Mahanagar Gas Ltd vs Commissioner Of Central Excise, Mumbai ...

(Arising out Order-in-Appeal No. US/97/M-II/2013 dated 28.03.2013 passed by the Commissioner of Central Excise (Appeals), Mumbai I)

For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial)

1. Whether Press Reporters may be allowed to see No the 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 Yes of the Order?

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

Mahanagar Gas Ltd. Appellant

Vs.

Commissioner of Central Excise, Mumbai II Respondent

Appearance:

Ms. Padmavati Patil, Advocate for the appellant Shri N.N. Prabhudesai, Supdt. (AR) for the respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial)

Date of hearing : 12-06-2015 Date of decision : 23.06.2015

O R D E R No:..

This appeal is directed against order in appeal number US/97/M-II/2013 dated 28.03.2013.

2. The relevant facts that arise for consideration are that appellant during the period March and April 2009 availed Cenvat credit of an amount of Rs.1,52,556/- on the service tax paid by the service provider Makwanas engineering and technical services for the training conducted during the relevant period. The revenue authorities were of the view that the Cenvat credit is not available as the training was conducted for the staff of an agency which was providing the business auxiliary services. A show cause notice was issued for demand of such ineligible Cenvat credit by invoking extended period, on an allegation that there was suppression of the fact on the part of appellant. The show cause notice was contested on merits as well as on limitation. The adjudicating authority after following the due process of law confirmed the demands raised along with interest and also imposed equivalent amount of penalty. Aggrieved by such an order, an appeal was preferred to the first appellate authority. By the impugned order the first appellate authority has rejected the contentions raised by the appellant, upheld the order of confirmation of demand, interest and penalties imposed.

3. Learned Counsel appearing for appellant would draw my attention to the facts of the case. It is her submission that appellant herein had engaged the services of an agency for dispensing/vending of compressed natural gas which is highly hazardous job, hence outside agencies were engaged for training of the personnel though they are not appellants employees. It is her submission that the services rendered for training is in respect of the business activities undertaken by the appellant. It is submission that the business of dispensing CNG is being highly hazardous, safety of the personnel and the dispensing outlet was one of the prime consideration, which required specialised technical training. It is her submission that such training was imparted by one of the service providers and the charges for such training were paid by the appellant, in support of which, she produces invoice for the month of August 2008. It is the submission that the personnel engaged in dispensing highly flammable CNG and the services rendered for training personnel is in relation to the business activities, even prior to manufacturing activity or subsequent dispensing activity. She would rely upon the judgement of the Honourable High Court of Bombay in the case of Ultratech Cement Ltd 2010 (20) S.T.R. 577 (Bom) for this proposition, more specifically to paragraph number 27,28,34& 35.

4. Learned departmental representative on the other hand would submit that the appellant has outsourced the activity of vending/dispensing of CNG at various outlets and the service providers charge service tax under business auxiliary services to the appellant. It is his submission that the training activity which is undertaken is of the staff who are dispensing the CNG and are not the employees of appellant. He would then take me through the definition of the input service as is enshrined in rule 2(l) of Cenvat credit rules 2004. It is his submission that the services of dispensing CNG are not used in the manufacture of final products nor for the clearance of the same upto the place of removal. The entire activity of dispensing is post manufacturing activity. It is also the submission that the activity of training as imparted by service provider has nothing to do with the appellant. He would rely upon the majority decision of the Tribunal in the case of Telco Construction Equipment Company Ltd  2013 (32) STR 482 for the proposition that activities relating to business requires integral connection between the activity and the business of manufacturing of final product. Since the final product, CNG, in this case is already manufactured at the time of dispensing the same, the services rendered for training of the personnel has nothing to do with the business activity of the appellant. He would also rely upon the judgement of Honourable High Court of Bombay in the case of Ultratech cement Ltd (supra) for the proposition that activities in relation to business postulates activities integrally connected business of assessee. It is his submission that the case of Zenith Machine Tools Private Limited  2010 (255) E.L.T. 83 has heard services utilised by job worker credit not available to assessee.

5. Learned Counsel in rejoinder would submit that the entire demand is hit by limitation as show cause notice is invoking extended period of time despite the fact that the availment of Cenvat credit was in the knowledge of the Department when monthly returns were filed.

6. Heard both sides and perused the records.

7. The issue involved in this case is regarding the denial of Cenvat credit of the service tax paid on the services received for training of persons in dispensing of CNG in retail outlets.

8. It is undisputed that the dispensing activity of CNG in the retail outlet is undertaken by personnel who are the employees of service provider and not of appellant. This service provider is discharging service tax under the category of business auxiliary services; Cenvat credit availed by the appellant is of the service tax paid on the services rendered for training of the personnel. In my considered view appellant as no case on merits as even though appellant has paid for the services rendered to training of the personnel, the said services or not rendered to the appellant directly. I find that the issue is no more res Integra as in the case of Gujarat State Petronat Ltd. 2013 (32) STR 510, Tribunal held that if services are utilised by the service provider Cenvat credit can be availed by such service provider and not any other assessee. The said ratio will apply in this case also , accordingly the appeal on merit fails. However on limitation, I find that appellant has a strong case in his favour. As already recorded hereinabove, that the appellant had availed Cenvat credit on the months of March and April 2009, the said availment of credit has been informed to Department when they filed monthly returns.

In my considered view, appellant could have entertained a bona fide belief that having paid for the training of personnel, they can avail the Cenvat credit of the service tax paid and I do not see any element of suppression or misstatement of facts on the part of the appellant that too with intent to evade duty in a situation as is in this case. Entertaining a bonafide belief of availment of Cenvat credit of the service tax paid that too, when assessee pays for such services, is a rational interpretation that would be taken by any assessee, in a situation as is the case before me. In my view, show cause notice dated 14th October 2010 invoking the extended period is incorrect and impugned orders confirming the demands on the grounds of suppression and misstatement are unsustainable and liable to be set aside when it is on records and undisputed that appellant has been filing monthly returns with the authorities indicating therein the availment of Cenvat credit on the invoices raised by the service provider for training of personnel. In my considered view, the extended period cannot be invoked in a situation as is in a given case before me.

Accordingly in the facts and circumstances of this case, I hold that the confirmation of demand, interest and imposing penalties by invoking extended period is unsustainable and liable to be set aside. The impugned order is set aside on limitation and demands confirmed is set aside as also interest and penalties.

9. The appeal is disposed of as indicated hereinabove.

(Pronounced in Court on .)

(M.V. Ravindran) Member (Judicial)

//SR

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