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TMI Blog2024 (8) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... vices availed for the period prior to 01.04.2011. All these services fall in the inclusive part of the definition of input services. It is therefore found that the appellant is eligible for credit for all these services prior to 01.04.2011. Input services - Period after 01.04.2011 - HELD THAT:- After 01.04.2011 the definition excludes services in the nature of outdoor catering services, insurance and civil construction services. The Ld. Counsel for appellant has submitted that they have reversed the credit for the period after 01.04.2011 with regard to these services. It is also submitted that the appellant is not contesting the issue on eligibility of credit on services like outdoor catering, civil construction, insurance (hospital) for the period after 01.04.2011. The demand confirmed for the period after 01.04.2011 on this issue is upheld. Write off of obsolete items is set aside for the period prior to 01.03.2011 as well as for period after 01.03.2011 - HELD THAT:- The demand in respect of the issue on write off of obsolete items is set aside for the period prior to 01.03.2011. However, the demand for the period after 01.03.2011 is sustained. The appellant has reversed the cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible at the time of debonding. Time Limitation - penalties - HELD THAT:- Show Cause Notice and Statement of demand are issued for the period 2009-10 to 2012-13. Part of the demand falls within the extended period. In the present case, the issues are mostly interpretational in nature - The issue with respect to credit on various input services is also interpretational in nature, as an amendment was introduced in the definition on inputs services w.e.f. 01.04.2011. Further, there is no positive act of suppression established against the appellant. Show cause notice has been issued based on the objections raised by the audit. As and when pointed out, the appellant has reversed the credit in respect of the issue of write off as well as ineligible input services post 01.04.2011 - there are no grounds for invoking the extended period. The issue of limitation is answered in favour of the assessee and against the Revenue. For the same reasons, the penalties imposed are also set aside. Appeal allowed in part. - MS. SULEKHA BEEVI. C.S., MEMBER (JUDICIAL) AND MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) Shri M. Karthikeyan, Advocate, for the Appellant Shri M. Selvakumar, Authorised Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,401/-, (Rupees Seventy two lakhs thirty six thousand four hundred and one only) being the amount equivalent to the Cenvat credit taken in respect of the written off inputs should not be recovered for the period 2009-10 to 2012-13 under Rule 14 of Cenvat Credit Rules 2004 for contravention of Rule 3(5)(b) of Cenvat Credit Rules 2004. (iv) a sum of Cenvat Rs 28,06,689/- (Rs.27,24,941/-, Edu cess Rs.54,499/-, SHE cess Rs.27,249/-) already debited should not be appropriated against the demand mode in clause (iii) above: (v) A sum of Rs. 1,50,278/- (Cenvat Rs.1,45,901, Edu Cess Rs.2,918/- and She Cess Rs.1,459/-) being the excess credit availed by them on account of common input service such as Group Audit, Internal Audit, Security, Banking and financial services, Preparation of Transfer Pricing Documentation for the year 2009-10, Consultancy services etc., which were commonly used by them 100% EOU unit situated adjacent to them for the period 2009-10 and 2010-11 should not be recovered under Rule 14 of Cenvat credit Rules 2004 read with proviso to Section 11 A of the Central Excise Act 1944. (vi) A sum of Rs.4,33,68,282/-(Rupees Four Crores thirty three lakhs sixty eight thousand two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 read with Section 11 A of the Central Excise Act, 1944, (b) I appropriate a sum of Rs,6,75,625/-Edu Cess Rs.13,613/- and SHE Cess Rs.6756/- (totaling to Rs 6,95,994) debited in cenvat account against the demand in clause (i (a)) above (c) I demand Interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944 towards the duty amount demanded for Rs 24,82.684/- for the period from the liability to expunge the credit to till the date of payment. (d) I impose Penalty of Rs. 24,82,684/- under Rule 15 (2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act 1944, (ii) (a) I demand an amount of Rs. 72,36,401/- (Rupees Seventy two lakhs thirty six thousand four hundred and one only) being the amount equivalent to the Cenvatcredit taken in respect ofthe written offinputs for the period 2009-10 2012-13under Rule 14 of Cenvat Credit Rules 2004 read with section 11 A of Central Excise Act 1944 for contravention of Rule 3(5)(b) of Cenvat Credit Rules 2004 (b) I appropriate a sum of Rs. 27,36,474/- already debited in the appropriate duty head of cenvat account against the demand of Rs. 72,36,401/-as mentioned (ii) (a) above: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove. (c) I impose Penalty of Rs. 1,00,000/-(Rupees One lakh only) under Rule 15 (1) of Cenvat Credit Rules, 2004 . 6. Aggrieved by such order the appellant is now before Tribunal. 7. The Ld. Counsel Shri. M. Karthikeyan appeared and argued for the appellant. The first issue is with regard to denial of credit alleging that certain input services do not qualify to be input services under Rule 2 (l) of Cenvat Credit Rules 2004. The Ld. Counsel referred to the definition of input prior to 01.04.2011 and after which reads as under: - Prior to 01.04.2011: input service means any service, - (i) used by a provider of taxable service for providing an output service, or (i) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage uptothe place of removal, procurement of inputs, activities relating to business, such as accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee; 8. It is submitted that the various services on which credit has been denied by department are outdoor catering services, courier service used for transportation of finished goods to customers worldwide, civil construction services, logistic services used for export of goods, insurance services for employees, outward transportation services, custom house agent services and credit availed on rent charges paid for EOU unit which was availed by the DTA unit. 8.1 It is submitted that the appellant has availed outdoor catering services for the period prior to 01.04.2011 as well as after the said date. As per the definition for the period prior to 01.04.2011, the appellant is eligible for credit on outdoor catering services. After the amendment to the definition of input services w.e.f. from 01.04.2011 the credit on outdoor catering services is not eligible. The appellant is not contesting this issue for the period post 01.04.2011. 9. The department has denied the credit availed on service tax paid on rental charges paid by the appellant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they are paying excise duty on such assessable value. They are not collecting any freight charges separately over and above the assessable value. The decision in the case of Delta Electronics, India Pvt Ltd 2023 (9) Centax 214 was relied by the appellant to argue that when the freight charges are included in the assessable value, the credit on outward transportation of goods should be allowed. The Interim Order No.40020/2023 dated 21.12.2023 rendered by the Larger Bench of the Tribunal in the case of Ramco Cements Ltd was adverted to by the Ld. Counsel to submit that it was held by the Larger Bench of Tribunal that if the place of removal is proved to be the customer's premises, the credit on outward transportation is eligible. The Ld. Counsel prayed that the said credit may be allowed. 12. The department has denied credit availed on civil construction services. It is submitted that the appellant had availed credit on civil works carried out for the purpose of renovation of the factory premises. The factory premises have a direct nexus with the manufacturing activities carried out by the appellant. It is submitted that the appellant is eligible for credit for the period pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 16. The third issue is with regard to the demand confirmed alleging that the appellant is required to reverse the credit when inputs /capital goods are written off. In paragraph 3 of the show cause notice, it is alleged that the appellant has written off the value of non-moving and slow moving stock of raw materials to the value of Rs. 301.62 lakhs, Rs.188.41 lakhs, Rs. 162.21 lakhs and Rs. 0.42 lakhs respectively during the years 2009-10 to 2012-13 in their books of account. In terms of Rule 3 (5B) of Cenvat Credit Rules, it is proposed in show cause notice that the appellant has to reverse credit to the extent of Rs. 72,36,401/-. 17. It is submitted that Rule 3 (5B) was amended with effect from 01.03.2011, which provided that the credit has to be reversed even if the inputs are partially written off. Prior to this date, the provision did not specifically state that credit has to be reversed when the goods are not fully written. It is submitted that the appellant has only partially written down the value of the non-moving stock and therefore, not liable to reverse the credit prior to 01.03.2011. Further, it is submitted that there is no machinery provision available for making s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt vide letter dated 13.09.2012 addressed to the Superintendent, Mugappair Division requesting permission for merging of their debonded EOU unit with the existing DTA. However, no response was received from the department and then the appellant sent a reminder letter dated 10.12.2012. Still there was no response to the request made by the appellant and vide letter dated 09.04.2013 the appellant informed the department, that with effect from 01.03.2013 the debonded EOU is going to merge with the DTA unit. It was also informed that as a consequence of merging, the stock of materials and Cenvat credit balance of both units together are accounted in the DTA unit with the registration number of DTA unit. 20. The Learned Counsel submitted that since the EOU unit had already debonded and NOC granted in 2011 itself, it had continued to function only as a DTA unit. The debonded unit has taken credit of the duties paid at the time of debonding as a DTA unit. Under such circumstances, the objection raised by the audit, that there is no provision under Rule 10 for transfer of credit from EOU unit to DTA unit is erroneous. The department has denied the credit alleging that there are no document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Selvakumar appeared and argued for the department. In regard to the first issue of credit availed on ineligible input services, it is submitted that the appellant has availed credit on outdoor catering services, civil construction services and insurance services which are excluded from the definition of input services with effect from 01.04.2011. So, also the services in the nature of courier charges, CHA services have not been established to be having nexus with the manufacturing activity carried out by the appellant. In regard to GTA services, the Ld. AR submitted that the appellant has to establish that the buyer's premises is the place of removal. It requires to be verified whether the buyer's premises is the place of removal. For this purposes the matter may be remanded. 24. The second issue is with regard to the credit denied on the service tax paid on rental charges, the Learner AR submitted that the DTA unit has availed credit of the rental charges paid for the EOU unit. The argument of the appellant that if they had taken ISD registration, they would be able to distribute the proportionate credit cannot be accepted. 25. The next issue is with regard to the confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g services, courier service, civil construction services, logistic services, custom house agent services, insurance services availed for the period prior to 01.04.2011. All these services fall in the inclusive part of the definition of input services. We therefore find that the appellant is eligible for credit for all these services prior to 01.04.2011. 31. After 01.04.2011 the definition excludes services in the nature of outdoor catering services, insurance and civil construction services. The Ld. Counsel for appellant has submitted that they have reversed the credit for the period after 01.04.2011 with regard to these services. It is also submitted that the appellant is not contesting the issue on eligibility of credit on services like outdoor catering, civil construction, insurance (hospital) for the period after 01.04.2011. The demand confirmed for the period after 01.04.2011 on this issue is upheld. 32. So also the appellant s DTA unit has availed credit of service tax paid on rental charges for EOU. The amount has been reversed by the DTA unit and has been re-availed by the EOU. The appellant has submitted that they are not contesting this issue. For this reason, the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be payable from the date CENVAT credit is taken or utilized wrongly. Applying the decision and also taking note that appellant had sufficient credit balance, the demand of interest in this regard cannot sustain and requires to be set aside. Ordered accordingly. 34. The second issue is with regard to confirmation of demand Rs.1,50,278/- alleging that certain input services which have been used commonly for DTA unit and EOU. The Ld. Counsel has argued that if the appellant had taken ISD registration they would able to distribute the credit to DTA and EOU units as per Rule 7 of CCR, 2004. Applying the ratio laid in the decision in the case of Dashion Ltd., (supra) the demand cannot sustain. The relevant part reads as under:- 4. It is undisputed that the Rules of 2004 provide for a scheme for distribution of credit by input service distributor. Term input service distributor has been defined in in Rule 2(m) of the Rules of 2004 as to mean an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically and without any additional reasons disentitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. It was in this background that the Tribunal viewed the requirement as curable. Particularly when it was found that full records were maintained and the irregularity, if at all, was procedural and when it was further found that the records were available for the Revenue to verify the correctness, the Tribunal, in our opinion, rightly did not disentitle the assessee from the entire Cenvat credit availed for payment of duty. Question No. 1 therefore shall have to be answered in favour of the respondent and against the assessee. 34.1 Relying on the above decision we are of the view that the demand cannot sustain and requires to be set aside. Order accordingly. 35. Third issue is with regard to the allegation that the credit is taken without documents. From the facts, it is seen that this allegation has been raised when the credit lying with debonded EOU was transferred to DTA unit. 36. The appellant requested the department permission to merge the debonded unit with the existing DTA unit as one common DTA unit. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derabad-IV, John Deere India Pvt. Ltd Vs CCE(supra), Pune-III and CCE, Thane-I Vs Sequent Scientific Ltd(supra). It has been consistently held by the Tribunal in all these cases that the CENVAT Credit lying in balance as on the date of de-bonding of 100% EOU and conversion to DTA unit, could be transferred to the DTA unit and be utilised by the said unit. Following the principle consistently laid down by the Tribunal in aforesaid cases, we do not find merit in the impugned order, which is contrary to the said precedents. 6. Consequently, the same is set aside and the appeal is allowed with consequential relief, if any, as per law. . 37. Following the above decision, we are of the considered opinion that the denial of credit alleging that the transferred credit has been availed without documents cannot sustain and require to be set aside. Order accordingly. 38. It also needs to be noted that part of this demand relates to credit availed in respect of inputs at the time of de-bonding. The adjudicating authority as well as the Tribunal denied the eligibility of credit on inputs availed by EOU consequent to de-bonding. The appellant preferred an appeal before the Hon ble Jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as utilization of Cenvat credit. 15 . The insertion of the proviso relating to Cenvat credit on capital goods at the time of debonding of the unit was done in 2008 by way of Notification No. 35/2008-C.E. (N.T.) shows that the legislative intent at that time was to allow Cenvat credit to be taken in respect of the capital goods only at the time of debonding. It also implies that the benefit was not available for inputs and raw materials at the time of debonding because the Legislature in its wisdom has not included the raw material or inputs in the proviso or at any other place in Rule 3 of Cenvat Credit Rules, 2004. The specific inclusion of the proviso in respect of the capital goods meant that the Cenvat credit should be extended only to that extent and applicability of the Cenvat Credit Rules to raw materials and inputs, at the time of bonding by necessary implication stood excluded. 16. In the case law of Rajdhani Fab Pvt. Ltd. (supra) cited by the appellant, the limited question before the Tribunal was whether the Cenvat credit was admissible on duty paid indigenously procured capital goods and the Hon ble court settled that question only. The question of admissibility to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvat credit on capital goods is a question of fact, which needs to be verified, the same is liable to be remanded to the adjudicating authority for verification. 20 . In view of above, the order of the Commissioner is upheld in respect of duty, interest and penalty in relation to raw materials and waste (Sl. No. 1, Sl. No. 2, Sl. No. 4 and Sl. No. 5 at page 6 of O-I-O). 21 . In respect of the capital goods mentioned at (Sl. No. 3 of the Table at page 6 of O-I-O), the matter is remanded back to the adjudicating authority to examine afresh the evidence produced by the appellants in support of their claim about payment of duty and to decide the matter in accordance with law after affording a reasonable opportunity to the appellants to present their case. 39. The Ld. Counsel has argued on the ground of limitation also. Show Cause Notice and Statement of demand are issued for the period 2009-10 to 2012-13. Part of the demand falls within the extended period. In the present case, the issues are mostly interpretational in nature. In respect of one issue as to the eligibility of credit on inputs at the time of debonding, the appellant had approached the Hon ble High Court. The issue with r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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