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TMI Blog2016 (7) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/485/09 1,05,73,348/- and demand of ST of 19,432 and 8,96,340 and app of ST and interest paid. Penalty of Rs. 2000/- per entry & 19,432/- April 2006 to March 2007 Table 2 - Appeals filed by the Revenue (C.C.E., Belgaum) UNIT IMPUGNED ORDER APPEAL BY DEPT-NoS. CENVT REFUND (RS.) PERIOD MSPL EOU II Common Order-in-Appeal No 7/2008 dt 5.3.2008 (in respect of 2 Appeals) decided in favour of the assessee ST/224/08 39,82,339 [Rs. 18,43,805/- disallowed in O-in-O 18/2007 & Rs. 21,38,534/- disallowed 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward transportation up to the port of shipment is not an input service in terms of the Hon Tribunal decision in the case of Gujarat Ambuja Cements Ltd Vs CCE - 2007 (6) STR 249 (T). 4.1. The Commissioner has disallowed CENVAT credit in 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 CENVAT credit cannot be allowed in the light of Rule 6 (1) of the CENVAT Credit Rules, 2004 as the iron ore is exempt from duty under Notification No 4/2006 CE dated 1.3.2006 the EOU is required to pay service tax on GTA service by cash. Accordingly, the demand of Service tax of Rs. 19,432/- with interest and penalty of equal amount under Section 78 has been confirmed by the Commissioner. 4.3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (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 is not exempted goods. The provisions of Rule 6 (1) to (4) of the CENVAT Credit Rules, 2004 are not applicable to iron ore manufactured and exported by 100% EOU. * Even otherwise, it is well settled law that the provisions of Rule 6 (1) to (4) of the CENVAT Credit Rules, 2004 are not attracted to the "excisable goods" exported even if they are otherwise exempt from payment of excise duty. The Appellants (M/s MSPL Ltd.)rely on the following decisions : (i) Repro India Ltd Vs Union of India [2009 (235) 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon High Court of Gujarat in the case of CCE Vs Dynamic Industries Ltd - 2014 (307) ELT 15 (Guj) has held that where the exports are on FOB basis the place of removal is the port and not factory gate. Hence, the services of CHA, Shipping Agents, Container Services used for export of finished goods by the manufacturer are eligible for CENVAT credit. 5.4. The appellants further argue that it is also well settled law that service tax paid on various services up to the port is available as CENVAT Credit to the manufacturer-exporter and the port is to be considered as the place of removal. The Appellants rely on: (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 Commissioner (Appeals) that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to manufacture, where on iron ore specified in the First Schedule to the Central Excise tariff Act, 1985, no duty of Excise is payable 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' service, audit service, security agency supply service, maintenance and repair service, technical testing & calibration service, commercial or industrial construction service and transportation of goods by road - by a goods transport agency service is not permissible to M/s MSPL Ltd. EOU-I. 7.3. Further the Department (Revenue) by reiterating the findings of the impugned order(s) state that the place of removal in the instant case is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed 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) 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. In this regard, there are two C.B.E.C. Circulars which are No. 314/30/97-CX dated 6.5.1997 and No. 54/2004-Cus dated 13.10.2004. 10.1. Further, we find that the Foreign Trade Policy 2004-09 has given wider meaning to the word "manufacture" in Paragraph 9.36, which defines as follows : "Manufacture" means to make, produce, fabricate, assemble, 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-engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in effect provide them relief from Service Tax [Para 6.1) of the FTP]. 6. For availing CENVAT Credit, the procedure 6. and provisions 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 allow EOU/EHTP/STP units to pay duty through Cenvat credit." 10.3. Further, CESTAT in the case of Hewlett Packard India Sales (P) Ltd. Vs. Commissioner of Cus., Bangalore [2009 (242) E.L.T. 545 (Tri.-Bang.)] quotes Para 9.37 of the Foreign Trade Policy (FTP) as referred to by the Advocate in this case in respect of definition of "manufacture", which is as follows : "Manufacture" means to make, produce, fabricate, assem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 products. If the exempted products are exported outside India the provisions of Rule 6(6)(v) of the Cenvat Credit Rules are applicable. Therefore, the bar provided under Rule 6(1) and the liability created under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 are not attracted. By denying to the petitioner from exporting the printed books under bond what the respondents want to do is in fact to levy 10% on the sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 2004 the petitioners are entitled to avail Cenvat credit in respect of the inputs used in the manufacture of the final products being exported irrespective of the fact that the final products are otherwise exempt." 8. xxx xxx "9. ............... Rule 6(6) is precisely needed only when the final products are exempt from payment of duty. In this context the Revenue itself has accepted that under the provisions of Cenvat Credit Rules, 2002 there were provisions for removal of exempted goods under bond but the same was not available with effect from 9th September, 2004 under Cenvat Credit Rules, 2004. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for export under the items of the provisions of the Central 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 Credit Rules, 2002 as well as under the Cenvat Credit Rules, 2004 remains the same. As noted earlier the object and purpose of Rule 6(6) of Cenvat Credit Rules, 2004 is to promote the policy of the Government that the benefit of duty paid on input is available as credit in respect of certain exempted goods as well as the exempted goods exported under bond. The minor change in the wordings of Rule 6(6) of the Cenvat Credit Rules, 2004 by using the term "excisable goods" instead of exempted goods is that the term "exempted goods" may not cover the dutiable goods which are exported under bond. Therefore, in order to widen and cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; The Departments assumption and contention is that sale of the goods took place within the factory premises only. But from the facts on record, it is clear that in respect of the subject goods exported by M/s MSPL Ltd., the "place of removal" is the port of shipment and not the factory gate. The Hon'ble High Court of Gujarat in the case of CCE Vs. Dynamic Industries Ltd. [2014 (307) E.L.T. 15 (Guj.)] has held that where 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. M/s MSPL Ltd. can take support from C.B.E.C. Circular No. 97/8/2007-ST dated 23.8.2007, where the Board has clarified that manufacturer can claim that the sale took place at the destination point. The decision of Hon'ble High court of Punjab & Haryana in the case of Ambuja Cements Ltd. Vs. Union of India [2009 (236) ELT 431 (P&H)] supports this stand. Here also we find support from the CESTAT, Bangalore's decision in the case of A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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