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M/s MSPL Limited Versus Commissioner of Central Excise (Vice-Versa)

2016 (7) TMI 154 - CESTAT BANGALORE

Refund of accumulated input service tax Cenvat credit. - Department denied Cenvat credit mainly stating that the activity of extraction, crushing, grinding, sorting and washing of iron ore undertaken by the assessee does not amount to manufacture under Section 2(f) of the Central Excise Act and therefore, no duty is payable under Section 3 of the Central Excise Act and the goods, therefore, cannot be termed as excisable. - Held that:- In this regard, there are number of decisions of the hig .....

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al - Held that:- here exports are on FOB basis, place of removal is port and not factory gate. Therefore, in the present case, M/s MSPL Ltd. are entitled to the Cenvat credit for all the input services for bringing the goods upto the port of shipment. - Revenue's appeal dismissed - Assessee's appeals accepted - Decided in favor of assessee. - ST/224/2008-DB, ST/411/2008-DB, ST/483/2009, ST/484/2009 & ST/485/2009-DB - Final Order Nos. 20332 to 20336/2016 - Dated:- 20-1-2016 - Shri M.V. Ravin .....

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als are given in the Tables 1 & 2 below : Table 1 - Appeals filed by M/s MSPL Ltd. UNIT IMPUGNED ORDER APPEAL Nos. CENVT/ST & PENALTIES (RS) PERIOD MSPL EOU I O-IN-O No 5/09 dated 20.3.2009 ST/483/09 2,09,23,320/- & penalty of 2000/- for each credit entry in CENVAT A/C April 2007 to March 2008 MSPL EOU II O-in-O No 6/09 dated 20.3.2009 ST/484/09 93,64,460/- & penalty of 2000/- for each entry in CENVAT A/C April 2007 to March 2008 MSPL EOU II O-in-O No 7/09 dated 20.3.2009 ST/485/ .....

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sallowed in O-in-O 19/2007] 4/2006 to 6/2006 And 7/2006 to 9/2006 MSPL EOU I Order-in-Appeal No 8/2008 CE dt 5.3.2008 decided in favour of the assessee ST/411/08 53,533/- refund of unutilized Cenvat credit rejected [O-in-O 20/2007] 4/2006 to 8/2006 2. In case of the appeals Nos. ST/483 to 485/2009 wherein M/s MSPL Ltd. have filed appeals against the Orders-in-Original Nos. 5/2009, 06/2009 & 07/2009 dated 20.3.2009, the matter mainly concerns with disallowance of CENVAT credit of various amou .....

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s follows : The Appellants submit that they have taken CENVAT Credit on Sampling & Analysis and Testing service, Audit Service, Commercial & Industrial Construction Service, Manpower Supply, Security Service, Maintenance and Repair of plant and machineries, CHA service, Port Service, Cargo Handling Service and Goods Transport Agency service received and used in the EOU and for export of iron ore. The Commissioner has disallowed the cenvat credit on the following grounds: (i) The activity .....

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on No 4/2006 CE dated 1.3.2006 is not applicable to EOU is not acceptable. (iii) The contention that FOB Value is the transaction value, the exporter is the owner of the export goods, the exporter has borne the cost of services in relation to clearance from the factory until the goods were delivered/loaded in the vessel and accepted by the Captain of the ship for delivery to the buyer, the criterion for determining the place of removal was the place where the transaction of sale takes place, t .....

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n three appeals Nos. ST/483 to 485/2009 on identical grounds. 4.2. In Appeal No ST/485/09 against Order-in-Original No 7/2009 the Commissioner has recorded in Para 15.1 that prior to substitution of Rule 2 (p) of the CENVAT Credit Rules, 2004 with effect from 1.3.2008, there is no restriction for utilization of CENVAT Credit by the manufacturing Unit towards payment of service tax on GTA service as provider of output service. However, in Para 15.2, it is recorded that since it is held that CENVA .....

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der : The activity of extraction, crushing, grinding, screening, sorting, washing, grading, etc of iron ore undertaken by the EOU does not amount to manufacture under Section 2 (f) of the Central excise Act, 1944 and no duty of excise would be payable under Section 3 of the CEA, 1944 is contrary to law. 4.4. Para 9.36 of the Foreign Trade Policy (FTP) 2004-09 defines manufacture , as under : Manufacture means to make, produce, fabricate, assemble, process or bring in to existence, by hand or by .....

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oreign Trade (Development and Regulation) Act, 1992 governing the 100% EOUs for the purpose of manufacture and export of goods comes within the inclusive definition of manufacture under Section 2 (f) of the Central Excise Act, 1944. 4.6. The Appellants rely on: (i) Tirumala Impex Vs CCE, Visakhapatnam [2010 (251) ELT 240 (T)] (ii) Hewlett Packard India Sales (P) Ltd Vs CCE, Bangalore [2009 (241) ELT 545 (T)] 4.7. Goods produced in EOU are not exempted goods: The SCN and the impugned orders state .....

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in the case of Sahajanand Technologies (P) Ltd Vs CCE, Daman - 2007 (210) ELT 108 (T) has held that the exemption notification issued under Section 5A will not be applicable in respect of clearances effected by 100% EOUs unless specifically provided for in the notification itself. The EOUs are required to pay excise duty on iron ore cleared in DTA. 4.8. Rule 6 not applicable to excisable goods exported: The iron ore classified under CHH 2601 is excisable goods. The iron ore produced in the EOU .....

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) ELT 614 (Bom)] (ii) CCE, Delhi Vs Punjab Stainless Steel [(234) ELT 605 (Del)] (iii) CCE Vs Drish Shoes Ltd. [2010(254) E.L.T. 417 (HP)] (iv) Union of India Vs Sharp Menthol India [2011 (270) ELT 212 (Bom)] (v) Neo Foods Pvt Ltd Vs CC [2009 (242) ELT 562 (T - Bang)] 4.9. In view of the above, the disallowance of credit by invoking Rule 6 of the Cenvat Credit Rules, 2004 is contrary to law. 5. The appellants, M/s MSPL Ltd. Further submits as follows : 5.1. Place of removal means (i) A factory .....

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E Vs Accurate Meters Ltd. - 2009 (235) ELT 581 (SC) in the context of interpretation of place of removal as defined in Section 4 (3) (c) of the Central Excise Act, 1944 has held that indisputably, a place where the excisable goods are sold can be a place of removal. 5.1.2. The transaction of sale is thus at the port where the goods cross the customs frontiers. 5.2. With reference to the place of removal , the appellants rely on CBEC Circular No 97/8/2007 ST dated 23.8.2007 in the context of CENV .....

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) the freight charges were an integral part of the price of the goods. In such cases the credit of service tax paid on the transportation up to such place of sale would be admissible. The Hon High Court of Punjab and Haryana in the case of Ambuja cements Ltd Vs Union of India - 2009 (236) ELT 431 (P & H) has approved the said circular. 5.3. The appellants further argue that the Hon High Court of Gujarat in the case of CCE Vs Dynamic Industries Ltd - 2014 (307) ELT 15 (Guj) has held that wher .....

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(i) Ashirvad Pipes Pvt Ltd Vs CCE, Bangalore [2012 (31) STR 693 (T- Bang)] (ii) Oriental Containers Ltd Vs CCE [2012 (28) STR 397 (T- Mum)] 6. In case of the appeals Nos. ST/224/2008 and ST/411/2008 filed by the Revenue, M/s MSPL Ltd. argue as follows : The Grounds of Appeal by the Department have not challenged the finding of facts and eligibility of the EOUs to take CENVAT credit on various input services used up to the port for export of goods. The Department has accepted the decision of the .....

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show that while holding the assessee as eligible for CENVAT credit of service tax paid on various services received up to the port and refund of accumulated CENVAT credit there is a specific direction to the adjudicating authority to sanction refund claims after due verification along with interest. The Ld. Assistant Commissioner of Central Excise, Bellary has subsequently verified the refund claims and passed a detailed Order-in-Original No 31/2008 dated 26.4.2008 sanctioning refund of CENVAT c .....

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MSPL EOU-I. The Appellants submit that the orders sanctioning refunds have not been challenged and have attained finality. Therefore, the Appeals filed by the Department are infructuous and is required to be dismissed. 7. In case of appeals Nos. ST/483 to 485/2009, the Revenue s main stand is that the credit of service tax paid on various input services like sampling and analysis audit service , security agency supply maintenance and repair , technical testing & calibration , commercial or .....

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yable under Section 3 of the Central Excise Act, 1944. 7.1. The Departments further contention is that once it is held that no duty of excise is payable on the process such as crushing, grinding, screening and washing of iron ore undertaken by M/s MSPL Ltd. EOU-I, no CENVAT credit is admissible to M/s MSPL Ltd. 7.2. The learned A.R. for Revenue has reiterated the findings of the impugned order(s) and state that the credit of service tax paid on various services such as sampling and analysis ser .....

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r disputed the fact that the place of removal in the instant case, is a place other than factory. The Department states that the contentions of M/s MSPL Ltd. regarding place of removal are not acceptable. 7.4. In case of appeals Nos. ST/224/2008 & ST/411/2008, the Department s main submissions are as follows : M/s MSPL Ltd. are not entitled to refund of unutilized Cenvat credit and the Commissioner s(Appeals) orders Nos. 07/2008 & 08/2008 dated 5.3.2008 have to be set aside and the matte .....

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in all the orders passed by the Commissioner of Central Excise. In fact, many of the services appear to be not covered under the definition of input service and the assesee are not eligible to take credit of service tax paid by them. The Commissioner (Appeals) ought to have taken into consideration that all the services mentioned may not be eligible to be treated as input service as defined under Cenvat Credit Rules, 2004. The Commissioner (Appeals) was to remand the case back to the original ad .....

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redit to M/s MSPL Ltd. M/s MSPL Ltd. have filed three appeals (Nos. ST/483 to 485/2009) where Cenvat credit has been disallowed and duty demand along with interest has been confirmed against them. 10. We find that on this subject matter, there has been precedent decisions available. The Department has denied Cenvat credit mainly stating that the activity of extraction, crushing, grinding, sorting and washing of iron ore undertaken by the assessee does not amount to manufacture under Section 2(f) .....

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process or bring in to existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling, re-conditioning, repair, remaking, refurbishing, testing, calibration, re-engineering. Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. 10.2. C.B.E.C. Circular .....

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nd Jewellery Export Promotion Schemes - Regarding. xxx xxx xxx (ii) Extension of CENVAT credit to EOUs : 4. At present, EOUs (including STP/EHTP 4. units) are allowed to import as well as procure goods from domestic tariff area without payment of duty. Therefore, there was no necessity for extending CENVAT credit facility to them. However, some EOUs have to procure their raw materials on payment of duty also. As a trade facilitation measure, it has been decided to allow EOUs (including STP/EHTP .....

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s as specified in CENVAT Credit Rules, 2004, will apply. However, as regards job work, the EOU/EHTP/STP shall not be allowed to send the goods directly to the job worker without bringing the goods to the units (as the goods will then not acquire the status of EOU goods) and will be governed by Board s existing Circulars on this issue relating to EOU/EHTP/STP. 7. Rule 17 of the Central Excise Rules, 7. 2002, has been amendment suitably by Notification No. 18/2004-C.E. (N.T.), dated 6-9-2004, to a .....

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distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling, reconditioning, repair, remaking, refurbishing, testing, calibration, re-engineering. Manufacture , for the purpose of this Policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining 10.4. The Department - Revenue s contention is that because of provisions of Rule 6 (1) to (4) of .....

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ed products are exported outside India, provisions of Rule 6(6) (v) of the Cenvat Credit Rules, 2004, will be applicable which states that provisions of Rule 6 (1) to (4) will not be applicable for the excisable goods removed without payment of duty after they are cleared for export under bond in terms of the provisions of Rule 2 of the Central Excise Rules. In order to make the subject matter clear, the relevant provisions of Rule 6 of the Central Excise Rules, 2004 and provisions of Rule 6 of .....

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(3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either - (i) ..... (ii) ..... (iii) ..... (iv) ..... (v) cleared for export under bond in terms of provisions of the Central Excise Rules, 2002 . (emphasis supplied) The petitioners had manufactured both dutiable and exempted final product (packaged software and printed books respectively). The petitioner has taken credit on input used in the manufacture of dutiable as well as exempted final produ .....

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our opinion this is wholly impermissible. The provisions as now contained in Rule 6 of the Credit Rules, 2004 were contained in Rules 57C and 57CC of the Central Excise Rules, 1944 as they stood prior to 1st April, 2000. From 1st April, 2000 till 30th June, 2001 similar provisions were contained in Rule 57AD of the Central Excise Rules, 1944. In the context of these Rules circular dated 8th November, 2001 of the Ministry of Finance was issued. It dealt with the question whether 8% has to be pai .....

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as been explicitly provided what was implicity in erstwhile rules 57C and 57CC. Further, the present rule 57AD(4) clearly goes on to show that the exempted goods are eligible to be exported under bond. To interpret otherwise will render the new rule 57AD(4) redundant. In view of the foregoing in this case the provisions of sub-rule 57C(1) are satisfied as stipulated under Rule 57C(2) as well as Rule 57CC(6)1 and there was no need to comply with the provisions of rule 57CC1). Therefore, it is cle .....

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the sale price of the printed books not so exported. Even though Rule 6(1) of the Cenvat Credit Rules, 2004 provides that no Cenvat credit will be available in respect of the inputs used in the manufacture of exempted products, Rule 6(6)(v) of the Cenvat Credit Rules creates an exemption inter alia in respect of the excisable goods removed without payment of duty for export under bond in terms of Central Excise Rules, 2002. Considering the language of Rule 6(6)(v) of the Cenvat Credit Rules, 200 .....

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d goods under bond but the same was not available with effect from 9th September, 2004 under Cenvat Credit Rules, 2004. We may reproduce Rule 6(5) of the Cenvat Credit Rules, 2002 (emphasis supplied) which reads as follows : (5) The provisions of sub-rule (1), sub-rule (2), sub-rule (3) and sub-rule(4) shall not be applicable in case the exempted goods are either - (i) cleared to a unit in a free trade zone; or (ii) cleared to a unit in a special economic zone; or (iii) cleared to a hundred per .....

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995; or (vi) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002. We may reproduce Rule 6(6) of the Cenvat Credit Rules, 2002, which read as under :- "The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either - (i) cleared to a unit in a special economic zone; or (ii) cleared to a hundred per cent export oriented undertaking; or cleared to a unit in an Electronic Har .....

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al Excise Rules, 2002; or (vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting. A perusal of the aforesaid Rules would clearly show that sub-rule (i) to (vi) are identical and the difference in Rule 6(6) of the Cenvat Credit Rules, 2004 and Rule 6(5) of the Cenvat Credit Rules, 2002 is not relevant for the purpose of the present case. Rule 6(1), 6(2), 6(3) and 6(4) of the Cenvat Credit Rules under Cenvat Cred .....

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t the term exempted goods may not cover the dutiable goods which are exported under bond. Therefore, in order to widen and cover both dutiable and exempted goods exported under bond, Rule 6(6) of Cenvat Credit Rules, 2004 uses the expression excisable goods . As an illustration, if a car which is dutiable is exported under bond without payment of duty there may be doubt as to whether credit on the inputs will be available, since the car is cleared without payment of duty under Rule 6(5) of Cenva .....

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Steel [2009 (234) E.L.T. 605 (Del) which states that the manufacturer would be entitled to refund of duty paid on inputs even when the goods were otherwise exempted from payment of duty; and an exporter of exempted goods cannot be put to a disadvantageous position. Further the Hon ble High Court of Himachal Pradesh in the case of CCE Vs. Drish Shoes Ltd. [2010 (254) ELT 417 (HP)] clearly held that sub-rule 6 (6) of Cenvat Credit Rules, 2004 applies to both the exempted as well as dutiable goods .....

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e term used in sub-rule (6) is excisable goods and not exempted goods, as was the case in Rules of 2002. 10.4.3. In respect of the interpretation of the wordings place of removal , the Departments contention is that input services used for bringing the goods to the port of export cannot be covered under the term input service as in case of M/s MSPL Ltd., the Department considers the factory as the place of removal . The Departments assumption and contention is that sale of the goods took pla .....

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