hon'ble Supreme Court in the case of M/s. L T Ltd. [2007 (211) E.L.T. 513 (S.C.)]. In view of the fact that there is no allegation of non receipt of input service or the allegation of service not relatable to the factory and also in view of the fact that invoice was in the name of head office of the same factory and not in the name of someone else, the decision of the Commissioner that extended period is not invocable also has to be upheld. Since I have taken a view that appellants are eligible for the credit and suppression of facts and extended period are not invocable, the question of penalty does not arise. Accordingly the penalty imposed is also set aside. In view of the above discussion, appeal filed by the Revenue is rejected and appeal filed by the party is allowed. 10. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. 3. I have considered the submissions. I find that the decision in the case of Jindal Photo Limited was rendered in exactly similar circumstances. In that case also the registration was not taken by the head office as input service distributor. Further, I am unable to appreciate the stand taken by the Revenue that this decision is not applicable in view of the judgment in the case of Jindal Photo Limited deals with modvat/cenvat credit of goods and in this case the question involved is services. This itself is a wrong submission since in Jindal Photo Limited case also the ratio involved was cenvat credit on input services only. Further, it has also been submitted that receipt of goods is verifiable but not the services. In this connection it would be worthwhile to see the provisions to provisos of sub Rule 2 of Rule 9 of Cenvat Credit Rules, 2004. According to the said proviso, if the invoices do not contain all the particulars but contains certain details specified therein, the Assistant Commissioner can allow the credit on the basis of such defective documents, if the goods or services covered by such documents, have been received and accounted for in the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel, the procedural irregularity has to be ignored and the demand confirmed has to be set-aside on this ground. In the result, demand for cenvat credit of ₹ 1,07,07,142/- with interest and penalty equal to the same imposed under Section 11AC of Central Excise Act, 1944 are set-aside. 2013 (31) S.T.R. 62 (Tri.- Ahmd.) Precision Wires India Ltd. Versus Commissioner of Central Excise, Vapi 7. I find that factually there is no dispute regarding the receipt of input services at the head office. It is also undisputed that the said services can be distributed by the head office to the various factories and the appellant's factory being one of them. It is also undisputed that the appellant is eligible to avail the Cenvat credit of such services which has been received by the head office and distributed to them. I find strong force in the contentions raised by the learned counsel that the judgment of this tribunal in the case of Jindal Photo Limited (supra) and Samita Conductors Limited - 2012 (278) E.L.T. 492 (Tri.-Ahmd.), will directly cover the issue in the case in hand. 8. As regards the reliance placed by the learned Additional Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s registration and services received and used was also during the period when the appellant was registered with the Central Excise, therefore facts of the both the cases are entirely different, hence the said judgment cannot be applied in the present case. As regard the Balmer Lawrie CO. Ltd. (supra) case, we find that the said judgment is on the issue of invoices issued by the dealer without registration on which credit was taken. In the said judgment, this Tribunal has held that credit cannot be availed on the invoices issued by non registered dealer. In the present case, the invoices issued by input service distributor is in the capacity registered of input service distributor. Therefore facts are different firstly it relates to the unregistered dealer and secondly receipt of inputs and dealers are different entities. In the present case the input service distributor is not different entity, it is part of the same entity and invoices were issued only after obtaining registration therefore facts of this case are entirely different, hence the Balmer Lawrie Co. Ltd. (supra) judgment cannot be made applicable in present case. As regard various judgments, Eagle Flask Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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