OFFICE OF THE SUPRINTENDENT OF CENTRAL EXCISE,

- 1 - F.No. V.32/15-7/Meghmani/OA-I/10-11

BRIEF FACTS OF THE CASE:1. M/s. Meghmani Organics Ltd., Plot No. 184, Phase-II, GIDC, Vatva,

Ahmedabad (hereinafter referred to as “the assessee”) is registered with Central

Excise Department and having Central Excise Registration No.

AABCM0644EXM003 for manufacture of S O Dyes falling under Chapter 32 of

the first Schedule to the Central Excise Tariff Act, 1985. The assessee is availing

Cenvat credit facility under the provisions of Cenvat Credit Rules, 2004 [“CCR,

2004”, for short].

2. During the course of audit conducted at their factory premises, it

was observed that the assessee has availed Cenvat credit of Input services, in

the months of February, 2009, June, 2009 and December,2009, which on

scrutiny of the Bills raised by the Service providers, found to be ineligible in terms

of the provisions of the CCR, 2004. The assessee has availed Cenvat credit on

Courier service, which was used for removal of samples and so not appeared to

be admissible. The assessee has also availed Cenvat credit on various charges

such as Export C&F expenses, CHA charges and other expenses related to Export of the finished goods. In this regard, it was observed that services

rendered at the port area or for outward transportation beyond the place of

removal (factory gate), cannot be classified by ‘input service’ in terms of Rule 2(l)

of the Cenvat Credit Rules, 2004, as such services do not appear to have any

nexus with manufacture of the final product. The assessee has also availed

Cenvat credit on Maintenance and Repair services provided by M/s. Abdul

Rauf Shaikh, who has raised bills for maintenance and repair of the plants in the

assessee’s factory premises. In this regard, it was observed that the said Bills

did not reflect the Service Tax Registration Number of the Service Provider. Rule

9(2) of the CCR,2004, mandates for the assessee to avail the Cenvat credit only

on those documents which inevitably contain the service tax registration number

of the service provider. Hence, it appeared that the assessee is required to

reverse such Cenvat credit along with interest.

3. On inquiry by the jurisdictional Central Excise officers, it appears

that M/s. Abdul Rauf Shaikh has raised bills for maintenance and repairs of the

plants in the assessee’s factory premises and charged Service Tax to the

assessee, for which the assessee has taken Cenvat credit. However, the said

Bills did not reflect the Service Tax Registration Number of the said service

provider. Rule 4A(1) of the Service Tax Rules, 1994, inter alia provides that

every person providing taxable service shall issue an invoice or a bill or a

Challan, which shall be serially numbered and shall contain the name, address

and the registration number of such person. Rule 9(2) of the Cenvat Credit


Rules, 2004, provides that no Cenvat credit shall be taken unless all the

prescribed particulars are contained in the documents. Thus, it appears that

Rule 9(2) of the CCR,2004 mandates for the assessee to avail the Cenvat Credit

only on those documents which inevitably contain the Service Tax Registration

number of the Service Provider. Hence, the credit taken by the assessee on such

Bills/Invoices, which do not bear the Registration Number of the Service provider,

appears to be inadmissible.

4. A Statement dated 04.06.2010 of Shri Pravin M. Varia, Sr.

Executive (Excise) & Authorised Signatory of M/s. Meghmani Organics Ltd.,

Vatva, Ahmedabad, was recorded under Section 14 of the Central Excises

Act,1944, wherein he interalia stated that he had been shown a Statement of

Maintenance & Repairs charges in respect of services provided to M/s Meghmani

Organics Ltd., Vatva, Ahmedabad by Shri Abdul R. Sheikh during the month of

Feb.2009 & June,2009 wherein Service Tax paid is shown as 51,921/- and

5,278/- respectively. He further stated that they have taken Cenvat credit for

Rs.51,921/- and Rs.5,278/- for the aforesaid service tax paid for Maintenance &

Repairs by Shri Abdul R. Shaikh. He further stated that aforesaid service tax

credit was not specifically shown by them in their monthly ER-1 returns for

respective months and they did not submit the relevant documents i.e. Bills for

Maintenance & Repair Services issued to them by Shri Abdul R. Sheikh during

the aforesaid period. During recording of the said Statement, Shri Pravin M.

Varia, had also been shown Annexure A-1 regarding Courier Charges for the

month of June, 2009, Annexure A-2 regarding Export expenses for the month of

December 2009, Annexure A-3 regarding Export related expenses for the month

of December,2009 and Annexure A-4 regarding Courier Charges for the month of

December,2009; on which he put his signature in token of seeing & verifying the

same. On being inquired as to why M/s Meghmani Organics Limited, Vatva,

Ahmedabad, had taken Cenvat Credit of Service Tax on Services like (1) Courier

Charges (2) Export & Export related expenses, which is inadmissible to them,

Shri Pravin M. Varia stated that the credit in respect of the said services in their

opinion are correct under the definition of Input Services and are in relation to

their business activities hence that credit of service tax is not deniable as input

service.

5. The assessee, in connection with the inquiry regarding (i) Courier

charges (2) Export and Export related expenses, also informed vide their letter

dated 24.2.2010 that the credit in respect of the said services in their opinion are

covered under the definition of Input Services and are in relation to their business

activities hence that credit of Service Tax is not deniable as input service.


6. In this regard, it appeared that the business activities which are

sought to be extended in the definition of input services cannot include the

services rendered at the port area or for outward transportation done beyond the

place of removal (factory gate). Thus, this kind of services availed by the

assessee cannot be classified as an ‘input service’ in terms of Rule 2(l) of Cenvat

Credit Rules, 2004, as such, such services do not appear to have any nexus with

the manufacture of the final product. As provided under the provisions of Rule

2(l)(ii) read with Rule 3(1) of Cenvat Credit Rules,2004, ‘input service’ means any

services used by the manufacturer whether directly or indirectly, in or in relation

to the manufacturer of final products and clearance of final products upto the

place of removal, therefore, the credit of service tax paid on the services utilized

beyond the place of removal do not appear to be admissible to the assessee.

7. It appeared from the above, that the said assessee had

contravened the provisions of Rule 9(2) of Cenvat Credit Rules, 2004, by taking

Cenvat credit on the Bills which does not contain the service tax registration

number of the service provider. Further, the assessee has also contravened the

provisions of Rule 2(l) read with Rule 3(1) of Cenvat Credit Rules,2004 by taking

credit of service tax paid on the services utilized beyond the place of removal and

not falling under the definition of the term ‘input service’. Such credit wrongly

taken/availed by the assessee is required to be recovered from them.

8. Further, it appeared that such credit has been taken by the

assessee by way of suppression of facts and in contravention of the provisions of

the Cenvat Credit Rules, 2004, with intent to evade payment of duty. Shri. Pravin

M. Variya, in his Statement dated 4.6.2010, has admitted that the Service Tax

credit was not specifically shown by them in their monthly ER-1 returns and they

had not submitted the relevant documents. In absence of copies of relevant

documents, the Department was unable to know and verify whether the

documents were bearing service tax registration number or not. Further, in

absence of specific mention about the nature of services availed by the assessee

the Department was also unable to know and verify the nature of services and

use thereof. Thus, it was not possible for Department to ascertain whether the

services are falling under the definition of ‘input service’ or not. It was only during

the course of Audit, these irregularities were noticed. Subsequently, the

necessary inquiry was made the jurisdictional Central Excise Officers and a

Statement dated 4.6.2010 of Shri Pravin M Varia, has been recorded. On

completion of the inquiry, it was observed that during the months of February, 2009, June, 2009 and December, 2009, the assessee has wrongly availed


Cenvat credit of totally Rs.6,33,021/- on Courier charges, Export expenses, Export related expenses and Repairs & Maintenance Services, of which particulars are given in Annexures A-1, A-2, A-3, A-4 and A-5 and summarised in Annexure-A to this notice.

9. Thus, it appeared that Cenvat credit of Rs.6,33,021/- wrongly taken

by the assessee is required to be disallowed, demanded and recovered by

invoking extended period of limitation under the provisions of Rule 14 of the

Cenvat Credit Rules,2004 read with the Proviso to Section 11A(1) of the Central

Excise Act,1944. Interest is also payable under the provisions of Rule 14 of the

Cenvat Credit Rules, 2004, read with Section 11AB of the C. Ex. Act, 1944.

Further, the assessee also appears to be liable to penalty under the provisions of

Rule 15(3) of the Cenvat Credit Rules, 2004 (as prevailing during the period of in

which the credit was wrongly taken i.e., February, 2009, June,2009 and

December,2009) and saved by Section 38A of the Central Excise Act, 1944.

10. Therefore, M/s. Meghmani Organics Ltd., Plot No. 184, Phase-II,

GIDC, Vatva, Ahmedabad were issued a show cause Notice bearing F.No.

V.32/15-7/Meghmani/OA-I/10-11, dated 05/7/2010 calling upon them to show

cause, as to why:

(1) Cenvat credit of Rs. 6,33,021/- (Rupees Six lakh Thirty-three thousand

Twenty-one only), wrongly taken/availed by them should not be

disallowed, demanded and recovered from them under the provisions of

Rule 14 of the Cenvat Credit Rules, 2004 read with the Proviso to Section

11A(1) of the Central Excise Act, 1944.

(2) Interest should not be charged and recovered from them on the above

amount under the provisions of Rule 14 of the Cenvat Credit Rules, 2004,

read with Section 11 AB of the Central Excise Act, 1944.

(3) Penalty should not be imposed upon them under the provisions of Rule

15(3) of the Cenvat Credit Rules, 2004, as prevailing during the period in

which credit was wrongly taken, (i.e. February,2009, June,2009 and

December,2009) and saved by Section 38A of the Central Excise Act,

1944.


DEFENCE REPLY:

11. In response to the Show Cause Notice bearing

F.No.V.32/15-7/Meghmani/OA-I/10-11 dated 05.07.2010, the assessee

submitted their written reply dated 26.07.2010 wherein they denied the

allegations made in the Show Cause Notice, as the same are based on the

definition as mentioned in the Show Cause Notice, though the said definition of

"Input Service" read as under:

"Input Service" means "Any Service: -

(1) Used by provider of taxable service for providing an output service or,

(2) Used by 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 also includes services used in relation to setting up, modernization ,

renovation or repairs of a factory premise of provider of output service or an

office relating to such factory or premises, advertising or sales promotion, market

research, storage up to the place of removal, 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 scrutiny, inward transportation of inputs or capital goods, and

outward transportation up to the place of removal.

They submitted that in view of the above definition, the credit of the

Service Tax paid on the above Service availed by them were admissible to them

and not deniable.

12. They stated that their company is engaged with the business of

Pigments Dyes, having 90 % of their turn over in exports; that, service tax paid

on Courier services Rs. 203274/- (Rs.19186/- {June-2009 Annex-A 1} +

Rs.184088/-{Dec.-2009 Annex- A-4}) are "relating to business" to carried out

manufacturing activities i.e. being related to main activities; that they have not

exported or clear any final goods through courier; that all activities relating to

business fall under "Input Service"; that input services are not restricted to

services specified after expression "such as ", as it is purely illustrative; that the

above courier charges are paid for sending the Cheques/Drafts for payments of

Raw materials, Sending of Purchase/Sales Orders, other routine correspondence

with parties, sending of L/c. and samples for approval of customers. They

contended that hence this charges are paid for the services which are in relation

to activity of business and manufacturing.


13. They further submitted that, service tax paid on Export Expenses

and Export Related Expenses are paid on the services availed for Exports

Rs.3,72,548/- (Rs.2,62,910/- { Annex-A 2} + Rs.1,09,638/-{ Annex-A 4} ) are

"relating to business" to the place of removal i.e. at the point of loading of port for

export; that it is held by the Honourable Tribunal in the matter of Metro Shoes Pvt. Ltd. Reported in 2008(10) STR 382 (Tri.-Mumbai) that "Cenvat credit of

Service tax -Input service - Credit of Service tax on agent's commission, GTA,

advertising, clearing and forwarding, telephone, internet and courier charges -

Any input service used by manufacturer whether directly or indirectly in or in

relation to manufacture and clearance from place of removal covered by

definition and eligible for credit - Showroom is place of removal as final product

cleared to own showrooms and no sale at factory gate - Services used till place

of removal eligible for credit - Cenvat credit of Service tax paid on impugned

services eligible as credit - Credit not admissible on services directly or wholly

attributable to trading activities - Issue involving interpretation and penalty not

imposable-interest payable on credit held as not admissible -Sections 11A, 11AB

and 11AC of Central Excise Act, 1944 - Rules 2(1), 14 and 15 of Cenvat Credit

Rules, 2004. "

14.1 They also submitted that the Honourable Tribunal WZB,

AHMEDABAD in the matter of COMMISSIONER OF C. EX., RAJKOT V/s ADANI

PHARMACHEM P. LTD. Reported in 2008(12) STR 593 that, Cenvat credit of

Service tax-Input service - Custom House Agent service - Place of removal -

Goods sold on FOB/CIF basis and Service tax paid for CHA services rendered,

not disputed - Input service includes services rendered for outward transportation

up to place of removal, all Service tax paid to facilitate goods to reach place of

removal has to be eligible for benefit of Cenvat credit - Impugned CHA services

required to facilitate clearance of final products from place of removal i.e. load

port - Credit eligible - Rule 2(1) of Cenvat Credit Rules, 2004. [para 3]

14.2 They further submitted that in another similar case held by Honourable

Tribunal SZB, BANGALORE, in the matter of KUNTAL GRANITES LTD. Vs.

COMMISSIONER OF C. EX., BANGALORE, 2007 (215) E.L.T. 515 (Tri. - Bang.)

that:

“Remission of duty - Place of removal - Goods dispatched on lorry met with an accident resulting in spillage of 51 pieces of granite slabs

meant for export leading to its destruction - When goods removed from

factory for export purposes and goods are destroyed due to unavoidable


reasons, accident caused to lorry, then in such a circumstances goods

are not deemed to have been removed from factory gate in terms of

Section 5 of Central Sales Tax Act, 1956 as sale has not been

completed - When export documents presented to Customs office, then

that is the place of removal as per Section 5 ibid -Remission of duty

allowed - Rule 21 of Central Excise Rules, 2002. [para 3]

Exports - Place of removal - Section 4(3)(c) of Central Excise Act, 1944

explains that place of removal is premises from where goods sold after

clearance from factory - Place of removal for exports under Section 5 of

Central Sales Tax Act, 1956 is where export documents presented to

Customs office, [para 3]

In the instant case, it was considered by the Hon. Tribunal that, Section

4(3)(c) of C.E. Act clearly explains that the place of removal is the

premises from where excisable goods are to be sold after their clearance

from the factory. In the present case, the goods were exported and when

export documents are presented to the Customs office, then that is the

place of removal as per Section 5 of C.E. Act”.

15. They moreover submitted that, service tax paid on Repairs and

Maintenance Services are paid on the services availed for Repairs and

Maintenance of plant for Rs.57,199/-; that the contention of the authority that ,

the credit availed on the bills of Service provider which did not reflect the Service

Tax Registration number of Service provider; that they have provided the

Service Tax Registration copy at the time of their Audit EA 2000; that there is no

allegation in the Show Cause Notice that the Services were not utilized in or

relation to their products either directly or indirectly therefore Show Cause Notice

is not maintainable; that Show Cause notice is not maintainable in view of the

case law reported in 2009 (16) STR 418 (Tri. Ahmedabad) in the matter of

Commissioner of Customs & Central Excise, Vapi V/s. DNH Spinners,

wherein it is held that "Cenvat of Service Tax-Documents for taking credit-credit

denied on technical ground that documents not in the name of assessee's factory but issued in the name of Head Office situated elsewhere- No dispute

about Input Services received by assessee-substantive benefits not deniable on

procedural ground- Revenue appeal rejected- Rule 9 of Cenvat Credit Rules,

2004"; that therefore also credit is not deniable, as they have taken credit of

Service Tax used in &. in relation to manufacture of their final products either

directly or indirectly.


16.1 They also stated that as the credit is admissible, the question of

penalty as proposed in the show cause notice is not maintainable; that even

otherwise penalty is not imposable as proposed in the show cause notice, as this

is a case of interpretation of provisions and no malafide intention to evade

payment of tax, penalty is not imposable; that Honourable Tribunal in the matter

of Mundra Port & Special Economic Zone Ltd. V/s. C.C.E. Rajkot, as reported in

2009(13) S.T.R. 178 (Tri. Ahd.) have held that "Penalty (Service tax) - Imposition

of - Cenvat credit on various goods and services -Bona fide dispute on

admissibility of credit - Issue involving bona fide interpretation of provisions –

Credit availed in statutory records on due intimation to authorities - No mala fide

so as to invoke penal provisions - Penalty set aside - Rule 15 of Cenvat Credit

Rules, 2004".

16.2. They submitted that as explained herein above the credit is available to

them in accordance with the provisions of Law, the question of demand of

interest and imposition of penalty as proposed in the show cause notice does not

arise. 2007 (214) E.L.T. 173 (P & H)

16.3. The definition of 'input service' is very broad and has to be interpreted in

the light of requirement of business and it can not be read restrictively. On

a proper appreciation of the same, the service tax credit availed on the above

services are admissible to them and not deniable as proposed in the show cause

notice, as it is in relation of activity of business & manufacturing activity by virtue

of the definition of ‘input service'

17. During the personal hearing on 24.01.20100 the assessee submitted an

additional written reply, wherein they stated that they have availed the credit of

Service Tax paid on Courier Services for Rs.2,03,274/-(Rs.19,186/-{Jun-

2009 Annex-A 1} + Rs.1,84,088/-{Dec-2009 Annex- A 4}); that they were

using services of courier for placing order, filing quotation for procurement as

well as marketing, dispatch instructions, issuing cheque for procurement,

sending stock transfer documents to depots, receiving dispatch instructions

from marketing/depots/head office, delivery of important documents to their

inland and foreign buyers and for the payments by cheque/D.D. of Raw material

purchased from their suppliers etc. They clarified that, for their export business,

they have to send all documents to buyer in relation to dispatch and business

inquiry.

18. They further stated that in Cenvat Credit Rules, 2004, Rule 2 (l), the

definition of "Input Service" read as under :


" Input Service" means "Any Service:-

(1) Used by provider of taxable service for providing an output

service or,

(2) Used by 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 also includes services used in relation to setting

up, modernization , renovation or repairs of a factory premise of provider

of output service or an office relating to such factory or premises,

advertising or sales promotion, market research, storage up to the place

of removal, 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 scrutiny, inward transportation of inputs or capital goods, and

outward transportation up to the place of removal.

19. They further submitted that, it is not in dispute that, the

definition of "input service" contain an exhaustive list of services, which have a

bearing on the scope of the main part of the definition i.e. "in or in relation to"

the manufacture of final products and clearance of the final products; that it is

true that, the above provisions of law used the phrases "in relation to"

"pertaining to" and" relating to" as equivalent expressions; that these

expressions found in deeming provisions were also held to have been used in an

expansive sense; that the meaning to the phrase "in relation to" used in Rule 2(l)

of Cenvat Credit Rules, 2004, but the expression "in relation to" can be found in

various grammatical situations in different legislative texts and contexts will

have to be construed in a manner consistent with the Scheme of the law; that

one has to understand the definitions under Rule 2 of the Cenvat Credit Rules

by keeping in mind the Cenvat Credit Scheme as a whole; that it is only from the

language of the statute that, the intention of the legislature must be gathered,

for the legislature is no more and no less than what it says; that the intention of

legislature is manifest in itself in framing the Rule 2 of Cenvat Credit Rules,

2004.

20. They also submitted that, Service Tax paid on Courier charges

are "relating to business" to carried out manufacturing activities i.e. being

related to main or essential activities; that all activities relating to business, fall

under "Input service"; that input service are not restricted to services specified


after expression "such as" as it is purely illustrative and availment of Cenvat

credit of Service Tax on Courier Charges are activity relating to business and

credit of Service tax thereon admissible - Rules 2(l) (ii) of Cenvat Credit Rules,

2004.

21. They further contented that, they are eligible for the

Cenvat/Modvat credit so taken find support from the Case Law as reported in

2009 (16) S.T.R. 305 (Tri. - Bang.), COMMISSIONER OF C. EX. & CUS.,

GUNTUR Versus CCL PRODUCTS (INDIA) LTD.

"Cenvat credit of Service tax - Input service - Credit on insurance

premium, repair of vehicles, AMC charges for telecom and courier

charges - Impugned services in respect of manufacturing and exporting

coffee powder which is the business activity undertaken -Final product

of appellant is coffee powder - Services received or rendered in relation

to manufacture of final products - Issue covered by precedent decisions -

Impugned order allowing credit sustainable -Rules 2(l) and 14 of

Cenvat Credit Rules, 2004. [paras 3, 6.2, 6.3]"

22. The appellant referred the following case laws in support of their contention:

(1) 2010 (20) S.T.R. 624 (Tri. - Ahmd.)

COMMISSIONER OF C. EX. & CUS., VAPI Versus APAR INDUSTRIES LTD.

(2) 2010 (18) S.T.R. 446 (Tri.Del), IN THE CESTAT. PRINCIPAL BENCH, NEW

DELHI.

COMMISSIONER OF CUS. & C. EX., RAIPUR Versus HEG LTD.

(3) 2010 (17) S.T.R. 519 (Tri. Del.),IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

JAYPEE REWA PLANT Versus COMMISSIONER OF C. EX., BHOPAL

(4) 2010 (17) S.T.R. 134 (Tri. - Ahmd.), IN THE CESTAT. WEST ZONAL BENCH,

AHMEDABAD

CADILA HEALTHCARE LTD. Versus COMMISSIONER OF C. EX., AHMEDABAD

(5) 2008 (11) S.T.R. 266 (Tri. - Bang.), IN THE CESTAT, SOUTH ZONAL BENCH,

BANGALORE

COMMR. OF C. EX., HYDERABAD-IV Vs DELOITTE TAX SERVICES INDIA PVT. LTD

(6) 2008 (10) S.T.R. 382 (Tri.- Mum), IN THE CESTAT, WEST ZONAL BENCH,

MUMBAI


METRO SHOES PVT. LTD. Versus COMMISSIONER OF CENTRAL

EXCISE, MUMBAI-I

23. They further stated that they have rightly taken the credit and the

same is not required to be recovered as proposed in the Show Cause Notice.

Export Expenses and Export Related Expenses

(e.g. Export Sales Shipping Exp. /Export C. & F. Exp. Etc.)

24.1 They also submitted that, service tax paid on Export Expenses and

Export Related Expenses are paid on the services availed for Exports Rs. 3,

72,548/- (Rs.2,62,910/- { Annex-A 2} + Rs.1,09,638/-{ Annex-A 4} ) are

"relating to business" to the place of removal.

24.2 They submitted that on going through the decision relied upon by the

Appellant in the case Of C.C.E., Rajkot V/s. Adani Pharmachem. P. Ltd. as reported in 2008 (232) E.L.T. 804 (Tri. – Ahmd.) wherein it was held

by the Honourable CESTAT that,

“Cenvat credit of Service tax – Input service – Custom House Agent service –

Place of removal – Goods sold on FOB/GIF basis and Service tax paid for CHA

services rendered, not disputed – Input service includes services rendered for

outward transportation up to place of removal, all Service tax paid to facilitate

goods to reach place of removal has to be eligible for benefit of Cenvat credit –

Impugned CHA services required to facilitate clearance of final products from

place of removal i.e. load port – Credit eligible – Rule 2(l) of Cenvat Credit Rules,

2004. [para 3]”

24.3 They further stated that this has been so held by the Tribunal in the case

of M/s. Kuntal Granites Ltd. V/S Commissioner of Central Excise, Banglore

reported in 2007 (215) ELT 515 (Tri. Banglore)

Final Order Nos. 313 & 314/2007, dated 1-3-2007 in Appeal Nos. E/266 &

675/06

"Remission of duty - Place of removal - Goods dispatched on lorry met with an

accident resulting in spillage of 51 pieces of granite slabs meant for export

leading to its destruction - When goods removed from factory for export

purposes and goods are destroyed due to unavoidable reasons, accident

caused to lorry, then in such a circumstances goods are not deemed to have


been removed from factory gate in terms of Section 5 of Central Sales Tax Act,

1956 as sale has not been completed - When export documents presented to

Customs office, then that is the place of removal as per Section 5 ibid -

Remission of duty allowed - Rule 21 of Central Excise Rules, 2002. [para 3]

Exports - Place of removal - Section 4(3)(c) of Central Excise Act, 1944 explains

that place of removal is premises from where goods sold after clearance from

factory - Place of removal for exports under Section 5 of Central Sales Tax Act,

1956 is where export documents presented to Customs office, [para 3]"

24.4 In view of the above and following the said judgments, they are of the

view that in case of export of goods, the load port is the place of removal. Hence

services of logistics/CHA , for onward transportation of goods from factory to

ICD and ICD to port of removal is covered under the Input Service definition.

They further stated that the Cenvat Credit of Service Tax paid on service

charges incurred towards CHA/Logistics for outward transportation of goods for

exports is admissible to them; that therefore, demand of such interest and to

impose the penalty is not sustainable.

Cenvat Credit on Repairs and Maintenance Services :

25. They also stated that they have availed the credit of Service Tax

paid on the services availed for Repairs and Maintenance of plant for

Rs.57,199/-; that it is the contention of the authority that, the credit availed

on the bills of Service provider which did not reflect the Service Tax Registration

number of Service provider; that they have provided the Service Tax

Registration copy at the time of their Audit EA 2000 on being asked by the

officer for genuineness; that even though the credit of Service Tax is denied by

the authority and issued the Show Cause Notice in the matter; that there is no

allegation in the Show Cause Notice that the Services were not utilized in or

relation to their products either directly or indirectly therefore Show Cause

Notice is not maintainable; that Show Cause notice is not maintainable in view of

the case law reported in 2009 (16) STR 418 (tri. Ahmedabad) in the matter of

Commissioner of Customs & Central Excise, Vapi V/s. DNH Spinners, wherein it is held that "Cenvat of Service Tax-Documents for taking credit-

credit denied on technical ground that documents not in the name of assessee's factory but issued in the name of Head Office situated elsewhere- No

dispute about Input Services received by assessee-substantive benefits not

deniable on procedural ground-Revenue appeal rejected- Rule 9 of Cenvat

Credit Rules, 2004"; that therefore also credit is not deniable, as they have taken


credit of Service Tax used in & in relation to manufacture of their final products

either directly or indirectly.

26. They further stated that the definition of Input Service has to be

interpreted in the light of the requirement of business and it can not be read

restrictively; that in view of the above, contention in the Show Cause Notice, that

the Credit of Service Tax paid on the above services are not covered under the

Input Services ' is not correct; that hence in the light of the above clarification, they

hold that, the definition of Input Service has to be interpreted in the light of the

requirement of business and it can not be read restrictively; that in view of the

above, contention in the Show Cause Notice, that the Credit of Service Tax paid

on the above services are not covered under the Input Services’ is not correct and

proper in the justice of law; that hence the Service Tax credit availed on above

services may be allowed and the Show Notice is to be vacated in the interest of

justice.

PERSONAL HEARING:

27. Personal hearing in the matter was held on 24.01.2011 which was

attended by Shir Manukumar V. Mori, General Manager, authorised

representative of the assessee. During the course of personal hearing he

submitted the written submission alongwith the case laws in support of their claim

stating that the input service has a wide meaning and it includes courier

services/CHA/export expenses/maintenance repair services. He submitted the

copy of decision in case of M/s. Ultra Tech Cement Limited (Bom. H.C.), Nagpur

Bench dated 25.10.2010, on input services. He also prayed for allowing their

service for taking cenvat credit and requested that the SCN may be dropped.

DISCUSSIONS & FINDINGS:-

28.1. I have carefully gone through the facts of the case as well as oral and

written submissions made by the assessee. The case on hand involve following

issues, which are to be examined:

i) Whether the services of Clearing & Forwarding agents for

clearance of goods for export, CHA [for export}, Export Sales

Shipping, etc qualify as ‘input services’?

ii) Whether the services of Courier availed for removal of samples,

delivery of documents to inland and foreign buyers/suppliers etc.

qualify as ‘input services’?


iii) Whether the Cenvat credit of service tax is admissible on the basis

of bills raised by service providers, which does not contain

mandatory details as required under Rule 9(2) of the CCR, 2004?

28.2. I would like to go through the term “input service” as defined under Rule

2(l) of the CCR, 2004. The said definition of “input service” is reproduced here-in-

under:

(l) "input service" means any service,-

(i) used by a provider of taxable service for providing an output service; or

(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to 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 upto the place of removal, 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 upto the place of removal;

28.3 Though the term "Place of removal" is not defined in the Cenvat Credit

Rules, 2004, in Section 4 (3} (c) of the Central Excise Act, 1944, it is defined

as follows:

(c) “place of removal” – means

(i) factory or any other place or premises of production or manufacture

of the excisable goods;

(ii) warehouse or any other place or premises wherein the excisable

goods have been permitted to be deposited without [payment of

duty;]


(iii) depot, premises of a consignment agent or any other place or

premises from where the excisable goods are to be sold after their

clearance from the factory;

from where such goods are removed;

28.4 I would also like to go through the provisions of Rule 9(2) of the CCR,

2004, which read as under:

(2) No CENVAT credit under sub-rule(1) shall be taken unless all the particulars

as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules,

1994, as the case may be, are contained in the said document:

Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or

taxable service, assessable value, Central Excise or Service tax Registration number of the person issuing the invoice, as the case may be, name and

address of the factory or warehouse or premises of first or second stage dealers

or provider of taxable service, and the Deputy Commissioner of Central Excise

or the Assistant Commissioner of Central Excise, as the case may be, is

satisfied that the goods or services covered by the said document have been

received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit;

28.5 Rule 4A (1) of the Service Tax Rules, 1994, inter-alia prescribes the

details to be incorporated in the invoices issued by a person providing taxable

service. The text of the said Rule is reproduced below:

Rule 4A. Taxable service to be provided or credit to be distributed on invoice, bill or challan: –(1) Every person providing taxable service shall not later than fourteen days from

the date of completion of such taxable service or receipt of any payment towards

the value of such taxable service, whichever is earlier issue an invoice, a bill or,

as the case may be, a challan signed by such person or a person authorized by

him in respect of taxable service provided or to be provided and such invoice, bill

or, as the case may be, challan shall be serially numbered and shall contain the

following, namely :-

(i) the name, address and the registration number of such person;


(ii) the name and address of the person receiving taxable service;

(iii) description, classification and value of taxable service provided or

to be provided ; and

(iv) the service tax payable thereon.

28.6.1 Now, coming to the first issue regarding services of Custom House

Agents and Clearing & Forwarding Agents ( both for export), Export Sales

Shipping etc., it is beyond dispute that these services were utilized by the

assessee after removal of the goods from their factory. Thus, it can not be said

that these services have been used by the assessee, directly or indirectly, in or

in relation to the manufacture of final products or clearance of final products upto

the place of removal, in as much as the place of removal was factory gate in this

case, as defined under Section 4(3)(c) of the Central Excise Act,1944. Since the

credit of input services availed in or in relation to the manufacture upto the place

of removal is only admissible, the services availed by the assessee does not

qualify to be input service and credit of service tax paid on such services is not

admissible.

28.6.2 I find that the assessee has cited a number of decisions in support of

their contention. On examination, I find that many of the case-laws cited by the

assessee are not relevant to the issue on hand. For instance, on going through

the case law of Metro Shoes (supra), I find that it was not related to the

services of Custom House Agent. However, the services of Clearing &

Forwarding Agents are covered under this case. I find that in the Metro Shoes

case (supra), the sales were affected at the premises of company’s own showrooms, which is not the situation in present case. In the said case

there was no dispute as regards the retail showroom being considered as place

of removal whereas, in this case the assessee has not claimed that their place of

removal was other than factory gate. In the Metro Shoes case (supra) credit was

taken on inputs services (including C&F Agents’ services) provided during the

course of transportation of final product from the factory premises to their own

showrooms, which were ‘place of removal’ in that case and hence Credit upto

the place of removal was allowed. In the case under discussion it is not so. In

the instant case, undisputedly, the place of removal is factory gate. Therefore,

the case of Metro Shoes cited by the assessee is clearly distinguishable by facts

and hence ratio of said decision is not applicable to the present case.

28.6.3 In the present case, the assessee is preparing an invoice in the name of their foreign customer, thereby indicating a Sales transaction. It is not a situation where the goods are first cleared from the factory and a buyer identified


subsequently. If the goods are cleared to a premise first from where they are to be sold on identifying a buyer, it can well be the place of removal. But having cleared the goods under an export invoice, this cannot be the situation. Therefore, the factory gate would be the place of removal in all cases of export clearances, irrespective of where the title to goods changes.

28.6.4 On going through the case law of Kuntal Granites Ltd. Vs. CCE, Banglore - 2007 (215) ELT 515 (Tri. – Banglore) , referred to by the assessee, I find that in the case, supra, issue relates with the remission of duty in respect of the goods despatched for export destroyed in the transit, which is not the situation in the present case. Therefore, simply quoting the case law the assessee can not avert from the spirit of the present issues.

28.6.5. On going through the definition of ‘input service’ as defined under Rule 2(l) of CCR, 2004, as depicted here-in-above, I find that the inclusive part of the definition of 'input service' specifically restricts all services "used by the manufacturer whether directly or indirectly, in relation to the manufacture of final products and clearance of final products up to the place of removal. If the expression used in Rule 2(l)(ii) is assumed to cover the services used beyond the place of removal, the specific restriction imposed regarding 'up to the place of removal" in the inclusive part of the definition would appear redundant. It is not permissible to assume that the legislature has used expressions, redundant in the definition clause. In the case of M/s Rohit Pulp and Paper Mills Ltd Vs Collector of Central Excise, reported in 1990 {47} ELT 491 (SC), relying on the Parle Exports and Tata Oil Mills cases, the Apex Court held that ‘in interpreting the scope of any notification, the Court has first to keep in mind the object and purpose of the Notification. All parts of it should be read harmoniously in aid of, and not in derogation of that purpose'.

28.6.6. Input services, in the case of a manufacturer are those services, which

are used in or in relation to manufacture and clearance, which include services

in relation to various things explained in the inclusive part of the input service

definition. Business expenses could be many and varied and the Cenvat

Scheme as it is currently worded do not provide for set off of all taxes involved

on such business expenses. The input service tax credit can be extended only in

respect of those input services which are clearly provided in the said definition.

28.6.7. I further find that the main part of the definition of "input service" under Rule 2(l) of Cenvat Credit Rules, 2004 deals with services used in the manufacture or clearance of final product as also with Service used in relation to the manufacture or clearance of final products. Any service used in the manufacture or clearance of final products is easily identifiable, whereas any service used in relation to the manufacture and clearance of final products


requires to be determined, for which a "relation" - whether direct or indirect, proximate or remote - has to be established between the service and the activity of manufacture or clearance, as the case may be. The services specified in the inclusive part of the definition of "input service" pertain to activities performed either in relation to manufacture of final products or in relation to clearance of such goods. They can, definitely, be of aid to the determination of the scope of expression, "in relation to", used in the main part of the definition. In so far as clearing and forwarding of export cargo, the Customs House Agents services or the Export Sales Shipping services are concerned, the inclusive part of the definition is restrictive as it permits considering only those activities utilized up to the place of removal as input service. The scope of the expression "in relation to", used in the main part of the definition of the "input service" vide rule 2(l) of Cenvat Credit Rules, 2004, must be understood as circumscribed by this limiting factor.

28.6.8. In the present case under consideration, there is no dispute that the place of removal is the factory gate and expenses incurred thereafter do not constitute the assessable value of excisable goods. Place of removal being well defined which admits no extension of meaning as held by the Hon'ble Tribunal in the case of Ultratech Cement Limited V/s CCE, Bhavnagar, reported in 2007 (6) STR 364 (Tri-Ahmd), that all activities relating to business, used by the manufacturer in relation to the manufacture of final product and clearance of the final product up to the place of removal alone are eligible for input credit. Once the final products are cleared from the place of removal, there is no scope for subsequent use of service to be treated as input.

28.6.9. In the case of Commissioner, Central Excise, Indore Vs NHK Springs Limited, reported in 2007 (7) STR 63 (Tri-Del) it has been held that,

'the expression 'clearance of final product from the place of removal' has to he

understood in the context of the preceding words, which refer to service used by

the manufacturer in relation to the manufacture and clearance of final products,

from the place of removal, which itself may require input service’.

28.6.10. Further, I find that a recent decision in case of Commissioner of C. Ex., Chennai Vs Sundaram Brake Linings - 2010 (19) S.T.R. 172 (Tri. – Chennai) is squarely applicable in the present case. In the said case, Hon’ble

CESTAT, Chennai, on relying a decision of Hon’ble Supreme Court in case of

Maruti Suzuki Ltd. v. CCE, Delhi - 2009 (240) E.L.T. 641 (S.C.), held that use

of the input service must be integrally connected with the manufacture of the final

product. The input service must have nexus with the process of manufacture. It

has to be necessarily established that the input service is used in or in relation to

the manufacture of the final product. One of the relevant test would be can the

final product emerge without the use of the input service in question. I find that in


the present case, the Agency Services utilized beyond the factory gate after

removal of finished goods for export does not meet the test for entitlement to

credit i.e. the Nexus theory and Relevance test as broadly discussed by the

Hon’ble Supreme Court in case of Maruti Suzuki (Supra).

28.6.11. Further, I find that in the case of Nirma Ltd. Vs CCE, Bhavnagar -

2009 (13) STR 64 (Tri.-Ahmd.), Hon’ble CESTAT has relied upon the case of

Excel Crop Care Ltd. Vs Commissioner as reported at 2007 (7) STR 451 (Tri.-Ahmd.) wherein it has been held that – “The CHA services availed in respect of

export does not have any nexus with the manufacture and clearance of the

product from the factory. The business activities which are sought to be included

in the extending arm of the definition, in my opinion, cannot include the services

rendered at port area.” In light of this, Hon’ble CESTAT has rejected the appeal

filed by the appellant. I find that these case laws are squarely applicable in the

present case.

28.7.1 Now coming to the second issue regarding the Courier services, I find

that the assessee had taken Cenvat Credit of Service Tax paid by them on

Courier charges paid by them for despatching samples, delivering of documents

to their buyers/suppliers etc. Rule 2(l)(ii) of Cenvat Credit Rules,2004 defines the

eligible category of Services for availing credit and primarily, from the definition

laid down it clearly emerges that the services should have been used directly or

indirectly in the manufacturer or clearance of their final products. Thus, apparently there should be a nexus between the ‘input service’ and the activity of ‘manufacture’. In the present case, I find that there is no nexus

between the Courier charges and the manufacturing/clearance activities.

Therefore, I find that the Courier service can not be termed as ‘input service’.

28.7.2 Further, I find that as held by the Hon’ble CESTAT, Chennai in case of

Commissioner of C. Ex., Chennai Vs Sundaram Brake Linings - 2010 (19) S.T.R. 172 (Tri. – Chennai), discussed in the foregoing para, the input service

must have nexus with the process of manufacture. It has to be necessarily

established that the input service is used in or in relation to the manufacture of

the final product. It is beyond doubt that in the present case there is no nexus

between the services availed by the assessee with the manufacture process.

28.7.3 I further find that the said assessee failed to establish nexus between the

Courier Service availed by them and the manufacture of the finished excisable

goods. Such a requirement is clearly necessary as has been held in the case of


Vikram Ispat Vs CCE, Raigad - 2009 (16) S.T.R. 195. It has also been held in

the said case that any service to be brought within the ambit of definition of ‘input

service’ should be one which should satisfy the essential requirement contained

in the main part of the definition. This requirement is equally applicable to the

various items mentioned in the inclusive part of the definition as well. The

Tribunal has also held that no credit can be allowed unless the assessee

adduces evidence to establish the nexus between the services and the

manufacture of the final products. Relying on the above decision, I find that the

services in the subject issue are coming within the ambit of definition of “input

service”. In view of this, I am constrained to hold that the assessee is not entitled

to Cenvat Credit on the services in question.

28.7.4 Further, Hon’ble Tribunal in the case of CCE, Nagpur Vs Manikgarh Cement Works - 2010 (18) S.T.R. 275 has held that to come under the definition

of input service, a service must satisfy the essential requirement of having been

used in or in relation to the manufacture or clearance of final product whether

directly or indirectly. This decision also holds that the Hon’ble Supreme Court in

the case of Maruti Suzuki Ltd. Vs CCE, Delhi - 2009 (240) E.L.T. 641 (S.C.) has impliedly overruled the decision of the Bombay High Court in the case of

Coca Cola India Pvt. Ltd. Vs CCE, Pune - 2009 (15) S.T.R. 657 (Bom.) = 2009 (242) E.L.T. 168 (Bom.). The Tribunal has also held in this case that the decision

of the Hon’ble Supreme Court in Maruti Suzuki (supra) though rendered in a case

relating to ‘inputs’ is also applicable to a case of ‘input service’ in view of the

main part of the definition.

28.7.5 In case of Maruti Suzuki Vs Commissioner [2009 (240) E.L.T. 641 (S.C.)], the Hon’ble Supreme Court laid down the test for eligibility of CENVAT

credit, and the same is required to be satisfied by way of establishing the nexus

between the inputs or input service on the one hand and finished goods on the

other as already discussed broadly in foregoing paras.

28.7.6 I further tend to rely on the decision in the case of Vandana Global Ltd. Vs CCE, Raigad - 2010 (253) E.L.T. 440 (Tri. -LB), wherein the Larger

Bench of the Tribunal has also followed the decision of the Hon’ble Supreme

Court in the case of Maruti Suzuki (supra) according to which no credit can be

allowed in respect of input or input service unless the same is integrally

connected to the manufacture of the finished excisable goods.


28.8.1 Now, coming to the third issue in question, I find that the assessee had

availed service tax credit in respect of the maintenance and repair service. They

have availed said credit on the basis of the bills raised by their said service

provider. However, the said bills raised by their service providers does not bear

mandatory details as required to be mentioned under the provisions of Rule 9(2)

of CCR,2004 read with Rule 4A (1) of the Service Tax Rules, 1994. The in depth

reading of the provisions of Rule 9(2) of CCR, 2004 read with Rule 4A (1) of the

Service Tax Rules, 1994 clearly reveals that it is mandatory on the part of the

taxable service provider to invariably mention certain details including their

service tax registration number on the bills raised by them for enabling the

same to be the valid documents for availing Cenvat credit by the service recipient

on the basis of such bills. It is further revealed that the provisions under Rule 9

(2) of CCR, 2004 provides for condonation in case the said bill/invoice does not

contain all the particulars but contains the details of duty or service tax

payable, description of the goods or taxable service, assessable value, Central

Excise or Service tax Registration number of the person issuing the invoice,

as the case may be, name and address of the factory or warehouse or premises

of first or second stage dealers or provider of taxable service. Thus, it is crystal

clear that for enabling a bill raised by service provider to be a valid document for

availing Cenvat credit on the basis of the same, the service provider shall invariably mention the mandatory details on their bills, which includes their service tax registration number. The cardinal principle of interpretation is that

the language of the statute has to be interpreted literally, i.e., by finding the

intention of the Legislature in the words employed in the statute. Things have to

be taken as they are. One cannot supply words to the provisions or read

legislative intendments from it. Thus, in light of the mandatory provisions

contained in the statute, as discussed above, I find that the bills in question

issued by the service provider in the instant case are not the valid documents for

availing Cenvat credit in terms of the provisions of Rule 9(2) of CCR, 2004 read

with Rule 4A(1) of the Service Tax Rules, 1994.

28.8.2. Further, on going through the decision of the Hon'ble Tribunal in the

case of DNH Spinners. Vs. CCE, Vapi [2009 (16) STR 418 (Tri, A’bad), referred

to by the assessee, I find that the same is not applicable in the present case, as

the same dealt with the issue of availing cenvat credit on the basis of the invoices

issued in the name of Head Office and not in the name of assessee’s factory,

which is not the situation in the present case.

28.8.3. I find no good reason on the assessee’s contention that in their case the


Show Cause Notice does not allege that the services of maintenance and repair

were not utilized in or in relation to their products either directly or indirectly and

therefore show cause notice is not maintainable. The verification of the facts that

services have actually been used or otherwise is not the issue for discussion. By

contending on this point the assessee is deflecting the main issue.

28.8.4 The assessee further contended that as the credit is admissible, the

question of penalty as proposed in the show cause notice is not maintainable.

They further stated that penalty is not imposable as proposed in the show cause

notice, as this is a case of interpretation of provisions and no malafide intention

to evade payment of tax on their part. In support of their contention they relied

upon the decision of Honourable Tribunal in the matter of Mundra Port & Special

Economic Zone Ltd. V/s. C.C.E. Rajkot, as reported in 2009(13) S.T.R. 178 (Tri.

Ahd.), wherein it has been held that, the Credit was availed in statutory records

on due intimation to authority and no mala fide on part of the assessee so as to

invoke penal provisions. Hence penalty under Rule 15 of Cenvat Credit Rules,

2004 set aside. The scrutiny of returns of the said assessee revealed that

department has not been informed either through the monthly/ quarterly returns

or in any other manner regarding taking of Cenvat Credit of Service Tax paid on

the services availed beyond the factory gate as well as that availed by them on

the basis of invalid documents. The assessee in their monthly returns simply

mentioned the gross Cenvat Credit of the said Service Tax they have availed and

subsequently utilized for the payment of the Central Excise duty. The assessee

never categorically marked the nature of input services for which they have

availed the Cenvat Credit. On the basis of the details submitted by the assessee

in their returns, it is not possible for the scrutinizing officer to demarcate the

nature of the input services. The said assessee never disclosed the department

the nature of input services availed by them and Cenvat Credit of Service Tax

taken by them without ascertaining that the said services actually been availed

beyond the factory gate as well as that same availed by them on the basis of

invalid documents. I find that case law cited by the assessee has no applicability

in the present case. These facts came into light only at the time of audit of the

financial records of the assessee’s factory premise. I find no good reason on the

assessee’s contention that the credit was taken by them after due intimation to

the department. It is apparent that the assessee has suppressed the vital facts

regarding taking of Cenvat Credit on services which did not qualify as ‘input

services’. They have also suppressed the vital facts regarding availing the

Cenvat credit on the basis of invalid documents as discussed in the foregoing

paras.


28.8.5. Further, in the present scenario of Self Assessment Procedure and

also supported by Rule 9(6) of the Cenvat Credit Rules, 2004 which stipulates

that the burden of proof regarding admissibility of Cenvat Credit shall lie upon the

manufacturer or provider of output service taking such credit. In this era of self

assessment, the onus of taking legitimate Cenvat Credit has been passed on the

assessee in terms of the said rule. In other words, it is the responsibility of the

assessee to take Cenvat Credit only if the same is admissible. In the present

case, I find that it was very well known to the said assessee that the services in

respect of which they have taken Cenvat Credit were the services availed

beyond the factory gate and despite of knowing that the same have been availed

beyond the factory gate and have not been used in or in relation to the

manufacture of final products, the assessee availed the Cenvat Credit of the

Service Tax paid on such services. They were very much aware that the

mandatory details were not mentioned in the bills raised by their service provider,

though they availed Cenvat credit on such invalid documents. I find that there

was unambiguous suppression of facts and inaction on the part of the said

assessee.

28.8.6 Therefore, it is concluded that the assessee had wrongly taken Cenvat

Credit on the basis of the invalid bills in respect of Service Tax paid on input

services received under the category “Maintenance and Repair”. They have

wrongly availed Cenvat credit on service tax paid on Agency Charges, Clearing &

Forwarding Services etc. which are export related services. Also, they have

availed Cenvat credit on courier charges. I have no disbelief to say that the

export related services and courier charges can not be termed as “Input

Services”. Also the bills raised by their service provider were not valid documents

for availing Cenvat credit on the basis of the same. It also undoubtedly emerges

from the facts & records placed before me that while wrongly availing / utilizing

Cenvat Credit during the period in question, the said assessee had neither

submitted any document / information to the department nor disclosed any fact

relevant to the issue. I find that the said assessee has not informed the details of

the wrongly taken Cenvat credit of Service Tax and utilization thereof, to the

department, with an intent to utilize the same towards payment of Central Excise

duties, which otherwise, they had to be paid in cash from their Personal Ledger

Accounts and hence wilfully suppressed the material facts and hence imposition

of penalty is very well justified and warranted in this case.

28.8.7. Further, I find that in case of Goodyear India Ltd. Vs Commissioner Of Central Excise, New Delhi - 2002 (149) E.L.T. 618 (Tri. - Del.), Hon’ble

CEGAT, Northern Bench, New Delhi, held that penalty imposable on assessee,


having not acted in a bona fide manner. The case law, supra, is squarely

applicable in the instant case also. In the instant case, admittedly, the Cenvat

Credit had been taken by the assessee of a huge amount in contravention of the

provisions of Rule 3 of Cenvat Credit Rules, 2004 read with Rule 2(l) (ii) of the

Cenvat Credit Rules, 2004. They have also contravened the provisions of Rule

9(2) of the CCR, 2004 read with Rule 4A(1) of the Service Tax Rules, 1994

Hence having taken the credit wrongly and improperly, as the same was not

permissible to them under the law; the penalty deserves to be imposed upon the

assessee.

29.1 In view of the foregoing facts, I find that the assessee has not declared the

particulars and nature of the services availed by them and they have not

informed to Central Excise Department about availment of Cenvat credit on these

services as well as facts regarding availing of Cenvat credit on invalid documents

but, the facts came under the knowledge of Department at the time of Audit of

records of the factory premise of assessee. I find that the assessee has

suppressed the material facts with intent to wrongly avail Cenvat credit in

contravention of the provisions of Rules 2(l)(ii), read with Rule 3(1) of the Cenvat

Credit Rules, 2004 ; the provisions of Rule 9(2) of the CCR, 2004 read with Rule

4A(1) of the Service Tax Rules, 1994; and the provisions of Rule 9(6) and Rule

9(7) of CCR, 2004 and the credit wrongly taken by them is required to be

recovered from them with interest by invoking extended period of limitation under

the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with the

provisions of Section 11A(1) and Section 11AB of the Central Excise Act, 1944.

Further, all these acts of contravention constitute offence of the nature and type

as described above and the assessee has rendered themselves liable for penal

action under Rule 15(3) of Cenvat Credit Rules, 2004.

30. Further, as regards the proposal of penalty, I first reproduce the provisions

of Rule 15 of the Cenvat Credit Rules, 2004, as existed on upto the date

26/2/2010, which are as under (emphasis supplied):

“15. Confiscation and penalty.- (1) If any person, takes CENVAT credit in respect of input or capital goods, wrongly or in contravention of any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or two thousand rupees, whichever is greater.

(2) In a case, where the CENVAT credit in respect of input or capital goods has been taken or utilized wrongly on account of fraud, willful mis-


statement, collusion or suppression of facts, or contravention of any of the provisions of the Excise Act or the rules made thereunder with intention to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act.

(3) If any person, takes CENVAT credit in respect of input services, wrongly or in contravention of any of the provisions of these rules in respect of any input service, then, such person, shall be liable to a penalty which may extend to an amount not exceeding two thousand rupees.

(4) In a case, where the CENVAT credit in respect of input services has been taken or utilized wrongly by reason of fraud, collusion, willful mis-statement, suppression of facts, or contravention of any of the provisions of the Finance Act or of the rules made thereunder with intention to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of section 78 of the Finance Act.

(5) Any order under sub-rule (1), sub-rule (2), sub-rule (3) or sub-rule (4) shall be issued by the Central Excise Officer following the principles of natural justice.”

In this case, the assessee is a ‘manufacturer’ and they have wrongly taken

Cenvat credit in respect of ‘input services’ in contravention of the provisions of

the Cenvat Credit Rules, 2004 and therefore penal provisions of only Rule 15(3)

of the Cenvat Credit Rules, 2004 (prevailing upto the date 26/2/2010) have been

rightly invoked in the Show Cause Notice. It is pertinent to note here that the

provisions of Section 11AC are made applicable under Rule 15(2) only which

applies to wrong availment of Cenvat credit in respect of ‘input’ or ‘capital goods’

but not applicable to wrong availment of Cenvat credit in respect of ‘input

services’. Therefore, I hold that penalty under Rule 15(3) [prevailing at the

material time] not exceeding rupees two thousand only is imposable in this case.

31. I also note here that the provisions of Rule 15 of the Cenvat Credit Rules,

2004 have been replaced by Notification No. 6/2010-CX (NT), dated 27.2.2010

with effect from the date 27.2.2010. The new provisions of Rule 15, effective from

27.2.2010, are not applicable in this case in as much as the period covered

under this case is much prior to the date 27.2.2010. However, in view of the

saving provisions contained in Section 38A of the Central Excise Act, 1944,

penalty under erstwhile Rule 15(3) of Cenvat Credit Rules, 2004 (i.e. prevailing

upto 26.2.2010) can be imposed in this order.

32. In view of the foregoing discussion, I hereby pass the following order:


ORDER

(i) I disallow the Cenvat Credit of Service Tax of Rs.6,33,021/- (Rupees Six Lakhs Thirty Three Thousands & Twenty One only) ( i.e. Rs.

6,14,575/- + 2% Education Cess Rs.12,294/- + 1% Higher &

Secondary Education Cess Rs. 6,152/-) and order for reversal /

recovery of the same under the provisions of Section 11A(2) of

Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules,

2004.

(ii) I also impose a penalty of Rs.2,000/- (Rupees Two thousand only) under Rule 15(3) of the Central Excise Rule 2004, in view of the

discussion held at Para 30 and Para 31 of this order.

(iii) I order recovery of interest at the prescribed rate on the amount of

wrongly availed Cenvat Credit under the provisions Section 11AB of

the Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit

Rules, 2004.

The Show Cause Notice bearing F.No. V.32/15-7/Meghmani/ OA-I/10-11,

dated 05.07.2010 stands disposed of in above terms.

(M. RAHMAN) JOINT COMMISSIONER,

CENTRALEXCISE, AHMEDABAD-I

F.No. V.32/15-7/Meghmani/OA-I/10-11 date: 22.02.2011

By RPAD / Hand Delivery

To,M/s. Meghmani Organics Ltd., Plot No. 184, Phase-II,GIDC, Vatva,Ahmedabad.

Copy to:(i) The Commissioner, Central Excise, Ahmedabad-I

[Attn: Assistant Commissioner (RRA), C.Ex, Ahmedabad-I](ii) The Assistant Commissioner, Central Excise, Division-III, Ahmedabad-I.(iii) The Superintendent, Central Excise, Range-III, Division-III, Ahmedabad-I(iv) Guard File