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TMI Blog2013 (12) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... imentation is over. It is also on record that the appellant had cleared the prototype goods on payment of duty either for export or for other purposes. If that be so, the prototypes cannot be construed as exempted goods. In such scenario, provisions of Rule 6 (5) of the Cenvat Credit Rule come into play. As per the said Rule, when input services are used both in the manufacture of dutiable goods as also in exempted goods, then the appellant is eligible to avail Cenvat credit of service tax paid on certain specified services manufactured by the said rule. “Consulting Engineers Service” is one of the specified services under sub-rule (5) of the said Rule 6. Viewed from this perspective, the appellant is not required to reverse any credit of the service tax paid on consulting engineers service and we hold accordingly. The adjudicating authority has not considered the issue on merits and therefore, the Revenue's appeal has to be allowed by way of remand and the adjudicating authority is directed to consider whether the appellant is eligible for Cenvat credit of the service tax paid on these services - Decided in favour of assessee by way of remand. - E/1037/12, E/939/11 & E/1050/11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest and also proposing to impose equivalent amount of penalty. The appellant contested the demand on the ground that the prototypes manufactured by the appellant at the ERC are not fully exempt from payment of excise duty and they have been exporting these prototypes on payment of duty under claim for rebate. Inasmuch as the goods have been utilised in the payment of dutiable goods as well as exempted goods, the provisions of Rule 6 (5) of Cenvat Credit Rules would apply and therefore, the appellant is rightly entitled for the credit. It is also submitted that an amount of Rs. 36,15,04,785/- does not pertain to input service credit and are not attributable to services used in the manufacture of prototypes at EC and therefore, demand to this extent is incorrect. After considering the submissions, the Ld. Adjudicating authority came to the conclusion that the appellants are not eligible to take Cenvat Credit amounting to Rs. 156,88,07,107/- and ordered that the same be recovered along with interest under the provisions of Rule 14 of Cenvat credit Rules, 2004 read with Sections 11A 11AB of the Central Excise Act, 1944. He also imposed a penalty of Rs.137,26,64,785/- under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has been discharging excise duty liability on such prototypes as an when they are cleared from the factory. They have also been filing annual statements wherein they have declared the quantity of prototypes manufactured, the duty forgone in respect of prototypes which were destroyed during testing, etc. and the department was fully aware that the appellants were availing exemption under the aforesaid notification only when the prototypes were destroyed during the course of testing. Therefore, since the prototypes are not unconditionally exempt and the appellant has been discharging excise duty liability on the prototypes, they are eligible for the benefit of Rule 6(5) of the Cenvat Credit Rules, 2004, which provides for availment of service tax paid on consulting engineers service when such services are used in the manufacture of both dutiable as well as exempted goods. 4.2 The Ld. Counsel also relies on the decision of this tribunal in the case of Cadila Healthcare Ltd., Vs. CCE, Ahmedabad 2010 (17) STR 134 (Tri-Ahmd) wherein it was held that technical testing and analysis services in respect of medicines used in the trial manufacture and R D conducted in respect of such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem. Therefore, there is an error committed by the adjudicating authority in dropping the demand for service tax credit of Rs. 36 crores without examining the issue in its proper perspective and therefore, the matter should be remitted back to the Commissioner for fresh consideration. 6. The Ld. Counsel for the appellant in his rejoinder submits that as regards the dropping of demand to the extent of Rs. 36 crores, the appellant has all the documentary evidences to show that they are rightly entitled for the Cenvat Credit and if given an opportunity, they are willing to submit the documents for consideration by the adjudicating authority. 7. We have carefully considered the submissions made by both the sides, Rule 2(l) of the Cenvat Credit Rules, reads as follows: input service" means any service,- (i) used by a provider of output service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sedly used a broad and comprehensive expression while defining the expression input service . Rule 2 (l) initially provides that input service means any services of the description falling in sub clause (i) and (ii). Rule 2 (l) then provides an inclusive definition by enumerating certain specified services First part of Rule 2(l), inter alia, covers any services used by the manufacturer directly or indirectly, in or in relation to the manufacture of final products. The inclusive part of the definition enumerates certain specified categories of services. However, it would be farfetched to interpret Rule 2(l) to mean that only two categories of services in relation to inputs viz. for the procurement of inputs and for the inward transportation of inputs were intended to be brought within the purview of Rule 2(l). Rule 2(l) must be read in its entirety .This must be read with the broad and comprehensive meaning of the expression input service in Rule 2(l). 7.2 The phrase in relation to has been construed by Apex Court to be of the widest amplitude. In M/s. Doypack Systems Pvt.Ltd. vs. Union of India and Others (1998) 2 SCC 299 at 302 1988 (36) E.L.T. 201 (S.C.), Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant would be eligible for the benefit of the said notification only when the prototypes manufactured by them get destroyed in the process of testing of the goods or it is scrapped after testing and experimentation is over. It is also on record that the appellant had cleared the prototype goods on payment of duty either for export or for other purposes. If that be so, the prototypes cannot be construed as exempted goods. In such scenario, provisions of Rule 6 (5) of the Cenvat Credit Rule come into play. As per the said Rule, when input services are used both in the manufacture of dutiable goods as also in exempted goods, then the appellant is eligible to avail Cenvat credit of service tax paid on certain specified services manufactured by the said rule. Consulting Engineers Service is one of the specified services under sub-rule (5) of the said Rule 6. Viewed from this perspective, the appellant is not required to reverse any credit of the service tax paid on consulting engineers service and we hold accordingly. 7.4 As regards the Revenue's appeal wherein the Revenue has contested the dropping of demand or service tax for an amount of Rs.36 crores (approximately), we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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