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TMI Blog2015 (7) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... d valves as owners and then issue them on bailment to the EPC contractor for a specific purpose of providing services to bring into existence a pipeline. Therefore, the contention of Revenue that when pipes and valves are transferred from manufacturer to the applicant, applicant would get possession of pipes and valves from the manufacturer but same is not for consideration and thus, there would be no "sale" in terms of Section 2 (h) of Central Excise Act, 1944, - is factually incorrect. Duty paying document - EPC contractor, who pays for the goods to the manufacturer, may direct said goods to be delivered at applicant's site, without it coming to the premises of EPC contractor and he (EPC contractor) need not be a "registered dealer" with the Central Excise. However, applicant cannot take Cenvat Credit of Central Excise duty paid on pipes and valves on the basis of invoice issued by "intermediary dealer", until and unless, this intermediary dealer is a "registered dealer". Therefore, the contention that the applicant is eligible to Cenvat credit of Central Excise duty paid by the manufacturer on pipes and valves on the basis of documents issued by "intermediary dealer", would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1994, as it existed prior to July 1,2012. Applicant proposes to avail the benefit of Cenvat credit in respect of the 'capital goods' and utilizing the same for discharging its output service tax liability. Applicant proposes to adopt engineering, procurement and construction ( EPC ) model for laying of gas transmission pipelines. The proposed activity, as described by the applicant, is as under; 4. The activity of laying of pipelines begins with identification of route of the pipeline from the source to destination. The identification of the route involves a feasibility analysis to ensure that an acceptable route for the pipeline exits that provides the least impact to the environment and public infrastructure already in place. Once the route for the pipeline is identified, the next step is to acquire Right of Use and Right of Way on the said route. In this regard, the applicant would obtain the Right of Use (ROU) in respect of the land along-with the identified route either under the Gujarat Water Gas Pipelines (Acquisition of Right of User in Land) Act, 2000 or the Petroleum and Minerals Pipeline (Acquisition of Right of User Inland) Act, 1962 The first one is a G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he pipes and valves and the issuance thereof to the EPC Contractors would be evidenced by appropriate documentation. The applicant would use the pipes and valves so received under the EPC Contracts for transport of gas through pipelines thereby using the pipes and valves for rendering taxable output service. 6. Applicant further submits that the EPC Contracts awarded by the applicant to the various EPC Contractors would involve both supply of goods like pipes and valves and rendering of construction/ erection, installation and commissioning services, and further the price agreed between the applicant and the EPC Contractor(s) will be a composite price, such composite price will be divided into two key components, viz. price for supply of goods and price for rendering of services. The EPC Contractors would charge separately for the supply of goods like pipes and valves from the applicant. In fact, separate invoices would be raised by the EPC Contractors for the sale of pipes and valves and provision of construction / erection, installation and commissioning services for the laying of the pipelines. In respect of provision of services for erection and commissioning of pipelines, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invoke the above Explanation to Rule 3(7) of Cenvat Credit Rules, to deny credit of capital goods to the applicant; that thus, the provisions of Valuation Rules as above cannot be used to restrict credit availment by the applicant. 9. Applicant submits that he would fulfill all the statutory requirements for availment of credit of excise duty paid on pipes and valves by manufacturers against the applicant's output service tax liability; that accordingly, the applicant would be eligible to avail credit of excise duty paid on pipes and valves by manufacturers against the applicant's output service tax liability for the taxable services of transport of gas through pipeline. In the light of the above facts, the applicant sought advance ruling on the following question: Whether the Applicant is eligible to avail Cenvat Credit of excise duty that would be paid on the pipes and valves procured from the manufacturer against the Applicants' output service tax liability for services in the nature of transport of gas through pipeline? 10. Revenue has raised certain issues, which are discussed, as under; 11. First point urged by the Revenue is that the question rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts, pre-fabricated building and printers which are fastened and are fixed to the earth Hon'ble High Court observed that the towers are immovable property and non excisable and hence, can neither be regarded as capital goods so as to fall within the definition of Capital Goods appearing in Rule 2 (a) of the Cenvat Credit Rules nor can be categorized as 'input' falling under Rule 2 (k) of the Cenvat Credit Rules. In-fact, Hon'ble High Court at para 31 concluded that a combined reading of sub-clause (a) (A) (i) and (iii) and sub rule (2) of the Cenvat Credit Rules indicates that only the category of goods in Rule 2 (a) (A) falling under clause (i) and (iii) used for providing output services can only qualify as capital goods and none other. Hon'ble Court further observed that goods in question, namely; the tower and part thereof, the PFB and the printers do not fall within the definition of capital goods and hence the appellants cannot claim the credit of duty paid on these items. 13. As per Rule 2 (a) of Cenvat Credit Rules, 2004 Capital Goods means:- (i) All goods falling under chapter 82, Chapter 84, Chapter 85, chapter 90, heading no. 68.05 grindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, in present case, capital goods (pipes and valves) are to be used for providing output service and it is not relevant whether these goods provide such service by being embedded to the earth. Therefore, we agree with the applicant that the relevant date to determine whether an item qualifies to be 'capital good' is the time of its receipt and not subsequent date. 16. Next issue raised by the Revenue is that the EPC Contractors who received the duty paid pipes and valves (capital goods) for laying the pipeline, were only eligible to take Cenvat Credit on capital goods under Rule 3 of Cenvat Credit Rules, 2004 and not the applicants. Revenue submits that as per Explanation to Rule 3 (7) (c) of Cenvat Credit Rules, where the provision of any other rule or notification provide for grant of whole or part exemption on condition of non availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules Further, Explanation 2 to Rule 2A of Service Tax (Determination of Value) Rules, 2006 clarifies that the provider of taxable service sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the applicant, therefore he is eligible to take Cenvat Credit of Central Excise duty paid pipes and valves received by him as service provider. Further, during arguments before this Authority, we were informed by the applicant that the above procedure i.e. applicant taking Cenvat Credit of Central Excise duty paid on pipes and valves is revenue neutral, which was not opposed by the Revenue. 19. Another issue raised by the Revenue is that the documents under which the applicant proposes to avail Cenvat credit are not the proper documents under Rule 9 of Cenvat Credit Rules, 2004. Revenue submits that Circular No. 96/7/95-Cx dated 13.02.1995 issued by the Central Board of Excise Customs (CBEC) clarifies that the credit is admissible even if the goods are sent directly to the user's premises and invoice is issued by a Registered Dealer; that said Circular is of no avail to the applicant, as EPC contractors are not registered dealers. Revenue further submits that transfer to possession of property vested in pipes will take place in following 4 instances; a) From pipe manufacturer to EPC Contractor through a sale invoice; b) From EPC contractor to applicants on site; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the cover of a manufacturer's invoice (raised on the EPC contractor only); that actual invoicing would happen from manufacturer to EPC contractor to the applicant. Applicant submits that CBEC Circular No. 96/7/95-CX dated 13.02.1995 read with Circular No. 218/52/96-CX dated 04.06.1996 clarifies that movement of goods could take place directly on a Rule 52A invoice from the manufacturer's premises to the user's premises on an order being placed by the dealer of excisable goods without being brought to the latter's premises. It was further clarified that persons taking part in transit sale need not get themselves registered; that in the instant case, it is not necessary for EPC contractors to get registered under the Central Excise Act in order to take Cenvat credit by the applicant on manufacturers' invoice. Applicant submit that as far as transfer of possession of property vested in pipes is concerned, while the transfer of property would happen in the pipes from the manufacturer to the EPC contractors the possession of the pipes would be directly transferred to the applicant (since pipes and valves would be directly consigned to the applicant from the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves etc by the applicants in the factual matrix of the present Advance? Ruling Applications. 22. Rule 9 of Cenvat Credit Rules, 2004 inter-alia states as under; (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :- (a) an invoice issued by- (i) a manufacturer for clearance of - (i) inputs or capital goods 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; (ii) inputs or capital goods as such; xxxxx (iv) A first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002 xxxxx 23. Rule 11 of the Central Excise Rules, 2002 reads as under: 11. (1) No excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent and in the case of cigarettes, each such invoice shall also be countersigned by the Inspector of Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the goods are directly transported to the applicant's site without going to the premises of EPC Contractor. Applicant has relied upon Tribunal judgment in CCE, Coimbatore Vs SSPE Cotton Mills (P) Ltd [1999 (106) ELT 102 (T) and Mahadev Industries Vs. CCE Belgaum [2000(115) ELT 452 (T)] wherein it was held that invoice having both dealers; as well as user of goods name, who purchased it through dealers, but directly supplied to the user, is a valid document. CBEC vide Circular No 96/7/95-CX dated 13.02.1995 read with Circular No 218/52/9G-CX dated 04.06 1990 clarified that movement of goods could take place directly on a invoice from the manufacturer's premises to user's premises on an order being placed by the dealer of excisable goods without being brought to latter's premises. Further, person taking part in transit sale need not be registered. It is further mentioned that in such a situation manufacturer will issue an invoice under Rule 52A and registered person's invoice is not required for availment of Modvat Credit; that the duplicate copy of manufacturer's invoice under Rule 52A will serve as cover for transport and for availment of Modvat by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s new procedure. In short, the contention of the applicant is that they would take Cenvat Credit of Central Excise duty paid on pipes and valves on the basis of invoice raised by the intermediary dealer i.e. EPC contractor. It is noticed that as per Rule 9 of Cenvat Credit Rules, 2004, Cenvat Credit can be taken inter-alia by provider of output service (i.e. applicant in this case), on the basis of any of the following document; 1. An invoice issued by (i) a manufacturer (ii) an importer (iii) an importer from his depot etc. (iv) a first stage dealer or a second stage dealer 2. a supplementary invoice issued by manufacturer etc. 3. a supplementary invoice, bill or challan issued by a provider of output service 4. a bill of entry 5. a certificate issued by an Appraiser of Customs 6. a challan evidencing payment of Service Tax 7. an invoice, a bill or challan issued by a provider of input service 8. an invoice, bill or challan issued by an output service distributor Applicant proposes to take Cenvat Credit of Central Excise duly paid on pipes and valves based on the invoice raised by intermediary dealer i.e. LPC contractor it is observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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