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2015 (10) TMI 2401 - CESTAT MUMBAI

2015 (10) TMI 2401 - CESTAT MUMBAI - TMI - CENVAT Credit - credit of input services distributed by the Input Service Distributor - Jurisdiction - appellant submitted that show cause notice should have been issued to ISD located at Thane and not to them (unit availing credit). - Held that:- Distinction between the location of ISD and that of a manufacturing unit itself is immaterial. Credit is finally availed and utilised by the manufacturing unit. What learned counsel is trying to say is that sh .....

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is no requirement of assessment or self-assessment. Input service distributor is only receiving the invoices of service tax paid which in turn are being distributed to different manufacturing units/service providing units. ISD per se does not value, classify or decide the rate of duty relating to the services so received. Therefore there is no question of his assessing such services. All that he does is distributing the same. - Role of ISD is very different than that of a registered dealer .....

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urn which is a common heading for service provider as well as input service distributor, it cannot be claimed that input service distributor is making self assessment and that self assessment is required to be challenged. No rule provides for assessment/self-assessment by ISD. In view of the said position, we find that the claim of the learned counsel is required to be out rightly rejected and we accordingly do so. - In case of availment of cenvat credit the primary responsibility that the c .....

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h Pvt. Ltd. (2014 (12) TMI 699 - MADRAS HIGH COURT). - Demand with penalty confirmed - Decided against assessee. - APPEAL NO: E/89307/2013 & APPLICATION NO: E/MA(Ors)-93782/2015 - A/3360/15/EB - Dated:- 15-10-2015 - Shri P.K. Jain, Member (Technical) And Shri S. S. Garg, Member (Judicial) For the Petitioner : Shri S.S. Gupta, Chartered Accountant For the Respondent : Shri Ashutosh Nath, Asst. Commissioner (AR) ORDER Per: P.K. Jain: Brief facts of the case are that the appellant is a manufacturin .....

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s are not taxable either to service tax or excise duty. As a company, the appellant is availing services in the manufacturing unit, head office as also various branch offices. The input services are in relation to the manufacturing activity as also trading activities. As far as input services which are exclusively used in the manufacturing activity at Roha plant, appellants are taking credit and there is no dispute. However, there are services which are used both in trading and manufacturing, an .....

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86/- and recover it under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 along with interest and also for imposition of equal amount of penalty under Rule 15 of the Cenvat Credit rules, 2004 read with Section 11AC of the Central Excise Act, 1944. In addition, it is also proposed to deny credit of ₹ 1,11,444/- which is in relation to input services like cab, photography, club, association etc. and also services of share transfer agent and stoc .....

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confirmed the demand of ₹ 1,30,90,786/- and imposed equal amount of penalty along with interest on the said amount. Similarly, an amount of ₹ 1,11,444/- is also confirmed along with interest and equal amount of penalty. Aggrieved by the said order, the appellant is before this Tribunal. 2. Learned counsel for the appellant s submission is that the demand notice has been issued to Roha factory and is without jurisdiction. According to the learned counsel, the show cause notice should .....

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Bang.); (iii) Castrol India Ltd. reported in 2013 (30) STR 214 (Tri.-Ahmd.). It was also submitted that the ratio of the said judgment has to be followed by the coordinate Bench at Mumbai. 2.1. The next submission of the learned counsel was that the credit cannot be denied unless the assessment of distribution of credit made at the ISD is set aside. It was submitted that the manufacturing unit has taken the credit based upon the invoices issued by ISD and thus the assessment has been made by the .....

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was that the CBEC has issued letter No.137/68/2013-ST dated 10.3.2014 clarifying that the provisions of Rule 14 of the Cenvat Credit Rules, 2004 shall only be invoked for denial of the credit. The said Rule 14 is not applicable to ISD and therefore the credit shall be denied at the jurisdiction where it is distributed. It was submitted that the said letter of the CBEC is not binding on CESTAT as it is contrary to the law laid down by the CESTAT. 2.4. In the appeal filed, appellants have contend .....

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des Benz reported in 2014-TIOL-476 is not applicable in the present case. The learned counsel submitted that in view of the details furnished, it will be seen that the major credit relates to management, maintenance or repair and business auxiliary service. Therefore, the ratio of the judgment in the case of Mercedes Benz (supra) will not be applicable. 2.6. Next submission of the learned counsel was that bifurcation of credit between manufacturing and trading shall be based on value addition an .....

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ules, 2004 permits credit of various services specified in the said Rule unless the services is used exclusively in relation to the credit of exempted goods or providing exempted services. 2.8. Next submission of the counsel was that the demand needs to be recomputed based on the provisions of Rule 6(3D) made effective from 1.4.2011. It was further submitted that the demand is time barred inasmuch as the show cause notice has been issued beyond a period of one year and there was no suppression o .....

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d hence extended period of limitation is not applicable. 3. Learned AR submitted that Shri Arun V. Bavdekar, General Manager, in his statement on 21/01/2011, has stated that, in addition to manufacture, they do trading also and that the cenvat credit passed on by head office includes service tax credit in respect of services used in head office and the same is attributed to both manufactured goods and traded goods and the services are common services. Shri Anil Kumar Singh, Director s statement .....

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ot independent of the main part of the definition. For being eligible for input service, it is required that the input service should be used in or in relation to the manufacture of excisable goods. It was also submitted that the input services for which ISD invoices were raised were relating to management, maintenance and repairs, advertisement, business auxiliary service, banking and financial services, company secretary service, courier, clearing and forwarding etc. Learned AR further submitt .....

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ule 7 further makes it clear that the said Rule permits distribution of credit by an ISD. Onus that credit availed correctly lies with manufacturer and not ISD. It was further submitted that the recovery of the wrongly taken cenvat credit has to be from the manufacturing unit alone as per Rule 14. Learned AR submitted that the appellant when they took the registration as ISD has indicated only Roha unit and their head office. Thus, strictly speaking, there was no need for them to take registrati .....

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orrectly and hence there is no question of assessment by the input service distributor as input service distributor is only a distributor and does not pay any duty. It was also submitted that in the service tax invoices submitted by the appellant, the description of services and reference number/details are finding place and therefore the judgment of the Godfrey Philips is not applicable to their case. It was further submitted that since the cause of action has arisen in Roha unit, the jurisdict .....

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AR further submitted that the definition of the input service was considered by the Hon ble High Court of Bombay at Nagpur in the case of CCE, Nagpur vs. Ultratech Cement Ltd. reported in 2010 (20) STR 577 (Bom.) and in para 29 the Hon ble High Court observed that the expression activities in relation to business in the definition of input service postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business .....

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ported in 2008 (10) STR 382 (Tri.-Mum.), has held that credit is not admissible on services directly or only attributable to trading activities. It was further submitted that in the case of Synise Technologies Ltd. vs. CCE, Pune reported in 2015-TIOL-1036-CESTAT-MUM, the Tribunal has held that credit disallowed in proportion of trading turnover is correct. Learned AR further relied upon the judgment of this Tribunal in the case of Mercedes Benz India Pvt. Ltd. vs. CCE reported in 2014 (36) STR 7 .....

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mmission agreements etc. and extended period was correctly invocable. It was also submitted that it is an admitted position by the Director (Finance) that they have suppressed and not indicated to the department that they are carrying on the trading activities and the credit in relation to the trading activities was also being availed by them. In view of this factual position, extended period of limitation is correctly invoked. 4. We have considered the rival submissions. Learned counsel s submi .....

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be disallowed/reversed. Learned counsels effort are therefore, either to bring down liability or remand to re-compute the liability based on some other criterion (other than turnover) to be decided by the Tribunal. 5. The first issue raised by the learned counsel for the appellant is relating to jurisdiction. Before discussing the issue on jurisdiction, it is important to understand the function of a registered dealer under Excise Law and that of input service distributor for distribution of s .....

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re are three entities the manufacturer of the goods who has cleared the goods on payment of duty, registered dealer and thereafter the buyer (some time the manufacturer of the goods might have registered his depots as registered dealer but that will not make any difference). The role of input service distributor is totally different. Input service distributor is not a dealer or trader in services i.e. he does not buy and sell the services. Input service distributor receives the services for his .....

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t separately. Since the services may be across various offices or manufacturing unit, it is in order to sort out this difficulty of the trade, the concept of input service distributor was envisaged wherein a person having various manufacturing units or branch offices etc. would receive the invoices pertaining to services at one place i.e. office and thereafter distribute the credit of service tax to various manufacturing units. Thus, legally ISD as also its manufacturing unit is single legal ent .....

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led and utilised by the manufacturing unit. What learned counsel is trying to say is that show cause notice should be issued to head as hand has acted as per the direction of head. In our view, as rightly pointed out by learned AR, cause of action stands with availment and utilization of credit at the manufacturing unit. Of course, ISD and manufacturing unit are integrally connected, and both of them unitedly has to resolve the issue with the department. We, therefore, reject the plea regarding .....

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es of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be. It would be seen from the definition that input service distributor is neither a service provider nor a manufacturer, but it is only an office of service provider or manufacturer. Since input service distributor neither manufactures the goods nor provides the service, there is no question of input service distributor liable to pay any excise duty or service tax .....

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ervice to its manufacturing units or units providing output service, subject to the following condition, namely:- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; or (b) credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. It would be seen from the said Rule that input service distributor is expected to .....

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assessment or self-assessment by ISD. 5.2. Having examined the concept of input service distributor, we may discuss the issue of the jurisdiction raised by the learned counsel. In this context, findings of Commissioner in the impugned order are as under: 16.1. It would be relevant to examine the Cenvat Credit Rules 2004 (CCR) to get clarity on this issue. Rule 3 of CCR is the enabling provision for availing credit. It provides that a 'manufacturer or producer of final products' or a  .....

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l goods and input services respectively lies upon the manufacturer or provider of the output service talcing such credit. Further the ISD is only an office of the manufacturer or producer of final products or provider of output service. Hence the manufacturer or producer of final products or provider of output service cannot claim ignorance of what his own office is distributing to him. In this context it would also be relevant to examine the provisions relating to the BSD as seen in the CCR. Th .....

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vices to such manufacturer or producer or provider, as the case may be;" (emphasis added) The ISD hence receives the bills, challans, etc of service tax paid by their offices / units and distributes it to their own units involved manufacturing or producing or providing service as the case may be. It becomes 'Cenvat Credit' only when these units manufacturing or producing or providing service take the specifiedtaxes indicated in the document issued by the ISD as credit into their boo .....

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its manufacturing units or units providing output service, subject to the following conditions namely: (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; or (b) credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. 16.2. From the above, it is clear that the role of ISD is restricted to receive and distribu .....

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stributed the credit to their own unit, one of them being the noticee. Hence, it is the noticee who should exercise due diligence and precaution before taking and utilizing such credit passed on to them. This is more so in the case of self-assessment. Hence the onus of ensuring that credit is distributed correctly lies with the ISD, the onus that it is availed correctly as per the Act and Rules does not lie with the ISD but only with the 'manufacturer or producer of final products' or a .....

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aken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of section 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries." (emphasis added) 16.3. Hence while there is no provision enabling an ISD to avail Cenvat Credit, as he acts only as distributor, recovery of wrongly availed credit .....

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r passing on the credit does not contain the nature of service provided and the details of services. It contains the service provider's details, distributor's details and the amount. Obviously the eligibility or otherwise of the service tax credit has to be examined at the end of input service distributor only. This is further supported by the fact that both Central Excise assessees and Service Tax assessees are under the regime of self assessment and therefore it is the assessee himself .....

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risdictional officer with whom input service distributor has registered to decide the dispute regarding eligibility or otherwise of the service tax credit that the input service distributor has taken and proposes to pass on to others. 16.4. I find that the judgment does not elaborate on any legal provisions, especially the relevance or lack of relevance of Rule 3, 9 (5) & (6) and 14 CCR, that can lead to a demand to the ISD, or otherwise, for credit wrongly availed by a manufacturer / produc .....

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ll within its territorial jurisdiction and consequently the same is not binding on the courts outside such territorial jurisdiction. Thus, I find that the judgment of non-jurisdictional Courts / Tribunals is not binding and is only of persuasive value. I therefore hold that the show cause notice demanding the amount of Cenvat Credit from the noticee to be legal and proper. 5.3. We have also gone through the judgment in the case of Godfrey Philips India Ltd. The said judgment does not discuss Rul .....

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hi vs Gurnam Kaur (1989) 1 SCC 101 has held as under: 11. Pronouncements of law, which are not part of the ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to the learned Judge who passed the order in Jamna Das' case and to the learned Judge who agreed with him, we cannot concede that this Court is bound to follow it. It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corp .....

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hows, no argument was addressed to the Court on the question or not whether any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a PG NO 939 pavement squatter. Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th edn. explains the concept of sub silentio at p. 153 in these words: "A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of .....

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he case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio. 12. In Gerard v. Worth of Paris Ltd. (k)., [1936] 2 All E.R. 905 (C.A.), the only point argued was on the question of priority of the claimant's debt, and, on this argument being heard, the Court granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, therefore, thi .....

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r which it did; nevertheless, since it was decided "without argument, without reference to the crucial words of the rule, and without any citation of authority", it was not binding and would not be followed. Precedents sub silentio and without argument are of no moment. This rule has ever since been followed. One of the chief reasons for the doctrine of precedent is that a matter that has once been fully argued and decided should not be allowed to be reopened. The weight accorded to di .....

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principle in relaxation of the rule of stare decisis. The 'quotable in law' is avoided and ignored if it is rendered, 'in ignoratium of a statute or other binding authority'. (1944 IKB 718 Young v. Bristol Aeroplane Ltd. Same has been accepted, approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of precedents as a matter of law. In Jaisri Sahu v. Rajdewan Dubey, [1962] 2 SCR 558 this Court while pointing out the proce .....

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precedents. It has been explained as rule of sub-silentio. A decision passed sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular' point of law involved in the decision is not perceived by the Court or present to its mind' (Salmond 12th Edition). In Lancaster Motor Company (London) Ltd. v. Bremith Ltd., [1941] IKB 675 the Court did not feel bound by earlier decision as it was rendered 'without any argument, without reference to the cru .....

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o be a law declared to have a binding effect as is contemplated by Article 141. Uniformity and consistency are core of judicial discipline. But that which escapes in the judgment without any occasion is not ratio decedendi. In Shama Rao v. State of Pondicherry, AIR 1967 SC 1680 it was ob- served, 'it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles, laid down therein'. Any declaration or conclusion arrived without app .....

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consideration of an issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. That which has escaped in the judgment is not ratio decidendi. This is the rule of sub-silentio, in the technical sense when a particular point of law was not consciously determined. (See State of U.P. Vs. Synthetics & Chemicals Ltd. 1991 (4) SCC 138, para 41). 5.4. In view of this position, the decision of this Tribunal in the case of Godfrey Philips India Ltd. and fol .....

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tions where goods were cleared by a manufacturer on a particular value, classification or rate of duty. When such goods were being received by another manufacturing unit and were being used as inputs in further manufacturing, the range officials in such unit were questioning value, classification or rate of duty paid by the original manufacturer. In those situations, this Tribunal has been taking a view that these aspects are to be assessed by the jurisdictional officer where such inputs have be .....

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different manufacturing units/service providing units. ISD per se does not value, classify or decide the rate of duty relating to the services so received. Therefore there is no question of his assessing such services. All that he does is distributing the same. 5.6. As mentioned earlier, the role of ISD is very different than that of a registered dealer and it is because of this reason that there is a separate return in case of a registered dealer which is not so in case of ISD. In case of ISD, .....

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) that they have distributed cenvat credit correctly. Based upon the heading given in the return which is a common heading for service provider as well as input service distributor, it cannot be claimed that input service distributor is making self assessment and that self assessment is required to be challenged. No rule provides for assessment/self-assessment by ISD. In view of the said position, we find that the claim of the learned counsel is required to be out rightly rejected and we accordi .....

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nd therefore there is no difference of opinion between us and the coordinate Bench so as to refer the matter to the Larger Bench. Rule 3, 9(5), 9(6) and Rule 14 have not been examined in that case. 5.8. Another submission made by the learned counsel was that the CBEC letter No.137/68/2013-ST dated 10.3.2014 is not binding on the CESTAT as it is contrary to the law laid down by CESTAT. In our view, the letter is not contrary to any decision of CESTAT. In fact the letter speaks of Rule 14 of the C .....

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uld like the amount to be recovered as the amount cannot be recovered both from the head office as also the manufacturing unit. It is after the said oral directions of the Tribunal, the matter was referred by the Commissioners to the Board and the said clarifications have been issued. If there was a contrary interpretation or decision on any legal issue between CESTAT and the Board, then the decision of CESTAT has to prevail but that is not the case here. Here the issue is only of the jurisdicti .....

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the manufacturing unit and the Revenue is asking them only to pay back the incorrectly availed cenvat credit. We therefore do not find any force in the arguments of the counsel and is therefore rejected. In our view, the letter of the Board is correct and is in order. 5.9. All the pleas relating to jurisdiction like show cause notice should be to ISD i.e., their head office by the jurisdictional Commissioner are rejected. 6. One of the contentions in the appeal filed by the appellant is that th .....

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to be noted that the definition of input service in the Cenvat Credit Rule is any service used by the provider of taxable service for providing output service or used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal. However, inclusive part of the definition list out certain services and as held by various courts that these services have to relate with the business of manufacture .....

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pted turnover, the value of trading i.e. without deduction of cost of goods sold shall be considered as value of exempted turnover and quoted para 17 of the said judgment. It was further submitted that Tribunal has not laid down general proposition. We have gone through the said judgment and one of us was in the Division bench that decided the said case. The issue in para 17 was that a particular assessee is manufacturing and also undertaking trading and trading is not considered as service (bei .....

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te the portion of service used for trading and manufacturing, the only way is to have some broad criteria which would be just and reasonable. However, no such criteria will be perfect. It was in that context that during the argument of that case the learned senior counsel submitted that in the case of trading, the value addition is 10% or near about that and because of that reason, in respect of the trading 10% of the value of the trading is taken while for manufacturing the whole value is taken .....

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o product. Hence, value addition criterion is not practically feasible to be used. Instead of value addition, simple and more appropriate criteria will be the ratio of total turn over of the trading goods, and that the manufactured goods and apportion of the input credit on services in the same proportion. Incidentally in the case of Mercedes Benz India Pvt. Ltd. (supra) on analysis it was also found that the main common input service were advertising event management, business auxiliary service .....

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anufactured goods. In view of the above analysis we are unable to agree with the contention of the learned counsel for the appellant and in our view the ratio of the judgment in the case of Mercedes Benz equally apply in the present case, and all other cases of similar nature. 8. We also note that the learned counsel of appellant has given a table indicating categorywise break up of credit and submitted that the credit mainly relates to management, maintenance or repair service and business auxi .....

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to the turnover of traded goods and the manufactured goods. Learned counsel has not been able to provide any alternative solution. Just saying value addition will not help. We do not consider value addition in the present case will lead to more just and reasonable criteria. In our considered view, the submission made by the appellant requires to be out rightly rejected. 9. Another submission of the learned counsel is that credit of services specified in the definition of input service after phr .....

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rvices which are common for manufacturing and trading are therefore used in connection with their business and the definition of input service as per Rule 2(l) specifically includes activities relating to business and therefore, they are entitled to take the credit of the same. We are not impressed with the said argument of the Ld.Sr.advocate. The term "input service" is defined under Rule 2(l) as "input service" means any service,- (i) used by a provider of taxable service f .....

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ment of inputs, activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; (Emphasis supplied). We observe the definition of "input service" has two parts. The first part provides for use by a provider of a taxable service for providing output service .....

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iness such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security. Thus we observe that second part of the definition includes services which are required for setting up of the factory or marketing of the goods. For example, advertisement or sales promotion or market research or storage upto the place of removal etc. are activities which may not be directly used in the manufacture of the goods bu .....

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to be related to the final products being manufactured by that manufacturer. Thus, if advertisement is relating to the goods manufactured by the manufacturer, then the manufacturer would be entitled for the credit of the same as an input service. Similarly, if the manufacturer's activity relating to accounting, financing, recruitment and quality control etc. are relating to the goods manufactured by him, then the manufacturer would be entitled to the credit of tax paid on input service. In o .....

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S.T.R. 482 (Tri-Bang.). This Tribunal by majority view observed as "30.2 The proposed order by the Hon'ble Member (Technical) allowing the credit in respect of five services and the proposal to remand for fresh consideration of the eligibility of nine services has been made in the light of decision in Coca Cola case holding that "all services which constitute activities related to business need not have a nexus with manufacture in a manner different from what was found in the Coca .....

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the business of the manufacture of final product, the service would not qualify to be a input service under Rule 2(l) of the 2004 Rules." In view of the above judgment, he was of the opinion that "a manufacturer claiming the benefit of CENVAT credit on any service under Rule 2(l) on the premise that the service is covered by the above expression should establish an integral connection between the activity/service and the business of manufacturing the final product." 31.1 I find th .....

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tter decision of the Hon'ble High Court of Bombay, Nagpur Bench in the case of Ultratech Cement Ltd. has dealt with the scope of the said phrase and held as under : "29. The expression "activities in relation to business" in the definition of "input service" postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qua .....

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must have nexus with the business of the assessee. The expression relating to business' in Rule 2(l) of CENVAT Credit Rules, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee." 31.4 On the other hand, a close perusal of the decisions relied upon by the learned advocate for the appellant, reveals that the said decisions did not interpret the expression relating to business'. 31.5 In v .....

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the cars in the Indian market viz. trading activity. In view of above position, we are of the view that the credit of input services which are used both in the manufacturing and trading cannot be entirely allowed. It will also be interesting to see various common services of which credit has been taken and are matter of dispute in the present case. The main common services on which the credit has been taken are advertisement, event management service, business auxiliary services, business suppor .....

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ncing, recruitment and" Thus the services used in activities such as accounting, auditing, financing, recruitment etc. are only to be allowed. The services under dispute are mainly advertisement, even management, business auxiliary, business support services. None of these services are relating to activities illustrated or enumerated in the definition. On this ground also we do not find any merit in the contention of the appellant assessee that they would be entitled to the credit of common .....

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anufactured goods and also the traded goods. In view of the said position the contention of the learned counsel is required to be rejected. We accordingly do so. 11. Another contention of the learned counsel was that the bifurcation of the credit between manufacture and trading shall be based on value addition and not on the basis of turnover of manufacturing and trading. Computation based upon value addition is not practical proposition. Even what constitutes value addition will be subject to d .....

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he Ld. Sr. advocate has argued that the amendments made in 2011 are substantive in nature even though the amendments have been introduced in the form of explanation. The explanation starts with the word "For removal of doubts". The same cannot be applied retrospectively, particularly, the said view is also supported by the fact that the said Notification was issued on 1.3.2011 and was to come in to force only from 1.4.2011. Moreover, Rules are delegated legislation and Government has n .....

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emoval of doubts..". In this context, Hon'ble Supreme Court in para 24 has observed "24. . If by reason of the said explanation, the taxing net has been widened, it cannot be held to be retrospective in operation. No doubt, the explanation begins with the words for removal of doubts'. Does it mean that it is conclusive in natureRs. In law, it is not. It is not a case where by reason of a judgment of a court, the law was found to be vague or ambiguous. There is also nothing to .....

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Explanation was inserted in Rule 6 of the Service Tax Rules, 1994, w.e.f. 10-5-08 :- "Explanation. - For the removal of doubts, it is hereby declared that where the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable t .....

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inserted in Rule 6 of the Service Tax Rules. The Legislative intention behind the amendments was explained by the Board as for plugging avoidance of tax on the ground of non-realization of money from associated enterprises and the intention of the Legislature in bringing the amendments is to introduce a new provision and not to remove any doubts in the existing provision. It is not, nor can it be, anybody's case that Explanation shall always take effect retrospectively. In the case of Commis .....

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that date. In the instant case also, Notification No. 19/08 introducing Explanation to Rule 6 of the Service Tax Rules, 1994 contains a provision that it shall be effective only from the date of its publication. The amendment to Section 67 is a substantive one and will be applicable only from the date of its introduction and not retrospectively, eventhough the Explanation uses the expression "for removal of doubts". The decision of the Tribunal in CCE, Pune v. Bajaj Auto Ltd. [1999 (1 .....

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f transactions between associated enterprises, service tax has to be paid immediately on entry of the transaction in the books of account." Similar view has been taken by this Tribunal in the case of Sitara Exports Ltd. vs. Commr. Of Central Excise, Vapi reported in 2010 (255) ELT 117 (Tri-Ahd). 15. We find considerable force in the arguments of Ld. Senior Advocate for the appellant that changes made by Explanation are substantive in nature. Explanations have been made in Rules by a Notific .....

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the learned senior counsel had argued that the provisions are substantive in nature. This Tribunal has agreed with the view of learned senior counsel. In our view, if an amendment in a provision results in change of financial liability, the amendment is required to be considered as substantive. On the other hand, if amendment does not change the financial liability it can be considered as procedural. In the present case, the provisions of Rule 6(3D) changes the financial liability in a big way .....

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an exempted service during the period prior to 1.4.2011 and the amended provision with effect from 1.4.2011 will not have retrospective effect. The next issue to be decided is how to apportion the credit of input service taken by the appellant, where such input services have been used both in the manufactured goods and trading activities of the imported goods. It is in this context that the ld.Sr.Advocate for appellant has argued that the same should be computed with reference to clause (c) of E .....

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f the goods which is not so in the case of manufactured goods. On a query by the Bench that since Ld.Sr. advocate is arguing that only the value addition should be taken in respect of the traded goods, then why the same criteria should not be applied in the case of manufactured goods i.e. take the differential amount between the selling price and cost of various raw materials Ld.Sr. advocate stated that in case of manufactured goods so many things go into production process like labour, electric .....

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, the issue was how to determine the turnover for purpose of value added tax in case of transactions in different currencies by the First National Bank of Chicago. The Bank used to purchase various currencies at a certain rate in other currencies. Similarly, the Bank used to sell various currencies in other currencies. The difference between the two is generally understood as spread and would be the income of the Bank. The question was what should be considered as the turnover for purpose of VAT .....

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ctured goods and traded goods for apportioning the credit of the service tax on input services or some other criteria should be followed. We, therefore, do not find any applicability whatsoever of the said judgment in the facts and circumstances of the present case. Another judgment quoted by the Ld.Sr. Advocate is the judgment of the Hon'ble Supreme Court in the case of Commissioner of Wealth Tax, Meerut vs. Sharvan Kumar Swarup & Sons reported in (1994) 6 SSC 623 = (2002-TIOL-684-SC-WT .....

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as mentioned earlier, it is not the computation of tax but apportionment of the credit of service tax on input services availed for manufactured goods and traded goods. As we have already held that trading was not a service and therefore cannot be considered as an exempted service before 1.4.2011, therefore, the substantive provision itself did not exist before the said date. Under the circumstances, we are of the view that the said judgment is not applicable in the facts and circumstances of t .....

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h was passed on 20/02/2014) has taken a contrary view. The Tribunal being a higher forum, decision of the Tribunal will prevail. The decision by the Commissioner in the case of Godrej Boyce & Manufacturing Co. Ltd., in our view is incorrect and need not be taken into consideration. 17. The learned counsel has also quoted certain judgments that there must be uniformity in application of laws on all the assessee. While there can be no dispute about such a proposition, however, on any issue, th .....

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ld be applied in all cases but uniformity should with reference to the correct interpretation. Since this Tribunal has taken a particular view that view is required to be followed by all lower authorities. The case of the Godrej has been adjudicated by the Commissioner when the decision of the Tribunal was not available. 18. learned counsel for the appellant has submitted that they should be given the benefit of the then Rule 6(5) of the Cenvat Credit Rules, which provides entire credit of servi .....

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