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TMI Blog2024 (10) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... n their factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price.' - In light of the claim made by the appellant that they are reversing the credit on proportionate basis in respect of electricity wheeled out by them there are no merits in the impugned order to the extent it is in respect of denial of credit on this account. CENVAT credit in respect of service received from the merchant exporter - HELD THAT:- The findings recorded in the impugned order are agreed to the effect that these services had no relationship howsoever negligible with manufacturing activities undertaken by the appellant - the impugned order that the definition of input service was amended in 2011 to delete activities relating to business from the inclusive part of definition. Thus the definition has become more restrictive than what was interpreted by the Hon ble High Court. As no sort of nexus can be shown between the services received by the appellant from the Merchant Exporter, for fulfillment of export quota, by procuring and exporting the sugar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sarne under Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Section 73(2) of the Finance Act,1994 read with Section 11A(4) of the Central Excise Act, 1944, from M/s Triveni Engineering Industries Ltd., (Sugar Unit) Sabitgarh, Tehsil-Khurja, Distt-Bulandshahar (ii) I confirm the demand of interest as per applicable rate in terms of Rule 14 of Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act,1994 read with Section1 1AA of the Central Excise Act, 1944. (iii) I also impose a penalty of Rs. 25,00,590/-(Rupees Twenty Five Lakhs Five Hundred and Ninety only) upon M/s Triveni Engineering Industries Ltd., (Sugar Unit) Sabitgarh, Tehsil-Khurja, Distt-Bulandshahar, under Rule 15 of the Cenvat Credit Rules, 2004, read with Section 78 of the Finance Act,1994 read with section 11AC of the Central Excise Act, 1944. 2.1 Appellant is manufacturer and also a service recipient and registered with department both as manufacturer and service recipient for payment of service tax on the specified services under reverse charge mechanism. 2.2 During course of audit it was observed that appellant has availed inadmissible CENVAT credit on- (i) invoices issued by the Merchant e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence this appeal. 3.1 I have heard Ms Aasmee Mangla, Chartered Accountant for the appellant and Shri Sandeep Pandey, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned chartered accountant submits that: Definitions of input service has been wrongly interpreted by the authorities below to hold that these services do not fall under the definition as contained in rule 2 (l) of the Cenvat Credit Rules, 2004; Authorities below have wrongly concluded that the activities undertaken by the appellant through the merchant exporter are more akin to trading of goods and hence covered by Negative List under Section 66 D (e) of the Finance Act, 1994 The gateway system was used for monitoring of electricity supply which have been used by tehm in the process of manufacture. In case were the electricity was wheeled out they have reversed the proportionate credit. Deniual of credit would result in cascading of taxes Extended period of limitation could not have been invoked. No penalty could have been imposed upon the appellant As demand itself is not sustainable so the demand of interest also need to be set aside. Reliance is placed on following decisions: Ultratech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uota, the appellant had signed/entered into a specific tripartite agreement dated 16/12/2015 with M/s. Shri Dutt India Pvt. Ltd., Mumbai, Maharashtra as a Merchant Exporter and M/s. Sahyadri SSK Ltd., as a sugar source mill. As per the tripartite Agreement, Merchant Exporter M/s. Shri Dutt India Pvt. Ltd., Mumbai agreed to procure 6786.00 MT raw/VHP brown sugar from Source Sugar Mill i.e., M/s. Shayadri SSK Ltd., to fulfill MIEQ sugar export quota allocated to the appellant. Further all the expenses/cost relating to transportation of sugar from Source Sugar Mill to the port of export and other expenses were born by the said M/s. Shri Dutt India Pvt. Ltd. 11. In the process, the third party, i.e., M/s. Shri DuttIndia Pvt. Ltd. raised bills on two counts charging service tax namely:- (a) 'export facilitation fee equal to commission payable to the third party for finding importers abroad and facilitate in export related documents and (b) reimbursement of loss while fulfilling the export quota equal to the difference between the domestic price and the export price (which is lesser). The appellant pleaded that even if sugar is procured from other mills, as per govt. notification, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture 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 output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal. In the instant case, the service provided by the Merchant Exporter in course of trading of goods procured from third parties cannot, by any stretch of imagination, be treated as used by the appellant, directly or indirectly, in or in relation to manufacture of their own final products. Moreover, those services are also not appeared in the inclusive Part of the above definition of input services for the purpose of taking Cenvat Credit. (D) The appellant contended that said export facilitation fee is an activity closely related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services were used in relation to traded goods not manufactured by the appellant in his factory and therefore all such relied upon case laws are not applicable in the instant case, 13. Relating to Cenvat Credit availed on the invoices issued by UP Sugar Mills Cogen Association for ' Contribution to install Gateway System , I find that such Gateway System is installed at the gate of the manufacturing unit to provide real time power value (KW) to SLDC via internet (by using mobile SIM Telemetry System) used by SLDC (state load dispatch center) to ensure about the surplus power exported or imported by a unit over a period of time and linked to U.P. Sugar Mills Cogen Association Communication Gateway System. The said system installed at the entrance/gate of the unit is used by the state load dispatch center (SLDC) to monitor power import. All the above activities were performed in relation of monitoring surplus electricity generation and export/import thereof. As electricity itself is an exempted / non-excisable goods or service, no credit is available on such services of Contribution for setting up Gateway System' provided by UP Sugar Mills Cogen Association. 4.3 The on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory to the joint ventures, vendors, grid etc. would not be admissible for CENVAT credit as such wheeled out electricity, cleared for a price, would not fall within the definition of input in Rule 2(g) of the CENVAT Credit Rules, 2002. This view is also expressed in para 9 of the judgment of this Court in the case of Collector of Central Excise v. Solaris Chemtech Limited - 2007 (214) E.L.T. 481 (S.C.). Further, our view is supported by the observations of this Court in the case of Vikram Cement v. Commnr. of Central Excise, Indore - 2006 (194) E.L.T. 3 (S.C.) which is quoted below :- It appears to us on a plain reading of the clause that the phrase within the factory of production means only such generation of electricity or steam which is used within the factory would qualify as an immediate product. The utilization of inputs in the generation of steam or electricity not being qualified by the phrase within the factory of production could be outside the factory. Therefore, whatever goes into generation of electricity or steam which is used within the factory would be an input for the purposes of obtaining credit on the duty payable thereon. 20. To sum up, we hold that the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoval, procurement of inputs, activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal; (xvii) Before adverting to the merits of the issue, reference may be made to various decisions rendered in the context of the expression input service as defined under Rule 2(l) of the Rules. This court in the case of Parth Poly Wooven Pvt. Ltd. (supra) has, after referring to various decisions on the question of interpretation of the said rule as well as interpretation of statutory provisions, held that to qualify for input service, such service should have been used for the manufacture of the final products or in relation to the manufacture of final product or even in the clearance of the final product from the place of removal. It has been held in the impugned order that the definition of input service was amended in 2011 to delete activities relating to business from the inclusive part of definition. Thus the definition has become more restrictive than wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2023 (70) G.S.T.L. 378 (Tri. - Del.)] delhi bench has observed as follows: 24 . The third issue that arises for consideration is regarding the invocation of the extended period of limitation in the show cause notice. The relevant portion of the show cause notice invoking the extended period of limitation is reproduced below : Whereas, from the facts discussed above, it further appears that 8. the assessee, by doing so, had intentionally and wilfully suppressed the details of providing/receiving that impugned taxable services and did not file prescribed ST-3 Returns containing the details correctly therein with the intention to short payment/non-payment of the applicable Service Tax on such services. Agreements were never shared by the assessee with the Department so that the nature of these advances could be ascertained from the agreements. Thus there is a clear case of suppression on the part of the assessee. The assessee was aware about the nature of such advances as he had entered into different types of agreements for different kinds of advances/security deposits but he has shown under a single heading in his Balance Sheet which reflects his intention to evade the Service Tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of Service tax of output service. 17. . 18. . 19. .. 20 . This Court is also of the opinion that the invocation of the extended period of limitation was warranted in the circumstances of the case. Being conscious of its trading activity and that it was not liable to service tax (since it did not include the amounts earned from that business, in its returns) meant that the assessee was aware of what it was doing. It cannot now take shelter under the plea that non-trading activity was expressly exempt from claiming credit, in 2011. That amendment made no difference, given that trading was never taxable under the Finance Act, 1994. In these circumstances, the Revenue was justified in invoking the extended period of limitation in this case. 4.9 In case of Kuttukaran Trading Ventures [2014 (35) S.T.R. 481 (Ker.)] affirmed by Hon ble Supreme Court as reported at [2015 (40) S.T.R. J187 (S.C.)], Hon ble Kerala High Court has held as follows: 25 . Adjudicating authority found that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the facts of the present case is fully justified. Applying the ratio of the above High Court judgment, I find that the extended period has rightly been invoked and penalty has rightly been imposed in this case. 4.11 Appellant has relied upon the decisions as follows, to submit that extended period could not have been invoked: A. Zee Media Corporation Limited [2018 (18) GSTL 32 (ALL). B. L G Electronics India Pvt Ltd [2024-VIL-424-CESTAT-ALH-ST] C. Progressive Stampings (P) Ltd. [2024-VIL-394-CESTAT-ALH-ST] On going through the said decisions I find that these decisions were rendered when the Court and the benches have concluded that the relevant facts were declared by the appellant to the department authorities in normal course and this fact has been established on perusal of returns etc. The same is not the case in the facts of present case and the said decisions are distinguishable. In view of findings recorded in the previous paragraphs and decisions referred I concur with the findings recorded in the impugned order for invoking the extended period of limitation. 4.12 As I find that extended period has been correctly invoked the penalty imposed under Rule 15 of CENVAT Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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