C.C.E. & S.T.-Daman Vs Ags Transact Technologies Ltd (CESTAT Ahmedabad)
CESTAT Ahmedabad held that location from where the service is provided is immaterial for availing the Cenvat credit on input services.
Facts- The respondent are engaged in the manufacture of Automatic Teller Machines (ATMs), other office Machines, Pumps of Liquids, Printing Machinery etc., falling under Chapter 84 of Central Excise Tariff Act 1985 and availing the benefits under the CENVAT Credit Rules, 2004.
It was noticed by the revenue that there was a sudden spurt in the availment of Cenvat Credit by the respondent particularly in reference to credit of service tax claimed to be input service. Discreet enquiry revealed that no such input services was received in their factory premises during the said month or even prior to the said month.
Further from the detailed enquiry it was observed that the respondent were availing Cenvat Credit on capital goods but no such ‘capital goods’ were received by them in their Daman Factory; also that the input services in respect of which Cenvat Credit was availed and utilized by the respondent did not have any nexus, directly or indirectly with the excisable goods manufactured by the respondent at their Daman unit.
It was also appeared that respondent had availed cenvat credit of various other services however, the services did not had any nexus with the manufacturing of the excisable goods at their Daman Plant; hence the credit of which was not available to them.
Accordingly, a show cause notice was issued to the respondent for the period, whereby it was proposed to deny the credit and recover the same along with interest and penalty. Adjudicating authority has dropped proceedings initiated against the respondent vide above show cause notices. Being aggrieved by the said impugned order the revenue filed the present appeal.
Conclusion- Held that it is a settled position that for availing the Cenvat credit the location from where the output service provided is not relevant. As long the service is provided by the service provider for which any input service is received and used for providing output service, the Cenvat credit on such input services shall be available and also for utilizing the said Cenvat credit for payment of service tax on the output service. Therefore, the location from where the service is provided and received is immaterial for availing the Cenvat credit on input services as well as for payment of service tax on the output services.
Further we observed that, the definition of “input service” is vider defined in Rule 2(l), and it would mean any service used by a provider of taxable service for providing an output service or 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. We also agree with argument of respondent that there is no restriction in Rule 2(l) of Cenvat Credit Rules, 2004 in respect of the input service to be received and utilized only in the factory or premises of the output service provider. Thus, for the above reasons, we find that the Ld. Commissioner rightly allowed the Cenvat credit to the respondent in the present matter.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
Brief facts of the case are that the respondent are engaged in the manufacture of Automatic Teller Machines (ATMs), other office Machines, Pumps of Liquids, Printing Machinery etc., falling under Chapter 84 of Central Excise Tariff Act 1985 and availing the benefits under the CENVAT Credit Rules, 2004. On scrutiny of the ER-1 return filed by the respondent for the month of March 2014, it was noticed by the revenue that there was a sudden spurt in the availment of Cenvat Credit by the respondent particularly in reference to credit of service tax claimed to be input service. Discreet enquiry revealed that no such input services was received in their factory premises during the said month or even prior to the said month. Further from the detailed enquiry conducted by the Jurisdictional Range Superintendent with the respondent, statement dated 05.02.2015 of Shri Dipesh Pravinchandra Shah, General Manager (Production) of the respondent, and scrutiny of the documents submitted by them, it was observed that the respondent were availing Cenvat Credit on capital goods but no such „capital goods‟ were received by them in their Daman Factory; also that the input services in respect of which Cenvat Credit was availed and utilized by the respondent during the period from March 2014 to December 2014 did not have any nexus, directly or indirectly with the excisable goods manufactured by the respondent at their Daman unit. According to the respondent, they were engaged in the manufacturing of ATM, Colour Dispenser Machines, POS-Point of Sales Machine, Inkjet Engravers Machines and Cash Shorting Machines at their Daman plant for which they have used services such as GTA, Security Services, Telephone Bill, Housekeeping. Whereas, it appeared that respondent during the relevant period has also availed credit of services tax for the services related to ATM Operation, Maintenance & Management Services, Security Services, Annual Maintenance charges, all of which were utilized at their depots/ Regional office/ Corporate Office/ Head Office/ Warehouse etc., and all their services were in relation to maintenance and management services of ATM machines installed at various other locations. Further, they have availed input service credit pertain to the services like Bank Charges, Courier services, GTA , Transaction charges, Legal charges, Work Contract Service, IT software service etc. which did not have any nexus with the manufacturing of the excisable goods at their Daman Plant; hence the credit of which was not available to them.
1.2 It also appeared that the respondent being a manufacturer of excisable goods, was registered with Central Excise Department and filing the ER-1 return in respect of their Daman Factory with Daman Authorities, that Head office of the respondent being Centrally registered at Mumbai as service provider for various locations across the Country was filing ST-3 returns with Mumbai authorities. While the credit of the duties paid on the goods and tax paid on the input services consumed by them at their different service locations all over the India were admissible to them as provider of output service subject to the conditions thereof and the same was to be reflected by them in their ST-3 returns, however, in respect of their manufacturing unit, the credit of the duties paid on the goods and tax on the services consumed in or in relation to the manufacturing activity alone was admissible to be reflected in their ER-1 return. Accordingly, a show cause notice dated 19.03.2015 was issued to the respondent for the period from March 2014 to December 2014, whereby it was proposed to deny the credit of Rs. 45,49,89,955/- and recover the same along with interest and penalty. Further, another show cause notice dated 02.02.2016 for the subsequent period from January 2015 to November 2015 was also issued to them demanding the wrongly availed Cenvat Credit of Rs, 67,40,11,629/- along with interest and penalty.
1.3 Both the show cause notices have been decided by the impugned Common Order-In-Original dated 07.09.2018. Learned Adjudicating authority has dropped the proceedings initiated against the respondent vide above show cause notices. Being aggrieved by the said impugned order the revenue filed the present appeal.
2. Shri Ajay Jain, Special Counsel, appearing on behalf of the revenue reiterated the grounds of appeal and submits that the Commissioner has erred in dropping the demands for recovery of Cenvat Credit. The main ground in which Cenvat Credit of „Capital Goods’ & „Input Services’ is proposed to be denied in both the SCNs is due to the admitted facts that such credit did not have any nexus directly or indirectly with the excisable goods being manufactured by the respondent at their factory at Daman. Therefore, the Ld. Commissioner has clearly erred in arriving at the finding that the account and records maintained are not questioned nor is the eligibility to credit availed, which is clearly contrary to the facts recorded in the impugned order.
2.1 He also submits that it is admitted by the respondent themselves, that they were engaged in manufacture and clearances of excisable goods at their Daman Plant for which the input services were GTA, Security Services, Telephone Bills, House Keeping services only. Whereas the input service credit availed by the respondent during the relevant period under dispute, were in relation to ATM Operation, Maintenance & Management Service, Security Service, Annual Maintenance Charges, and such credit also related to services like Bank charges, courier charges, GTA, Legal charges, IT software service etc., which were not received at the respondent’s premises at Daman. These services were, in fact, received and utilized at the depots/ Regional office/ Corporate office/ Head Office and such other locations for which they were severally registered and holding centralized Service tax registration & were filing separate periodical ST-3 returns. Thus, these were the input services received in relation to provisions of output service of ATM Operation & Maintenance & Management Services and such other output services at various other locations all over the country, but not definitely utilized in or in relation to manufacture and removal of dutiable excisable goods from the factory premises at Daman.
2.2 He further submits that Ld. Commissioner has travelled beyond the scope of subject show cause notices to take-up and first decide the issue of amendment of Centralized Service tax Registration from Mumbai to Daman, so as to take support of such decision to further buttress the erroneous conclusion arrived by her on the only core –issue involved in the present SCNs regarding there being no nexus of the input services & Capital goods. It is well settled law that the Order-In-Original cannot travel beyond the scope of show cause notice. Therefore, on this ground alone the impugned order is erroneous and hence not legally sustainable.
2.3 He also submits that Rule 3(1) of the Cenvat Credit Rules 2004 clearly requires, in cases of both input and capital goods, as well as, in the cases of input services, that such inputs or capital goods and input services are required to be received by the manufacturer at factory premises and used in the manufacture of final products. The Commissioner’s findings to the effect that there is no restriction of input services to be received in the factory or premises of output service provider is clearly erroneous.
2.4 He also argued that the Commissioner has failed to bring on records as to how the so called capital goods – i.e. ATMs –even while installed at customer site were having nexus with the manufacturing of dutiable finished goods in their Daman premises.
2.5 He further submits that Learned Commissioner has picked up an issue totally outside the purview of the charges/ allegations against the respondent and has travelled beyond the scope of show cause notice. The core-issue contained in both the show cause notice dated 19.03.2015 & 02.02.2016 was not of cross –utilization of Cenvat credit, but in respect of whether at all such input services & capital goods had any nexus in order to be qualified as admissible „input services’ or „capital goods’ entitling the respondent for such Cenvat credit. He also argued that the case laws relied upon by the Learned Commissioner in the impugned order are not squarely applicable to the facts of the present case.
2.6 He also submits that since the Centralized registration has been amended on 20.08.2015 by the appropriate authority of Daman Commissionerate, the Commissioner‟s finding holding such amendment to be effective from March, 2014 is clearly erroneous and not consistent with the procedure prescribed under Trade Notice No. 03/2011-12 ST Dated 01.10.2011. He prays that the appeal is maintainable on facts, merits, legality and be allowed in favour of revenue.
3. On other hand Shri Prakash Shah appearing on behalf of the respondent along with Shri Suyog Bhave, reiterates the finding given by the Adjudicating Authority in the impugned order. He further submits that both the show cause notices as well as the present appeals are based on incorrect and incomplete facts, and on a myopic view of the factual matrix of the present case. The present appeal proceed on the basis that respondent was only a manufacturer of dutiable final products and completely ignore the fact that the respondent also provide the output services from their Daman Factory and was holding centralized registration at its daman factory. The impugned Order-In-Original, in paragraph 9.9(ii), has clearly held that the allegation made in the show cause notices cannot be upheld because they have not considered the factual position of the Respondent being a centralized service provider registered earlier at Mumbai and thereafter in continuity transferred to the Daman premises and that the show cause notices have been issued in total disregard of the same. These findings are not under dispute in the above appeal.
3.1 He also submits that in the present case as well, despite submitting all the requisite documents, the amendment to the centralized registration was allowed after a period of more than a year had elapsed. In particular, due to the unreasonable delay, the Respondent had to continue filing the centralized service tax return under the centralized service tax registration at Mumbai, until the time the amendment of the registration was approved. Out of abundant caution, the respondent also filed a physical copy of the return with the authorities at Daman. The contention raised in grounds of appeal that the delay in granting of centralized registration to the Respondent is on account of lapses on the part of the Respondent is baseless. It is settled principle that the registration has to be granted within 7 days of filing of the application. Thus, the centralized service tax registration of the respondent at its Daman factory is effective from the date of application for amendment i.e. from 14.01.2014.
3.2 He also submits that the Circular No. F. No. 381/23/2010/862 dated 30.03.2010 which provide for clarification as regards cross-utilization nowhere stipulates that cross-utilization is permitted only if the registration under both service tax and central excise laws are at the same place of business. On the contrary, the said circular envisages filing of returns under the two laws in different Jurisdictions. Thus, irrespective of the date on which the amendment to the centralized registration took effect, since the respondent was always registered under both service tax and excise provisions during the relevant period, the respondent was entitled to cross-utilize credit out of the common pool.
3.3 He further submits that Respondent is eligible to avail Cenvat Credit pertaining to the input services and capital goods used for providing the output services from the centralized service tax registration at the Daman Factory. Respondent is eligible to cross–utilize the said Cenvat Credit to discharge the Central Excise duty on manufactured goods. Input service and capital goods, in respect of which the Cenvat Credit was availed, were received by the respondent as provider of output services. There is no requirement that input services or capital goods used for providing output services are to be received within the factory premises of the respondent. From a bare perusal of Rule 3 (1) of Cenvat Credit Rules, 2004, it is manifest that an output service provider is eligible to avail Cenvat Credit in respect of any inputs, input services or capital goods received by such service provider. He placed reliance on the decisions of Deepak Fertilizers & Petrochemicals Corpn. Pvt. Ltd. Vs. C.C.Ex., Belapur -2013(32) STR 532 (Bom).
3.4 He also submits that the respondent availed the Cenvat Credit on the input services which were used in providing the output services of ATM services. Further respondent availed the Cenvat credit on Capital Goods viz., ATMs manufactured by it and removed from the factory on payment of duty as stock transfer to various depots from where they are cleared and installed at client site by way right to use. Thus, both the input services and capital goods were availed by the respondent as a provider of output services and the Respondent is eligible to avail Cenvat Credit in respect of the input services and capital goods even if not received or used within its factory premises. It is pertinent to note that the eligibility/nexus of the input services and capital goods as regards the output services has not been questioned either in the show cause notices or in the present appeal.
3.5 He also argued that the respondent was entitled to cross –utilize the Cenvat Credit so availed to discharge the central excise duty liability liable to be paid on the removal of the manufactured goods. He placed reliance on the following decisions:
