Case Law Details
Sarita Handa Exports Pvt Ltd Vs Commissioner of Central Excise (CESTAT Chandigarh)
Introduction: In the case of Sarita Handa Exports Pvt Ltd vs. Commissioner of Central Excise (CESTAT Chandigarh), a contentious issue regarding Cenvat credit on Customs Clearance Services and Tour & Travels Services came under scrutiny. The central question revolved around whether these services had a direct nexus with the manufacturing activity of the appellant company, thereby making the claimed credits admissible. This article delves into the detailed analysis and ultimate decision reached by CESTAT Chandigarh in this intriguing case.
Detailed Analysis:
1. Background: M/s Sarita Handa Exports Private Limited, engaged in the production and export of various textile products, had availed credit for input services, including Customs House Agent Service, Goods Transport Agency Services, Banking Services, Commercial & Industrial Construction Services, among others. The Department contested the admissibility of these credits, leading to show-cause notices, interest, and penalty assessments.
2. Appellant’s Argument: Shri R.C. Choudhary, the appellant’s counsel, argued that certain services, like Construction Services and Customs Clearance Services, were eligible for credit based on favorable Tribunal judgments. They contended that the disputed services were integral to their manufacturing process.
3. Department’s Argument: Shri Aneesh Dewan, the Department’s Authorized Representative, asserted that the appellants failed to provide sufficient documentary evidence to establish a clear nexus between the disputed services and manufacturing activities. They highlighted vague or missing information on sample invoices.
4. Audit Objection: The appellants acknowledged that the show-cause notice stemmed from an audit objection and expressed willingness to present relevant documents to the Adjudicating Authority to support their claim.
5. CESTAT’s Decision: After a thorough examination, CESTAT Chandigarh held that credit for Commercial & Industrial Construction Service before April 1, 2011, was admissible, except for Rs. 207. The credit for Photocopy Service (Rs. 32,795) and Repair Services (Rs. 3,658) was also deemed admissible. However, the credit for Renting of Property Service (Rs. 3,70,800) was not disputed and reversed.
6. Customs Clearance Services and Tour & Travels Services: CESTAT ruled in principle that credit for these services was admissible to the appellants but required further examination by the Adjudicating Authority. The authority was tasked with calculating the admissible credit based on additional evidence provided by the appellants.
7. Penalties: No penalties were imposed, as the appellants were found to have no intention of evading duty. The issue pertained to interpretation, and most aspects had been resolved by subsequent Tribunal decisions.
Conclusion: The case of Sarita Handa Exports Pvt Ltd vs. Commissioner of Central Excise (CESTAT Chandigarh) sheds light on the complex issue of Cenvat credit eligibility for Customs Clearance Services and Tour & Travels Services. While the CESTAT upheld the admissibility of certain credits and remanded the case for further examination on others, it also recognized the absence of any intent to evade duty. This case highlights the importance of providing comprehensive documentation to substantiate claims for Cenvat credit and the role of adjudicating authorities in determining eligibility based on evidence.
(Pronounced on 14/09/2023)
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The appellants, M/s Sarita Handa Exports Private Limited, are engaged in the manufacture and export of Quilted Bed Spread, Pillow Sham, Duvet Cover etc. They have availed credit of various input services like Customs House Agent Service, Goods Transport Agency Services, Banking Services, Commercial & Industrial Construction Services etc. It was felt by the Department that these services have no nexus with the manufacturing activity and therefore, credit of the same is not admissible. Show-cause notices, denying the credit along with interest and imposition of penalty, were issued and the same were adjudicated vide Order dated 24.08.2022 wherein the Commissioner dropped the demand amounting to Rs.1,32,29,442/-and confirmed demand CENVAT credit of Rs.65,48,343/- Hence, the present appeals.
2. Shri R.C. Choudhary, learned Counsel for the appellants, submits that the learned Commissioner has denied the credit on Construction Services, Customs Clearance Services, Renting of Property Services, Installation Services; out of which the appellants do not dispute the inadmissibility of the credit availed on renting of property; they have, accordingly, reversed the credit of Rs.3,70,800/-. He submits that regarding Construction Service, the issue since stands settled in their favour by various judgments of the Tribunal. He further submits that in their own case, this Bench vide Order 2016 (44) STR 654 held that Customs Clearance Service, Construction Service, Photocopy Service are admissible.
3. Shri Aneesh Dewan, learned Authorized Representative for the Department submits that for the services under Customs Clearance Services and Tour & Travels Service, the appellants could not produce any documentary evidence to show that the services were availed in the course of manufacture of final products or in pursuit of their business; sample invoices produced by the appellants to the learned Commissioner did not indicate the services availed and in some cases, the indication was vague and therefore, nexus between the input service and the products manufactured and exported was not clearly established; though, the service of CHA were utilized, the invoices mentioned that the said service was for liasioning with DGFT Authorities for obtaining DEPB Licenses.
4. At this stage, learned Counsel for the appellants fairly submits that the show-cause notice was issued pursuant to an audit objection wherein the audit party has examined all the documents; if required, they are in a position to show the same to the Adjudicating Authority and the case may be remanded back to the learned Commissioner for this limited purpose.
5. Heard both sides and perused the records of the case. On going through the rival submissions and records of the case and the case laws in this regard, we find that the appellants are eligible for availing credit on Commercial & Industrial Construction Service for the period prior to 01.04.2011. We find that on this count, credit of Rs. 207/- is not admissible to the appellants. Rest of the credit is, however, admissible. Regarding Photocopy Service, we find that credit of Rs.32,795/- is admissible; similarly, CENVAT credit of Rs.3,658/- on Repair Services is also admissible. The appellants have not disputed the denial of credit of Rs.3,70,800/- on Renting of Property Service and have reversed the same. Thus, a total of Rs.3,71,007/- is not admissible.
6. Regarding Customs Clearance Services and Tour & Travels Services, we find that the impugned order records that the appellants have not produced invoices etc. to prove that the credit is correctly availed by them. While holding in principle that credit on these two services is admissible to the appellants, we are of the considered opinion that the issue requires to go back to the Adjudicating Authority to calculate the admissible credit on the basis of the evidence that may be produced by the appellants.
7. As the issue pertains to interpretation wherein most of the issues were settled by the decisions of this Tribunal at a later date, the appellants cannot be held to have any intention to evade payment of duty. Therefore, no penalties are imposable.
8. Thus, all the appeals are allowed by way of remand as per the discussion in Paras 5 and 6 above. The Adjudicating Authority shall calculate the credit admissible on the two disputed services i.e. Customs Clearance Services and Tour & Travels Services. The appellants shall submit all the documents they would like to rely upon to the Adjudicating Authority within four weeks of the receipt of this order. The Adjudicating Authority shall decide the issue within twelve weeks of the receipt of this order.
(Pronounced on 14/09/2023)
