TMI Blog2017 (2) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... s. On going through the said notification and the Circular no. 875/13/2008-CX dt. 16.10.2008 issued in this regard we find that though centralized registration was allowed, but it is specifically mentioned that provisions governing eligibility to claim the CENVAT Credit would be applicable as earlier. The issue of eligibility of CENVAT Credit on input service where the Input service distributor is not registered has been settled by the Gujrat High Court in the case of CCE Vs. Dashion Ltd. [2016 (2) TMI 183 - GUJARAT HIGH COURT] - it is clear that to avail input service credit, the registration of head office/registered office is not mandatory, however, it is necessary to ascertain the documents on which these units had availed credit as there have been claims and counter claims - In the Departments contention, all relevant documents on which input service CENVAT credit availed, had not been placed before the adjudicating authority, whereas, the claim of the appellant is that the relevant input service invoices were submitted before the authorities in September 2007. Hence, in our opinion, to verify the claim, it is necessary to remit the case for verification of the documents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od Jan.2007 to June 2007. The Appellants had paid back the said CENVAT Credit in cash against GAR7 challan on 24.09.2007 and 28.11.2007 under protest. Subsequently, a Show Cause Notice was issued to them on 24.12.2007 and adjudicated by the learned Commissioner on 31.03.2008, who confirmed recovery of CENVAT Credit and imposition of penalty under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. 1.2 Appeal No.E/1788-1790/2008: In these Appeals also, the officers of the Central Excise Department visited the two other locations of the Appellant viz. Maninagar and Jamalpur on 17.09.2007. During the course of investigation, it was noticed by the officers that besides availing CENVAT Credit on various capital goods, inputs and input services at these locations, the Appellant had also availed CENVAT Credit of capital goods, input and input services in relation to various distribution points/daughter stations, wherefrom the CNG had been distributed by the Appellant to the consumers. On recording the statements and carrying out further investigation, it revealed that the Appellant had availed CENVAT Credit on capital goods/inputs w.e.f. Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istributed to CNG stations for conversion into compressed natural gas to be filled into the vehicles. The natural gas received from CGS is compressed with the help of compressors at 240 to 250 Bars kg/cm sq. The said compressed CNG later sold/dispensed through dispenser at the CNG stations/outlets. The dispensers at the CNG stations/outlets are directly connected through tubing of the compressors/cascades. Simultaneously, the compressed CNG in online/mother CNG station is filled into mobile cascades at a pressure of 240-250 bars/kg cm.sq and transported to daughter stations/outlets for retail sale. 3.1 It is his contention that that even though the Appellant has applied for centralized registration on 11.10.2005, but due to the pendency of such application, they received separate Central Excise registration for their premises at Memco, Jamalpur and Maninagar. Further, he has submitted that during the period in question, the appellant had their business operation of distribution of CNG through 14 online stations, 6 daughter stations and 6 daughter booster stations situated at various locations in Ahmedabad. He has further submitted that the Appellant had paid CENVAT Credit on inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby becomes non-marketable at the daughter stations. To ensure that the pressure at daughter stations is maintained, at most of the daughter stations, boosters have been installed. Since all vehicle owners cannot come to mother stations, for injecting CNG into their vehicles, hence the place of removal of CNG also to be considered as daughter station from where the same is sold/injected to the vehicle owners/users. He has vehemently argued that the activity of compression continues and integrated one, and the natural gas must remain compressed under pressure at all times for it to be marketable from the place of removal. 3.4 The learned Advocate Shri Deven Parikh further submitted that the definition of compressed natural gas prescribed under Section 2(l) of Petroleum Natural Gas Regulatory Board, 2006, reveals that if the pressure of CNG falls below 200 bars, it does not remain compressed natural gas. Recompressed booster stations are not connected with steel pipeline network. It has compressor for making CNG out of natural gas as well. By the very nature of the product, the pressure in cascade reduces, therefore, the gases cannot be sold as CNG as per the said statutory def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he peculiar nature of goods, and the context in which the same has been sold, would be the extended factory i.e. daughter stations. Further, he has submitted that as place of removal is the place where CNG is dispensed into the vehicles, mother stations, online stations, daughter stations, and daughter booster stations, and Central Excise duty has been paid on the value on which the CNG sold to customers; the place where CNG dispensed into vehicles ought to be the place of removal. Therefore, inputs, capital goods and input services used at the place of removal is eligible to CENVAT Credit in view of the judgment in the case of CCE Nagpur Vs Ispat Industries Ltd 2015 (324) ELT 670 (SC), Sports Leisure Apparel Ltd Vs CCE Noida 2016-TIOL-887-CESTAT-ALL. 3.6 It is further submitted that Commissioner has denied CENVAT Credit on dispensers on the ground that the same were used outside the factory for manufacture and had no role to play in the manufacture of CNG. Countering the said observation, he has submitted that the dispenser is a measuring instrument used in conjunction with storage cascasdes for effecting delivery of CNG by a specified volume. The dispensers continuously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry cascades is also eligible as they were used for clearance of CNG prior to the place of removal. It is his contention that the stationary cascades are used for storing the CNG and then connected the same to the dispensers through pipeline for further distribution to their customers. 3.9 Distinguishing the decision of this Tribunal in the case of Mahanagar Gas Ltd Vs CCE Mumbai II 2015-TIOL-497-CESTAT-MUM , the learned Advocate submitted that in the said judgment, the CENVAT Credit on cascades was denied on the premise that the same were used for transporting CNG to daughter booster stations, where the CNG was filled by using compressors into the vehicles. The cascades are used for transporting the CNG which has already come into existence as a manufactured product and is a marketable commodity. The Tribunal has no occasion to deal with situation about eligibility of CENVAT Credit from the perspective of clearance of CNG prior to place of removal. In the present case, the place of removal is the mother stations, on line stations, daughter stations and daughter booster stations, from where the CNG is dispensed into the vehicle. Also, distinguishing the decision of Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted that obtaining centralized registration cannot be a condition precedent for availment of CENVAT Credit. In support, he has referred to the following judgments:- (i) Beico Inds. Pvt. Ltd. 2014 (36) STR 551 (Tri-Ahmd); (ii) Portal India Wireless Solutions Pvt. Ltd. 2012 (27) STR 134 (Kar.); (iii) Imagination Technologiesm P. Ltd 2011 (23) STR 661 (Tri-Mum); C.Metric Solution Pvt. Ltd. 2012 (286) ELT 58 (Tri-Ahmd) 3.12 It is his argument that since they have made correspondences with the Department for centralized registration prior to issuance of Notification No.43/2008-CE(NT), dt.06.10.2008, therefore, the said notification be considered as retrospective in application being clarificatory in nature. Further, assailing the finding of the learned Adjudicating authority for denial of CENVAT Credit on the ground that the Appellant did not produce Cenvatable invoice, the learned Advocate submitted that the Appellant through letter dt.27.2.2007, submitted copies of invoices on the basis of which CENVAT Credit had been availed. In respect of input services, the Department through a letter in November 2006, asked for supply of documents, under which CENVAT Credit on in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to evade payment of duty and accordingly penalty is not imposable on them. In support, he has referred to the following judgments:- (i) CCE Vs HMM Ltd 1995 (76) ELT 497 (SC); (ii) Godrej Soaps Vs CCE Mumbai 2004 (174) ELT 25 (Tri-LB); and CCE Aurangabad Vs Balkrishna Industries 2006 (201) ELT 325 (SC) 3.15 Further, challenging the personal penalty on the employee of the Appellant, the learned Advocate submitted that he is mere an employee and not the decision maker and thus he should not be held responsible for any omissions and commissions, as he has no malafide intention and working on the instructions of the appellant. In support, he has referred to the following judgments:- (i) Rammaica (India) Ltd Vs CCE 2006 (198) ELT 379 (T); (ii)Associated Plastics Rayons Vs CCE Vapi 2007 (210) ELT 524 (Tri); (iii) O.P. Agarwal Vs CCE Kandla 2005 (185) ELT 387 (Tri). 4.1 Per contra, the learned Authorised Representative for the Revenue submitted that the Appellant had wrongly availed CENVAT Credit on various inputs, capital goods and input services which were disallowed to them by the Adjudicating authority. He has submitted that the Appellant had wrongly availed credit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... daughter stations separately. 5. Heard both sides and perused the records. The undisputed facts are that the Appellant are engaged in the manufacture of compressed Natural Gas (CNG) at three locations viz. Memco, Maninagar and Jamalpur, designated as mother stations, which are sold/distributed through different locations known as daughter stations/daughter booster stations. The dispute centers around eligibility to CENVAT Credit on capital goods, inputs and input services at the registered premises (mother stations), when the capital goods, inputs and input services are utilized in distribution/sale of CNG at the daughter stations/daughter booster stations. 6. It is also not in dispute that the natural gas when compressed at a particular pressure results into compressed natural gas; a process which is prescribed as manufacture under Chapters 27 of Central Excise Tariff Act, 1985. 7. The principal argument of the Appellant is that even after compression of the natural gas at their mother stations, for the purpose of distribution of the same, the CNG was transported to various daughter stations wherefrom the same are injected into the vehicles. It is vehemently argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (105) of Section 65 of the Final Act; [(k) inputmeans - (i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service; Explanation 1 - The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2 - Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer [but shall not include cement, angles, channels, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for transporting the CNG to DBS, wherein the same are filled by using compressors into the vehicles. In our considered view these cascades are only transporting the CNG which has already come into existence as a manufactured product and is a marketable commodity. The argument of the learned Counsel that the CNG needs recompression into DNS in order to fill the product into vehicle is without any merits inasmuch CNG is already a marketable commodity, and the activity of recompression is neither incidental nor ancillary for manufacture of CNG at DBS as the recompression is of CNG. (ii) Secondly, reliance was placed on the Chapter Note 5 to the Chapter 27. The said Chapter Note will not be of any help to the appellant's case as the said Chapter Note talks about the compression of natural gas for the purpose of marketing the CNG would amount to manufacture, in the case in hand, the compression of natural gas takes place at mother station. At DBS the recompression of CNG does not bring into existence any new product which is distinct. 5.3 The reliance placed by the learned Counsel on the case of Vikram Cement and Birla Pericalse (supra) will also be of no help as in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference in the respective meaning of 'input' and capital goods assigned under Rule 2 of Cenvat Credit Rules,2004. However, it is necessary to refer to the meaning of place of removal prescribed at Section 4 of Central Excise Act, 1944 which reads under:- (c) place of removal means (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other [place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed; 13. The Hon'ble Supreme Court in Maruti Suzuki Ltd Vs CCE New Delhi-III 2009 (240) ELT 641 (SC) , while emphasizing the criteria of use, observed that the item which is used as packing material and its value included in the assessable value of the final product, would not by itself entitle the manufacturer to take credit. In our view, the place of removal is significant in the context of determination of assessable value and levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nward offshore operations, to trans ship stores to the oil rigs, without payment of customs duty. The Honourable Supreme Court was confronted with the issue whether oil rigs engaged in operations in the exclusive economic zone/ continental shelf of India, falling outside the territorial waters of India, are foreign going vessels as defined by Section 2(21) of the Customs Act, 1962, and are entitled to consume imported stores thereon without payment of customs duty in terms of Section 87 of the Customs Act, 1962. Answering the said question their Lordships observed as: 77. The Counsel for the Appellants may be right in contending that the limits of the territorial waters has not been extended. The limits of territorial waters as defined in Section 3 of the Maritime Zones Act, 1976 has not been extended but under Sections 6 and 7 thereof, sovereign rights can be exercised by the coastal States on a area which is recognized as the maritime limit of the coastal State which is being exercised. Section 2(21) of the Customs Act cannot be read in isolation. The entire scheme of the Customs Act and other Acts such as Maritime Zones Act, 1976 which are in pari materia have to be read t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as import and therefore, no customs duty shall be leviable on such mineral oils. Likewise, the goods supplied from the mainland to a place in EEZ or Continental Shelf of India in connection with any activity related to mineral oil extraction or production shall not be treated as export under the Customs Act, 1962 and consequently, no export benefits can be availed of on such supplies. Another implication of the said notification is that bringing of any goods from any other country to any place in EEZ or Continental Shelf of India in connection with any activity related to extraction or production of mineral oils shall be treated as import under the Customs Act, 1962 and would be charged to duty accordingly. 79. It may not be correct to contend that the oil rigs installed by the Appellants answer the description foreign going vessel. A vessel may be a foreign going vessel but if the oil rig is situated in the area to which the Customs Act applies or extends, the aid of Section 2(21) of the Customs Act cannot be taken to get the benefit under Sections 86 and 87 of the same Act, The principle underlying under Sections 86 and 87 is that the stores are consumed on board by a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Besides, the meaning of input and capital goods cannot be changed and read differently depending on the nature of raw material/finished goods, which will lead to absurdity and chaos in the administration of the CENVAT credit scheme. It is the principle of statutory interpretation that the result of an interpretation which leads to absurdity be avoided. The principal criteria for eligibility to CENVAT Credit on inputs rests on its use in or in relation to manufacture of final products in the factory and for capital goods its use in the factory of production. 17. The other argument of the learned Advocate is that once the compression of natural gas is completed at mother stations, at a pressure of more than 200 bars, the same pressure may not continue till it was injected into the vehicles of the customers at daughter booster stations. Hence, the pressure is required to be maintained at the daughter Booster stations. In other words, it is his contention that the process of manufacture continues till the compressed CNG is injected into the vehicles. At the first blush, the argument may look attractive, but a deeper analysis of the same would lead to a negative result. Firstly, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at para 27.3 of the impugned Order, the Ld. Adjudicating authority has disallowed it observing that the administrative/Registered office of the Appellant was not registered as input service distributor and no invoice, bills, challans were issued in the name of the three registered Units. The issue of eligibility of CENVAT Credit on input service where the Input service distributor is not registered has been settled by the Gujrat High Court in the case of CCE Vs. Dashion Ltd. 2016 (41) STR 884(Guj. ). Their Lordships observed as: 7. The second objection of the Revenue as noted was with respect of non-registration of the unit as input service distributor. It is true that the Government had framed Rules of 2005 for registration of input service distributors, who would have to make application to the jurisdictional Superintendent of Central Excise in terms of Rule 3 thereof. Sub-rule (2) of Rule 3 further required any provider of taxable service whose aggregate value of taxable service exceeds certain limit to make an application for registration within the time prescribed. However, there is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied for centralised registration of all the premises i.e. mother stations as well the daughter stations. They informed all the facts to the Department in the said letter and also subsequently during the course of correspondences with the Department on the business of compression and distribution of CNG from the mother and daughter stations respectively. Further, it is submitted that on 27.02.2007, they made their intention clear by addressing a letter to the department to avail Cenvat credit on capital goods and thereafter availed the credit. With regard to the second demand notice, it is submitted that in response to the communication received from the Range Superintendent dt. 30.08.2007 they had informed the details of credit availed on input services at all their registered premises along with necessary input invoices through letter dt. 07.09.2007. Therefore, based on audit objection, the demand issued for recovery of cenvat credit on input services availed for the for the period from May 2006 to May 2007, is barred by limitation. Precisely, it is their contention that no facts had been suppressed from the Department nor mis-stated or mis-decalred, hence, extended period of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to support the allegations of wilful misstatement, suppression, fraud or collusion on the part of the assessee. In fact, perusal of the show cause notice would show that the entire basis of the Revenue was wrongfully availment of the credit. Mere wrongfully availment without element of mens rea and that too for the purpose of evading payment of duty would not be sufficient to impose penalty. The adjudicating authority, without any basis or evidence, merely mechanically recorded that the assessee had, by reason of wilful misstatement, suppression of fact or in contravention of the provisions of the Rules, evaded payment of central excise duty. He was not even sure whether this was a case of wilful misstatement or suppression of fact or contravention of provisions of the Rules. 27. In view of the above decision of Hon'ble Gujarat High Court, penalty under Section 11AC of Central Excise Act, 1944 read with Rule 15(2) of CENVAT Credit Rules 2004 is not attracted. Also, for the same reason, since the Appellant had availed CENVAT Credit after furnishing the due information to the Department, therefore, confiscation of capital goods/inputs at daughter stations also unsustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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