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2015 (12) TMI 1305 - CESTAT BANGALORE

2015 (12) TMI 1305 - CESTAT BANGALORE - 2016 (41) S.T.R. 842 (Tri. - Bang.) - Denial of cenvat credit to manufacturing activity on the ground that assessee is availing the benefit of composition scheme under works contract to pay service tax - Revenue was of the view that inasmuch as the manufacturing unit of the appellant and the service providing unit of the appellant is one and the same, the manufacturing unit having availed the credit of duty paid on the steel plates used in the manufacture .....

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wdavalli was raised.

Both the roles of the assessee are separately defined roles covered by different fields of law. i.e. one by the excise law and the other by the service tax law. Mixing up of the two cannot be appreciated. There is no prohibition under the law for one person to be a manufacturer as also a service provider. The activity of providing service starts from procurement of pipes, where the activity of manufacture of pipes ends. As such we find no justifiable and valid re .....

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wa As per facts on record, the appellant M/s Megha Engineering and Infrastructure Ltd (hereinafter referred to as Megha) is engaged in the manufacture of MS Pipes in their factory located at Gowdavalli, Hyderabad. They are availing the benefit of CENVAT credit of duty paid on MS Plates and other inputs procured by them for use in the manufacture of MS Pipes. The said pipes were being cleared by them on payment of duty of excise by utilizing the credit so availed. Howeverin some cases of clearanc .....

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were executing similar works contracts awarded to them by various commercial undertakings such as ONGC, APGENCO etc. for which purpose they have taken a centralized service tax registration at their registered office located at Balanagar Hyderabad. For the purpose of payment of service tax on the said services of works contract, they opted for composition schemes and were accordingly discharging their service tax liability. However, it is seen that the appellants were first availing the benefit .....

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rein subject to fulfillment of certain conditions. For better appreciation relevant Rule 3 is being reproduced below: 3.(1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in se .....

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cution of the works contract; b) excluding - (i) the value added tax or sales tax as the case may be paid on transfer of property in goods involved; and (ii) the cost of machinery and tools used in the execution of the said works contract except for the charges for obtaining them on hire: Provided that nothing contained in this Explanation shall apply to a works contract, where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any accou .....

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tract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract. As seen from above, the sub-rule 2 of the said Rule 3 is to the effect that the provider of taxable service shall not take CENVAT credit of duties paid on any inputs, used in or in relation to the said works contract. The appellants, for the purpose of providing the said services were procuring the duty paid pipes from their manufacturing .....

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excise duty on the pipes, would amount to as if the service providing unit has availed the CENVAT credit. Accordingly after making investigation, a show cause notice dated 02.04.2012 was issued to the appellant proposing to deny the irregularly availed CENVAT credit of ₹ 85.90 crores availed during the period June 2007 to December 2011. The notice also proposed confirmation of interest and imposition of penalty. 5. During the course of adjudication, the appellant took a categorical stand t .....

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pecifically contended that the manufacturing of the pipes at their separate manufacturing premises located at Gowdavalliis a separate role played by them as a manufacturer and as soon as the goods are cleared from their factory on payment of duty, such role gets complete and over. The role of a service provider starts thereafter from their registered office located at Balanagar, Hyderabad and the two roles are not required to be intermixed. Inputs for providing the works contract service is the .....

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wing relate to the same assessee, it has be held that the EPC contract obtained by the assessee, which involved execution of the works contract from the stage of procurement of material involved in Its execution would start from the stage of procurement of raw materials for the MS pipes. Inasmuch as the appellant has availed credit on the inputs used in the manufacture of the pipes and inasmuch as the appellant is one and only one, they would not be entitled to avail the said credit. Accordingly .....

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duly registered one as a manufacturer of pipes and the other as a service provider. At the time of manufacture of the pipes, the appellant is availing CENVAT credit of duty paid on the plates used in the manufacture of the pipes which is being utilized by them for payment of duty of excise on the pipes so cleared by them to independent buyers as also to their own unit located at the registered office. Such manufacturing activities fall under the realm of central excise and as per the central exc .....

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e pipes. The pipes so procured by them from the manufacturing unit could have been procured by them from an outside independent manufacturer also, in which case, there would have been no dispute about fulfilment of the condition of non-availment of the credit in terms of the composition scheme. In fact, the Commissioner in his impugned order has also observed that if the pipes would not have been produced by the service provider from their own manufacturing unit, there would have been no dispute .....

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ocurement of inputs used in the manufacture of pipes cannot be appreciated inasmuch as there was no obligation on the part of the service provider for manufacturing the pipes themselves. If the service provider was at liberty to procure the pipes from another manufacturer who could have availed the credit on the inputs used for the manufacture of pipes, the appellants as a service provider would have been entitled to the composition scheme inasmuch as admittedly they have not availed credit of d .....

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the said rule to the effect that when the manufacturer of the pipes (even though it happens to be same person) availed the credit of duty paid on the inputs used in the manufacture of such pipes, the composition scheme would not be available. As a manufacture of the goods, the appellant is entitled to avail the credit. 9. The problem can also be viewed from another angle. If the Revenue is of the view that the EPC contract entered into by the service provider starts from the stage of procuremen .....

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