2021 (6) TMI 619 - AT - Service Tax

CENVAT Credit - input services - port charges - purchase of goods from high sea seller and some of the invoices for port services etc. were in the name of high sea seller - HELD THAT - Admittedly the melting scrap purchased by the appellant on high sea sale, is their input for manufacture of M.S. billets. Further Rule 9(1) of Cenvat Credit Rules provides that cenvat credit shall be taken by the manufacturer on the basis of invoice issued by a manufacturer for clearance of inputs from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer. Similarly, an importer is entitled to avail cenvat credit on inputs if the importer is registered in terms of the provisions of Central Excise Rules, 2002 (admittedly appellant is registered with the Central Excise Department as well as the Service Tax Department). There is no dispute as to the aforementioned requirement save and except the invoice not being in the name of the appellant (but in the name of the original importer - high sea seller). It is found that no specific documents have been mentioned considering the transaction of subsequent sale on high sea sale basis, in the Rules. Thus, the scheme of the Act read with the Rules has to be read harmoniously. If for something missing in the rules, the cenvat credit is available under the scheme of the Act, read with Rule 3 read with Rule 2(l) and (k) of the Cenvat Credit Rules, service tax credit cannot be denied for some gap left in the statute. The appellant has rightly taken cenvat credit under dispute - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant rightly took credit of service tax on port charges purchased from high sea seller.
- Whether the appellant's cenvat credit claim is in contravention of Cenvat Credit Rules.
- Whether the extended period of limitation is invokable.
- Whether the appellant's appeal against the order-in-original confirming the demand and imposing penalty should be allowed.

Analysis:
1. The appellant, a manufacturer of M. S. Billets, purchased melting iron scrap on high sea sales basis. They availed cenvat credit during 2010-11 to 2012-13. Revenue alleged improper documentation for some invoices not in appellant's name, leading to a demand for recovery. Appellant claimed eligibility for the disputed credit.

2. Revenue contended that the credit contravened Rule 9(i) and (ii) of Cenvat Credit Rules, asserting recoverability. They invoked the extended period of limitation under Section 11A/11A(4) of the Central Excise Act. Show cause notice proposed recovery with interest and penalty.

3. Appellant argued that the purchase of melting scrap for manufacturing M.S. billets qualified as an input for cenvat credit under Rule 2(l) read with Rule 3. They highlighted the trade practice of invoices being in the name of the party on the bill of lading. Appellant maintained they rightfully took credit against proper invoices.

4. The Tribunal found the appellant's purchase on high sea sale to be an input for manufacturing, aligning with Cenvat Credit Rules. Despite invoices not in appellant's name, the Tribunal interpreted the Act and Rules harmoniously, allowing the credit claim. The appeal was allowed, modifying the order-in-original and setting aside the penalty.

5. The Tribunal's decision emphasized the importance of aligning statutory interpretation with the scheme of cenvat credit to avoid defeating its purpose. The ruling provided consequential benefit to the appellant, overturning the penalty imposed in the original order. The judgment was pronounced on 17.06.2021.