United Phosphorous Ltd Vs C.C.E. & S.T.-Surat-ii (CESTAT Ahmedabad)
Introduction: The case of United Phosphorous Ltd vs. C.C.E. & S.T.-Surat-ii took a significant turn at the CESTAT Ahmedabad. The appeal addressed multiple issues, including the denial of Cenvat credit on various goods, short reversal of credit on electricity, denial of credit on renting godowns, and more.
Detailed Analysis:
1. Cenvat Credit Denial on Steel Items: The central point of contention revolved around the denial of Cenvat credit on steel items. The appellant argued that the denial was based on a precedent that was subsequently overturned by the Chhattisgarh High Court. The CESTAT, recognizing this change in legal circumstances, remanded the matter to the Adjudicating Authority for fresh consideration.
2. Short Reversal of Cenvat Credit on Electricity: The appellant did not contest the short reversal of Cenvat credit on electricity supplied to the sister concern. The CESTAT upheld the penalty, emphasizing that the related Cenvat credit was not admissible, considering the supply to the sister concern.
3. Credit on Renting Godowns: The case also dealt with the denial of credit on service tax paid for renting godowns located outside the factory premises. The CESTAT held that the mere location of the godown outside the factory premises should not be a basis for denial, as long as it is used for storing goods used in manufacturing.
4. Cenvat Credit on Construction/Repair of Shed: The credit on the construction or repair of the warehouse shed within the factory was deemed admissible by the CESTAT. This decision aligned with the judgment in Sanofi India Ltd vs. Commissioner.
5. Demand on Waste and Scrap: The CESTAT ruled that the demand for service tax on waste and scrap of plant and machinery was unsustainable unless the department could prove that Cenvat credit was availed on the machinery during its receipt and installation.
6. Personal Penalty: Regarding the personal penalty imposed on Shri Harakchand Jain, the CESTAT set it aside, considering that the issues involved interpretation of Cenvat credit rules, and a personal penalty was not warranted.
Conclusion: In conclusion, the CESTAT Ahmedabad’s ruling in the United Phosphorous Ltd case has far-reaching implications. It not only remands the crucial issue of Cenvat credit denial on steel items but also clarifies various aspects related to electricity supply, renting of godowns, waste and scrap, and personal penalties. This case highlights the dynamic nature of tax litigation and the importance of staying abreast of legal developments.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The following issues are involved in the present case :-
1. Denial of Cenvat Credit of duty paid on goods viz. HR Coils, Plates, HSM Plates, Chequered plates, ISMB, Joists, Beam, Flates, Girder, Angles, Channels, Shapes & Section made of iron & steel pipes and cement etc.
2. Short reversal of cenvat credit on electricity supplied to sister concern.
3. Denial of credit of service tax paid on renting of godowns situated outside the factory premises,
4. Denial of credit of service tax paid for construction of shed of warehouse.
5. Non -payment of central excise duty on illicit clearance of waste and scrap.
2. Shri Prakash Shah, Learned Counsel along with Shri Mihir Mehta and Shri Mohit Raval, Advocates appearing on behalf of the Appellant submits that the credit of duty paid on HR Coils, Plates, HSM Plates, Chequered plates, ISMB, Joists, Beam, Flates, Girder, Angles, Channels, Shapes & Section made of iron & steel pipes and cement etc. is admissible to the appellant. The Adjudicating Authority has denied the credit on the basis of Larger Bench judgment of this Tribunal in the case of Vandana Global Ltd – 2010 (253) ELT 440 (Tri.- LB) wherein the amendment made by the Notification No.- 16/2009 – CE (NT) dated 07.07.2009 by inclusion of Explanation 2 to Rule 2 (k) was held effective from retrospective effect.
2.1 As per the amendment these items were excluded from the definition of inputs. It is his submission that the Larger Bench held that the said amendment has a retrospective effect. This proposition has been over ruled by the Hon’ble Chhattisgarh High Court reported at Vandana Global Ltd. Vs. Commissioner of Central Excise & Cus, Raipur – 2018 (16) GSTL 462. Therefore, the entire basis of the adjudicating authority denying the credit on such items is not correct.
2.2 As regard the issue relates to credit on renting of godown he submits that the appellant had correctly availed the credit of service tax on renting of godown situated outside the factory premises and construction and repair of shed of warehouse within the factory. He placed reliance on the following judgments:-
