Commissioner Of Central Excise vs ) Electralloy Special Steel Castings P. ...

[Arising out of Order-in-Appeal No.93/2009 (M-III-ST) and OIA No.94/2009 (M-III-ST) both dt.10.11.2009 passed by the Commissioner of Central Excise (Appeals), Chennai]

Commissioner of Central Excise, Chennai-III Appellant

Versus

1) Electralloy Special Steel Castings P. Ltd. 2) Amsteel Castings Pvt. Ltd. Respondent

Appearance:

Shri K.P. Muralidharan, AC (AR) For the Appellant Shri J. Shankar Raman, Advocate For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing/decision :17.4.2015

FINAL ORDER No.40427-40428/2015

As the issue involved in these appeals is common, therefore both the appeals are taken up together for disposal.

2. Heard both sides.

3. The issue relates to availment of cenvat credit on Goods Transport Agency Service and its utilization for payment of service tax. Revenue filed against the impugned orders wherein the Commissioner (Appeals) has allowed the appeals of the respondents by relying this Tribunal's decision in the case of India Cements Vs CCE Salem  2007 (80) RLT 719 (CESTAT-Che.) and in the case of Andhra Pradesh Paper Mills Ltd. Vs CCE Vishakahapatnam  2007 (83) RLT 118 (CESTAT-Ban.). Revenue defends their grounds only based on Board's circular No.345/4/2005-TRU dt. 3.10.2005.

4. Ld. Advocate reiterated the findings of the Commissioner (Appeals) and also relied the decision by the Hon'ble Madras High Court in the case of CCE Salem Vs Cheran Spinners Ltd. reported in 2014 (33) STR 148 (Mad.)

5. After consideration of the submissions of both sides, and on perusal of records, I find that the issue stands settled by the decision of Hon'ble Madras High Court. In the case of Cheran Spinners Ltd., the Tribunal has allowed the credit which was challenged by Revenue before Hon'ble Madras High Court in C.M.A.No.894/2008. The Hon'ble High Court has dismissed the C.M.A. and upheld the Tribunal's order vide 2014 (33) STR 148 (Mad). The relevant paragraph of the Hon'ble High Court's order is reproduced as under :-

"9.?In terms of Section 37 of the Central Excise Act, 1944 (1 of 1944) and Section 94 of the Finance Act, 1994 (32 of 1994) and in supersession of earlier Cenvat Credit Rules, 2002, the Central Government framed Rules under Notification No. 23/2004-C.E. (N.T.), dated 10-9-2004. The Rules thus framed covered the subject matters given under Section 37 of the Central Excise Act and under Section 94 of the Finance Act. The Rule 2(l) defines input service, which reads as follows :-

2(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 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 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 security, inward transportation of inputs or capital goods and outward transportation up to the place of removal;

Rule 2(p), on which heavy reliance placed by the Revenue, defines output service, which reads as under :-

2(p)?output service means any taxable service provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions provider1 and provided shall be construed accordingly.

Explanation. - For the removal of doubts it is herby clarified that if a person liable for paying Service Tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay Service Tax shall be deemed to be the output service.

10.?Going by the fiction under Section 68(2) of the Finance Act, 1994 and Cenvat Credit Rules, 2004, deeming the payer of Service Tax as the person liable for paying the Service Tax in relation to such service, it is clear that while in the case of input service, any service 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, is considered as input service, in contrast to this, the explanation given under output service in Rule 2(l) of Cenvat Credit Rules, thus deems that in the case of a person not proving taxable service or manufacture final products but liable for paying Service Tax, the service for which he is liable to pay Service Tax by reason Section 62(2) of the Finance Act, 1994 shall be deemed as output service. Thus, while Rule 2(l) and 2(p) cover two classes of persons, the recipient of GTA services, by virtue of the Explanation to Rule 2(p) of the Cenvat Credit Rules, as a provider of output service, is entitled to all benefits that a person providing input service would be entitled to in the matter of Cenvat credit adjustment. Thus, a reading of Rule 2(l) and 2(p) would show that they cover two different situations and though their operations are totally different, yet, for the purpose of giving credit to the Service Tax payable from the Cenvat credit available, the recipient is also entitled to the same relief as a provider of the service. Thus, we do not find any error in the reasoning of the Tribunal that in the payment of Service Tax liability by the recipient of taxable service, such assessees are also entitled to make use of Cenvat credit to discharge their liability under the Service Tax provisions. Consequently, we do not agree with the submission of the Revenue to set aside the order of the Tribunal.

11.?Learned Standing Counsel appearing for the Revenue also placed reliance on the circular issued by the Board clarifying the provisions under Rule 2(l) and 2(p) of the Rules. Considering the fact that Rule 2(l) and 2(p) cover two different situations, in either event, the Rules contemplated adjustment of Service Tax liability as against the Cenvat credit available to the assessee, the circular relied on would not be of any assistance to the Revenue.

12.?We respectfully endorse the view of the Punjab and Haryana High Court, the Delhi High Court and the Himachal Pradesh High Court. In the light of the above discussion, we have no hesitation in affirming the view of the Tribunal, thereby, dismissing the above Civil Miscellaneous Appeal. No costs."

6. The Hon'ble High Court in the above order has considered all the issues including Board's circular dt. 3.10.2005 relied by the Revenue. By respectfully following the decision of Hon'ble High court (supra), I hold that there is no infirmity in the order passed by Commissioner (Appeals). Accordingly, both the impugned orders are upheld and appeals filed by Revenue are rejected. The cross objections filed by respondents get disposed of.

(Dictated and pronounced in open court)

(R. PERIASAMI) TECHNICAL MEMBER

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