Case Law Details

Case Name : Ardex Endura (India) Pvt Ltd Vs Commissioner Of Central Tax (CESTAT Bangalore)
Appeal Number : Appeal No. E/21017/2018-SM
Date of Judgement/Order : 09/08/2019
Related Assessment Year :
Courts : All CESTAT (819) CESTAT Bangalore (109)

Ardex Endura (India) Pvt Ltd Vs Commissioner Of Central Tax (CESTAT Bangalore)

Appellants are not liable to penalty on wrong availment of GTA services up to the customer’s premises because it was an interpretation issue and was settled by the Apex Court in the year 2018in the case of Ultratech and therefore no intention to evade service tax can be imputed on the appellant.

FULL TEXT OF THE CESTAT JUDGEMENT

The present appeal is directed against the impugned order dated 13 03.2018 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has disallowed the credit of Rs. 8,92,587/- (Rupees Eight Lakhs Ninety Two Thousand Five Hundred and Eighty Seven only) and also demanded interest and imposed equal penalty in terms of Section A1C of Central Excise Act read with Rule 15(2). The Commissioner (Appeals) has dropped the demand of Rs. 31,39,893/- (Rupees Thirty One Lakhs Thirty Nine Thousand Eight Hundred and Ninety Three only) along with interest and penalty. In the present appeal, appellant has only challenged the denial of cenvat credit of Rs. 6,83,245/- (Rupees Six Lakhs Eighty Three Thousand Two Hundred and Forty Five only). Briefly the facts of the present case are that the appellants are engaged in the manufacture of flooring leveling compounds, tile adhesive and grouts, water proof compounds, etc. and are availing the facility of cenvat credit under the provisions of Cenvat Credit Rules, 2004. During the course of audit, it was noticed that the appellant availed service tax credit on the services such as rent paid in respect of other branches and depots, courier service in respect of finished goods sent to customers, legal services, auditing services pertaining to branches, telephone charges of branches, export clearing charges, pest control charges, branches accounting software, exhibition charges, advertisement of branches, air travel agent services etc. They availed cenvat credit on such services amounting to Rs. 4032480/- (Rupees Forty Lakhs Thirty Two Thousand Four Hundred and Eighty only) during the period from July 201to March 2014. Department entertained the view that the appellant has wrongly availed the cenvat credit on these input services because all services are not directly or indirectly used in or in relation to the manufacture of final products. Department also alleged that the appellant has wilfully suppressed the material fact with intent to avail cenvat credit on ineligible services and therefore are rendered themselves liable for imposition of penalty. Accordingly, a show-cause notice was issued and after following the due process, Additional Commissioner vide order dated 29.05.2015 confirmed the demand of irregular credit along with interest and imposed penalty. Aggrieved by the said order, appellant filed appeal before the Commissioner and the Commissioner (Appeals) vide the impugned order reduced the tax demand from Rs. 4032480/- (Rupees Forty Lakhs Thirty Two Thousand Four Hundred and Eighty only) to Rs. 8,92,587/- (Rupees Eight Lakhs Ninety Two Thousand Five Hundred and Eighty Seven only) as per the table given below:

Sl. No. Nature of service availed Location Tax amount (Rs.)
1 Accounting Services Depot 9549
2 Auditing Service Depot 38,79
3 Renting of Immovable Property Services Depot 39,310
4 Telecommunication services-depot Depot 8,806
5 GTA services to customers Factory 2,09,342
6 GTA services – Factory to depot Factory 2,48,870
7 Transit insurance-Factory to Depot Factory 12 360
8 Clearing & Forwarding services Factory 9391
9 Intellectual Property Rights Services Factory 2,32,360
Total credit disallowed 8,92,587

Aggrieved by the said order, appellant has filed the present appeal.

2. Heard both the parties and perused the records.

3. Learned counsel appearing for the appellant submitted that the impugned order is not sustainable in law as the same is passed without properly appreciating the facts and the law. He fairly admitted that the appellants are not entitled to the credit amounting to Rs. 2,09,342/- (Rupees Two Lakhs Nine Thousand Three Hundred and Forty Two only) on GTA services paid for clearance up to the customer’s premises. Further the appellant has informed the Deputy Commissioner vide letter dated April 42018that they are not disputing their disallowance and requested the Deputy Commissioner to adjust the same against the excess pre-deposit of Rs. 3,02,436/- (Rupees Three Lakhs Two Thousand Four Hundred and Thirty Six only). Further the appellant also informed that they had deposited an interest amount of Rs. 2,20,950/- (Rupees Two Lakhs Twenty Thousand Nine Hundred and Fifty only) payable on 04.04.2018 vide Challan No. 418025.This was done by the appellant in view of the decision of the Apex Court in the case of Ultratech Cement Ltd. vide which the Apex Court in Civil Appeal No. 261/2016 has settled the matter. The appellant has also prayed that they are not liable to penalty because there was no clarity on the issue of cenvat credit on GTA services used in relation to outward transportation up to the place of customer’s premises. He further submitted that the Commissioner (Appeals) has denied the cenvat credit relating to accounting services for the depots, audit services for the depots and renting of immovable property services to various depots taken on rent and telecommunication services pertaining to depots totally amounting to Rs. 9664/- (Rupees Ninety Six Thousand Four Hundred and Sixty Four only). The learned counsel further submitted that the service tax credit on input services pertaining to depot has wrongly been denied by travelling beyond the show-cause notice. He further submitted that Order-in-Appeal has travelled beyond the show-cause notice and Order-in-Original with regard to input credit on services pertaining to depot. He referred to para 9 of the Order-in-Appeal wherein the Commissioner (Appeals) has observed that the appellant has not taken centralized registration having several manufacturing units at different places manufacturing similar goods and further the appellants have not submitted any documentary evidence to show that the branches of various depots were exclusively marketing their products and do not have centralized billing. These allegations were not part of the original show-cause notice and therefore cannot be levelled at Appellate stage. In support of this submission, he relied upon the decision of the Apex Court in the case of Godrej Industries Ltd. Vs. CCE, Mumbai – 208(29) E.L.T. 84(SC). He further submitted that it has been consistently held by the Tribunal that the assessee is entitled to cenvat credit of service tax paid on various services relating to depot as the depot is also covered in the definition of ‘input service’. In support of this submission, he relied upon the following decisions:

1. DSCL Sugar Vs. CCE, Lucknow – 012(12) TMI 830- CESTAT, New Delhi

2. Hawkins Cookers Ltd. Vs. CCE, Mumbai III – 2017(9) TMI 371- CESTAT (Mumbai) – 2017-VIL-821-CESTAT-MUM-CE

3. Tata Steel Ltd. Vs. CCE, Mumbai I – 2017(9) TMI 07- CESTAT (Mumbai) – 2017-VIL -823-CESTAT-MUM-ST

4. ITC Ltd. Vs. CCE, Bangalore – 2017(51) STR 294(Tri.-Bang.) – 2016-VIL-821-CESTAT-BLR-CE

5. Tally Solutions Pvt. Ltd. Vs. CCE, Bangalore – 2017(5) TMI 431- CESTAT-Bangalore

6. Oriental Carbon & Chemical Ltd. Vs. CCE, Delhi III – 2016(6) TMI 67- CESTAT Chandigarh

3.1. Learned counsel fur ther submitted that denial of cenvat credit on GTA services from factory to depot amounting to Rs. 2,48,870/- (Rupees Two Lakhs Forty Eight Thousand Eight Hundred and Seventy only) is not sustainable in law because the said services were used for removal of goods from the factory to depot for sale at depot in such cases the place of removal of goods is depot and transportation services up to the place of removal are covered under the inclusive part of the definition and the same will qualify as ‘input service’.

3.2. As far as denial of credit on Transit Insurance factory to depot amounting to Rs. 12 360/- (Rupees Twelve Thousand Three Hundred and Sixty only), the learned counsel submitted that the said services are used for removal of goods from the factory to depot for sale at depot and this is also covered in the inclusive part of the definition. As far as Clearing and Forwarding Services is concerned, the learned counsel submitted that the denial of cenvat credit amounting to Rs. 9391/- (Rupees Ninety Three Thousand One Hundred and Ninety One only) is also not sustainable under law because these services were availed for the purpose of procuring inputs, exporting finished goods outside India and therefore they are also covered under the inclusive part of the definition of ‘input service’ and will accordingly qualify as ‘input service’. Further with regard to cenvat credit on Intellectual Property Rights Services amounting to Rs. 2,32,260/- (Rupees Two Lakhs Thirty Two Thousand Two Hundred and Sixty only), the learned counsel submitted the royalty paid to the parent company is directly related to the manufacturing process of final products and hence it is eligible for credit.

4. On the other hand the learned AR defended the impugned order and submitted that the Commissioner (Appeals) after discussing each and every input service has specifically allowed the cenvat credit on various services. He further submitted that the cenvat credit of Rs. 8,92,587/- (Rupees Eight Lakhs Ninety Two Thousand Five Hundred and Eighty Seven only) was denied on few services given in the table. He also submitted that out of these services, the appellant himself has conceded that they are not entitle to cenvat credit on GTA service up to the customer’s premises in view of the judgment of the Apex Court in the case of Ultratech Cement and has also written the letter to the Department to adjust the said amount against the advance deposit made by them. He further submitted that the appellant has also paid the interest of Rs. 2,20,950/- (Rupees Two Lakhs Twenty Thousand Nine Hundred and Fifty only) on this amount.

5. After considering the submissions of both the parties and perusal of the material on record, I find that the denial of cenvat credit on input services availed at the depot viz. accounting services, audit services, renting of immovable property and telecommunication services amounting to Rs. 9664/- (Rupees Ninety Six Thousand Four Hundred and Sixty Four only) is not sustainable in law. Depot and branches play a crucial role for the manufacturers as orders have to be collected from customers and manufactured goods are stored prior to their sale. This facilitates higher volume for manufacturing at factory. Further this issue is no more res integra and has been settled by various decisions cited supra. Further I find that in the case of Tata Steel Ltd. cited supra credit was allowed on input services received at depot as these were used for overall business activity of manufacturing by the assessee. Further I find that in the case of Tally Solutions Pvt. Ltd. cited supra, CESTAT Bangalore allowed the credit on services received at branches as these branches facilitated manufacture. In view of the various decisions cited supra, cenvat credit on input services availed at depot amounting to Rs. 9664/- (Rupees Ninety Sx Thousand Four Hundred and Sixty Four only) is allowed being input service. Similarly, denial of cenvat credit on GTA services from factory to depot and transit insurance from factory to depot are also allowed being input service. These services are used for removal of goods from the factory to depot for sale at depot. Therefore, the place of removal of goods is depot and transportation services up to the place of removal are covered under the inclusive part of the definition.

5.1. Further with regard to denial of cenvat credit on Clearing and Forwarding Services is concerned, I note that these services are availed for the purpose of procuring inputs, exporting finished goods outside India, therefore these services are relating to procurement of inputs and transportation of goods up to the place of removal and are covered under the inclusive part of the definition of ‘input service’ and therefore the same is qualify as ‘input service’. With regard to denial of cenvat credit on Intellectual Property Right is concerned, I find that the appellant pays royalty to the parent companies Ardex UK, Ardex-Anlagen and Ardex-Australia and the same is directly related to the manufacturing process of final products. Hence the credit relating to the Intellectual Property Right Service is eligible. Further I find that in the case of Century Plyboards (I)Ltd. VsCCE, K olkata VII – 2013(31) STR 85(Tri.- Kolkata)] it has been held that cenvat credit on input services on the amount paid towards royalty charges is eligible for credit as it is in or in relation to the manufacture of the final products. In view of my discussion above, I hold that the appellants are entitled to the cenvat credit of input services as stated in the table except GTA services up to the customer’s premises which the appellant themselves have reversed along with interest in view of the judgment of the Apex Court in the case of Ultratech Cement Ltd. Further I hold that the appellants are not liable to penalty on wrong availment of GTA services up to the customer’s premises because it was an interpretation issue and was settled by the Apex Court in the year 2018in the case of Ultratech and therefore no intention to evade service tax can be imputed on the appellant. Accordingly, appeal is disposed of on above terms.

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