M/S Cema Electric Lighting vs Commissioner Of Central Excise

[ Arising out of OIA-137-138/2012-AHD-III-/SKS/COMMR-A-/AHD dtd 8.10.2012 Passed by Commissioner of Central Excise-AHMEDABAD-III ]

M/s Cema Electric Lighting Products India P Ltd - Appellant(s)

Vs.

Commissioner of Central Excise- - Respondent(s)

AHMEDABAD-III

Represented by

For Assessee : Shri Thangaraj, Consultant For Revenue : Shri S Shukla, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Hon.ble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. H.K. Thakur, Hon.ble Member (Technical)

Date of Hearing : 24/6/2015 Date of Decision : 16/7/2015

ORDER No. A/11009 / 2015 dtd 16/7/2015

Per : Mr. H K Thakur;

This Appeal has been filed by M/S Cema Electric Lighting Producs India P. Ltd against Order-in-Appeal No. 137 to 138/2012 Dated 10.10.2012 passed by the Commissioner(Appeals), Central Excise, Ahmedabad-III, wherein it has been held that the Appellant had wrongly availed total Cenvat Credit of Rs. 46,05,092/- which was ordered to be recovered under rule 14 of the Cenvat Credit Rules 2004 along with interest and equal penalty.

2. Revenues case in brief is that the Appellant is holding Central Excise Registration No. AACCC9663XM001 and has been engaged in the manufacture of Fluorescent Tube Lights, General Lighting Lamps, Compact Fluorescent Lamps etc falling under Chapter 85 of Central Excise Tariff Act 1985 and marketing products through 16 branch offices situated all over India, for which Appellant is availing Cenvat Credit. During the course of audit of the records of the Appellant, it was observed that for the period from January 2007 to October 2008, appellant has wrongly taken and utilized Cenvat credit of various Input services like Gardening, Manpower recruitment service, Outdoor catering service, Rent a cab service, Tour operator service, C & F agent services as well as services pertaining to the trading Activity carried out through their 16 branch offices situated all over India. A Show Cause Notice No. V.85/15-17/off/oa/11-12 Dated 05-05-2011 was issued for recovery of Cenvat Credit of Rs. 46,05,092/- under Rule 14 of the cenvat Credit Rules 2004 read with section 11A(1) of the Central Excise Act 1944 along with interest and for imposition of penalty. Out of demand of Cenvat Credit of Rs. 46,05,092/-, Adjudicating Authority allowed Cenvat Credit of Rs. 30,88,512/- availed in or in relation to above services except trading related activities, where Cenvat Credit of Rs. 15,16,580/- was disallowed. Both appellants and the revenue filed Appeal against the said Order dated 04-01-2012 before the Commissioner, Central Excise (Appeals), Ahmedabad-III, wherein Commissioner(Appeals) allowed Revenues Appeal and rejected Appellants Appeal by disallowing total Cenvat Credit of Rs. 46,05,092/- alongwith interest and equal penalty vide his O-I-A No. 137 to 138/2012 Dated 10.10.2012, which is challenged by appellant in this Appeal.

3.? Shri G. Thankraj (Consultant) appearing on behalf of the Appellant argued on the following points :-

a) that the definition of input service is very wide. Input service covers not only services used directly or indirectly in or in relation to manufacture of final products but also various services used in relation to business of the manufacturer whether availed prior to manufacture or after manufacture. He also argued that Adjudicating authority had correctly dropped demand but Commissioner (Appeals) has confirmed the demand on the ground that the department has filed appeal before the Honble Supreme Court against Bombay High Courts decision in the case of Coca Cola India Pvt Ltd reported in 2009(242)ELT-168(Bom). However, the said decision is not stayed so far, hence, it should be followed even today.

b) that Appellant is entitled to 100% credit in respect of services covered under Rule 6(5) of the Cenvat Credit Rules 2004; that an input service tax of Rs 23,93,214/- relates to services covered under Rule 6(5) ibid and these services were not used exclusively for providing the exempted services or manufacture of exempted goods; that these common input services were used both for marketing of appellants own manufactured goods and trading goods; that reliance by Lower authorities on the Tribunal decision in the case of ORION APPLIANCES LTD reported in 2010 (19) S.T.R. 205 (Tri. - Ahmd) is totally wrong, as in the said case, it has been held that credit of input services, which were entirely used in trading activity, was not available to the appellants for payment of service tax, but it does not extend to common input services covered under RUle 6 (5) ibid used for providing both dutiable and exempted goods.

c) that utilization of common input services more than proportionate cenvat credit attributable to Trading activities had been reversed, but the Lower authorities, having accepted that trading activity is not exempted service, has erred in applying Rule 6(3A) in attributing common input services to trading activity and that too on wrong basis. He submitted that percentage of trading income to total income is only 6.03 % as prescribed in Cenvat Credit Rules 2004 and appellant had already reversed excess input service credit. Additional Commissioner has erred in holding the percentage of trading income to total income as 63.37% without considering the explanation to Rule 6(3A)(c).

d) that the subject SCN is time barred as Appellant's Company has been subject to yearly audits During 22nd December 2008 to 26th December 2008 also, internal audit team conducted the audit. Reveunues queries have been duly answered vide appellant's letter dt 21.01.2009, 24.04.2009 and 25.09.2009; that appellant had received the said show cause notice only in May 2011. Consequently the department cannot invoke the extended period while issuing the show cause on the ground of suppression of facts and that SCN is time barred.

4. Shri S.Shukla, AR representing revenue, reiterated the findings of the first appellate authority and submitted that the services in question are not used in or in relation to the manufacture of final products and also are attributable to trading activity and hence the findings in the O-I-A does not require any interference. Learned Authorised Representative thus strongly defended the order passed by the first appellate authority.

5. Heard both sides and perused the case records. The issue involved is about denial of Cenvat Credit of Rs. 46,05,092/- under Rule 14 of Cenvat Credit Rules 2004 along with interest and equal penalty. Out of total demand of Rs. 46,05,092/-, Adjudicating Authority allowed total Cenvat Credit of Rs. 30,88,512/- availed on input services like Gardening, Manpower Recruitment Service, Outdoor Catering Service, Rent-a-Cab Services, Tour Operator Services, and C&F Service, whereas he has disallowed Cenvat Credit of Rs. 15,16,580/- attributable to Trading related Activity as not admissible to Appellant. On appeal against the said O-I-O by both sides, Commissioner (Appeals) Ahmedabad, disallowed entire Cenvat Credit of Rs. 46,05,092/- in favour of Revenue under Rule 14 of the Cenvat Credit Rules 2004.

6. So far as disallowing Cenvat Credit of Rs. 30,88,512/- is concerned, the findings of the first appellate authority in Para 8.1 and 8.2 of the impugned O-I-A in appeal, are to the effect that the original authority has followed the decision in the case of Coca Cola India Pvt Ltd-2009(242)ELT-168(Bom), where revenue has filed appeal against the said decision before the Honble Supreme Court, which is pending and that the appellant has not produced evidence to establish nexus between the services used with the manufacturing activities. I also find that original adjudicating authority has given findings and justification for allowing such cenvat credit of Rs. 30,88,512/- in O-I-O Dated 04-01-2012 in para 9.1 to 9.10. I agree with the submission of appellant that definition of Input service given under Cenvat Credit Rules 2004 is very wide and it covers services used directly or indirectly in or in relation to manufacture of final products. The inclusive part of definition of input service at the material time in 2007-08 allowed credit of services used in any activity relating to business. Regarding cenvat credit pertaining to canteen services no evidence exists on record that any amount has been recovered from the employees of the appellant. The scope of activities relating to business is wide for admissibility of cenvat credit at the material time which was correctly allowed by Adjudicating authority. Accordingly, service tax paid on any activity relating to business of manufacturing will be available as Cenvat Credit to the appellant. Commissioner (Appeals) finding for not following the case law of Coca Cola India Pvt Ltd-2009(242)ELT-168(Bom), is not correct because, there is no stay on the operation of that decision and only filling appeal against the decision is not enough for not following the said decision which is also followed in CCE v/s Parth Poly Wooven Pvt. Ltd. - 2012 (25) S.T.R. 4 (Guj.) and many other cases like 2014 (36) S.T.R. 994 (Guj.)- CCE v/s INDUCTOTHERM INDIA P. LTD. Hence Appellant is eligible for the cenvat credit of Rs. 30,88,512/-.

7. So far as disallowing Cenvat Credit of Rs. 15,16,580/- is concerned, first appellate authority has upheld the order of adjudicating authority. The credit in question relates to the services used in Trading activities carried out at Appellants 16 branches all over India. Trading activities have been treated as exempted service w.e.f. 1-4-2011, whereas the present dispute is for the period prior to 01-04-2011. Appellant has vehemently argued that they are entitled to 100% credit in respect of services covered under Rule 6(5) of the Cenvat Credit Rules 2004 as per the provisions prevailing at the material time. It is seen from the relevant portion of Rule 6(5), reproduced in Para 9 of the impugned O-I-A dt. 10-12-2012 that the said rule covers total 17 taxable service as specified in sub-clauses (g), (p), (q), (r), (v), (w), (za), (zm), (zo), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act where credit shall be allowed in full unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. Revenue has disallowed cenvat credit of Rs. 15,16,580/- holding it to be attributable to Appellants Trading Activity. However, from the records it is not forthcoming as to which are these services on which the appellant has taken cenvat credit and also whether the services at trading branches availed is covered under the above mentioned 17 services mentioned under Rule 6(5) of Cenvat Credit Rules 2004. Although, Appellant claims that they are entitled to 100% credit in respect of services covered under Rule 6(5) of the Cenvat Credit Rules 2004, but they have also not come out with clarity on the actual services availed by them. Therefore, this factual aspect needs proper verification of the records of the appellant by the original adjudicating authority. The original adjudicating authority is directed to verify and examine whether such Cenvat Credit is covered under Rule 6(5) for the above 17 services and that these services are not used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. Needless to mention that appellant will be granted an opportunity of personal hearing to produce necessary documents to prove eligibility to credit claimed by them following principles of natural justice.

8. Appellant has also argued that the subject SCN is time barred. Without expressing any views on this point, the appellant is also directed to put forth their submissions before the original adjudicating authority, who will also decide this question of limitation in denovo consideration.

9. In view of the above findings of facts and law applicable in this case, impugned Order demanding duty with equal penalty deserves to be modified. Accordingly, the duty demand of Rs. 30,88,512/- is set aside and for the demand of total Cenvat Credit of Rs. 15,16,580/- the matter is remanded to the Adjudicating Authority for fresh consideration in terms of Para 7 and 8 above.

10. Appeal filed by Appellant is allowed as per the observations contained herein above, by setting aside O-I-A dated 10-10-2012 passed by the first appellate authority.

(Pronounced in the Court 16.7.2015)

(H.K. Thakur) Member (Technical)

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