M/S Cmi Fpe Ltd vs Commissioner, Central Excise & Service ...

Appeal No.ST/326/2010-DB; ST/MA(Extn)/14105/2014 [Arising out of OIO No.14/DEM/VAPI/2010, dt.31.03.2010, passed by Commissioner of Central Excise & Service Tax, Vapi]

M/s CMI FPE Ltd. Appellant

Vs

Commissioner, Central Excise & Service Tax, Vapi Respondent

Represented by:

For Appellant: Shri Prakash Shah, Advocate For Respondent: Shri K. Sivakumar, Authorised Representative

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial) Honble Mr. P.M. Saleem, Member (Technical)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

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

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. P.M. SALEEM, MEMBER (TECHNICAL)

Date of Hearing/Decision:22.06.2015

Order No. A/10834/2015, dt.22.06.2015

Per: P.K. Das

The Appellants were engaged in the manufacture of excisable goods viz. parts of Cold Rolling Mills and Galvanising Line/Process Line etc, classifiable under Chapter 84 of the Schedule to the Central Excise Tariff Act, 1985. They availed input service credit during the period October 2007 to February 2008 on sales commission in respect of service rendered abroad. A Show Cause Notice dt.29.10.2009 was issued proposing to deny the CENVAT Credit on sales commission. By the impugned order, the Adjudicating authority confirmed the demand of CENVAT Credit alongwith interest and imposed penalty of equal amount.

2. The learned Advocate on behalf of the Appellant fairly submits that the Honble Punjab & Haryana High Court in the case of CCE Ludhiana Vs Ambika Overseas  2012 (25) STR 348 (P&H) held in favour of the Appellant that the services provided by the overseas commission agent for canvassing and procuring of order are within the ambit of definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004. But, the Honble Gujarat High Court in the case of CCE Ahmedabad II Vs Cadila Healthcare Ltd  2013 (30) STR 3 (Guj.) held against the Assessee. He submits that the Appellant Company is situated within the jurisdiction of Honble Bombay High Court and therefore, the decision of Honble Punjab & Haryana High Court should be followed.

3. He further submits that the entire demand is barred by limitation. It is revealed from the Boards Circular No.943/4/2011-CX, dt.29.04.2011, the various decisions of the Tribunals and the Honble Punjab & Haryana High Court, the Appellant was under bonafide impression that the credit is available on sales commission. It is also submitted that the Appellant maintained the statutory records and filed the returns and therefore, there is no suppression of facts with intent to evade payment of tax. He relied upon the decision of the Tribunal in the case of Jayaswal Neco Industries Ltd Vs CCE & ST Raipur  by Final Order No.52257-52258/2014, dt.07.05.2014 and the decision of Honble Gujarat High Court in the case of Commissioner Vs Dynamic Industries Ltd - 2014 (35) STR 674 (Guj).

4. On the other hand, the learned Authorised Representative on behalf of the Revenue reiterates the findings of the Adjudicating Authority. He submits that the Honble Gujarat High Court considered the decision of Honble Punjab & Haryana High Court and therefore, the latest decision of the Honble Gujarat High Court, on merit, should be followed by this Bench. Regarding the demand of tax is barred by limitation, the learned Authorised Representative for the Revenue submits that there is no material available that during the material period, the Appellant had a reason to bonafide belief that the Appellant was eligible for credit. He submits that all the decisions have come after the period of dispute.

6. After hearing both the sides and on perusal of the records, we agree with the submission of the learned Authorised Representative for the Revenue on merit that the Honble Gujarat High Court in the case of Cadila Healthcare Ltd (supra), after considering the decision of Honble Punjab & Haryana High Court, held that CENVAT Credit on overseas commission would not be admissible and hence, the denial of CENVAT Credit on merit is sustainable.

7. Regarding the denial of CENVAT Credit on limitation, we find tha vide Boards Circular No.943/4/2011-CX, dt.29.04.2011, it was clarified that the definition of input service allows all credit on services used for clearance of final product upto the place of removal. Moreover, the activity of sales promotion is specifically allowed and on many occasions, the remuneration for same is linked to actual sale. Reading the provision harmoniously, it is clarified that the credit is admissible on the services of sale of dutiable goods on commission basis. The Honble Gujarat High Court in the case of Cadila Healthcare Ltd (supra) differed with the view of Honble Punjab & Haryana High Court in the case of Ambika Overseas (supra). It is also noted that the Tribunal in various decisions during the material period held that the CENVAT Credit is available on overseas sales commission. So, we are unable to accept the findings of the Adjudicating authority that there was no bonafide belief on the part of the Appellant. The proviso to Section 11A (1) of the Central Excise Act, 1944 would apply, where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of the Act or of the rules made thereunder with intent to evade payment of duty, the extended period of limitation of 5 years would be invoked. The Adjudicating authority observed that there was no bonafide belief on the part of the Appellant that the Appellant is eligible to take CENVAT Credit. In view of the various decisions of the Tribunal, Boards Circular and the decision of Honble Punjab & Haryana High Court, it is clearly evident that there is sufficient material to take up the view that the Appellant was holding a bonafide belief of the admissibility of CENVAT credit on overseas sales commission. We have also noticed that the Appellant has taken the credit and duly recorded in the CENVAT account. Thus, there is no material available to invoke the extended period of limitation. Accordingly, the demand of CENVAT Credit alongwith interest and penalty for the extended period cannot be sustained.

8. In the case of CCE Vs Dynamic Industries Ltd, 2014 (35) STR 674 (Guj.), on the identical situation, the Hon'ble Gujarat High Court held that the extended period of limitation would not be invoked. The relevant portion of the said decision is reproduced below:-

12.?Accordingly, the substantial question of law raised in respect of the following three categories of services i.e. (i) Customs House Agents Services, (ii) Shipping Agents and Container Services and (iii) Services of Overseas Commission, is answered partly in favour of the assessee so far as aforesaid category Nos. (i) and (ii) are concerned. Insofar as category No. (iii) i.e. Services of Overseas Commission, is concerned, the same is answered in favour of the Revenue and against the assessee. So far as present appeal is concerned, after extending the period of limitation under the proviso to Sections 11A and 11AB of the Act, the show cause notice is issued by the Joint Commissioner, Central Excise, upon the respondent-assessee on the ground of contravention of provisions of Rules 2(1)(ii) and 9(2) read with Rule 3(1) of the Rules. Admittedly, the respondent-assessee had shown availment of Cenvat credit in Part IV and V of ER-1 returns filed by it. The appellant-Department has sought to justify its action by submitting that during the course of audit by the Office of the Accountant General, when a detailed examination of the material was done, it was realised that the respondent-assessee had availed Cenvat credit on the services of all the three categories. The respondent-assessee has rightly pointed out that all the service providers charge the service tax on all the three services and such services since were rendered at the port of export, which was the place of removal, the services were in relation to manufacturing activities as far as the first two services are concerned. However, insofar as the third service where this Court has held in favour of the Revenue and against the respondent-assessee, we are of the opinion that the extended period of limitation would not be available to the Revenue in absence of any material to indicate suppression on the part of the respondent-assessee. It is not in dispute that there was no suppression nor any misrepresentation in respect of Cenvat credit availed by the respondent-assessee in respect of these services.

9. The Tribunal in the case of Jayswal Neco Industries Ltd Vs C.C.E. & S.T., Raipur vide Order No.52257-52258/2014, dt.07.05.2014, held as under:-

6. We have considered the submissions from both the sides and perused the records. On merits, the question as to whether the VAT which was exempt and which the appellant have collected from the customers and retained in terms of a Scheme of the State Government, is to be included in the assessable value or not, stands decided against the appellant by the Apex Courts judgment in the case of Super Synotex (India) Ltd. (supra). Therefore, we hold that the appellant during the period of dispute were liable to pay duty on the assessable value including amount of VAT collected by them from their customers and retained by them and since the VAT amount was not included in the assessable value, there has been short payment of duty. However, the duty demand for the 2006-07 period has been issued only on 28.4.2011 by invoking extended period of five years under proviso to Section 11 A(1) and this demand would survive only if it can be proved that the appellant had not acted under bona fide belief or that they had committed fraud or willful misstatement or suppression of facts with intent to evade payment of duty. However, we find that during the period of dispute, the Boards Circular No.378/11/98-CX, dt.12.3.98 and No.671/62/2000-CX, dt.9.10.2002 were in favour of the appellant, as these circulars clarified that sales tax/VAT collected by an assessee but retained and not paid to the Government is not includible in the assessable value. Not only this, there were several judgments of the Tribunal on this issue which were in favour of the appellant company, the last other judgment being in the case of Super Synotex (India) Ltd. (supra) which was subsequently reversed by the Apex Court vide judgment reported in 2014 (301)ELT 273 (SC). In view of the Boards Circular and the judgments of the Tribunal, which were in favour of the appellant, it can be said that the appellant had acted under bona fide belief that VAT amount collected by them from the customers and retained was not includible in the assessable value and hence, in these circumstances, in view of the Apex Court judgment in the case of CCE, Vs. Continental Foundation Joint Venture (supra), the longer limitation period would not be available and as such, the duty demand would have to be held as time barred.

10. In view of the above, denial of CENVAT Credit alongwith interest and penalty is set aside, as barred by limitation. The appeal filed by the Appellant is allowed. The miscellaneous application for extension of stay order filed by the Appellant is dismissed.

(Dictated & Pronounced in Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial)

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