Case Law Details
Srinivasa Transports Vs Commissioner (CESTAT Hyderabad)
It is evident from the records that the appellant has rendered both Port service and Cargo Handling Service as well as several other services and paid service tax on these services. The vehicles in question were not used by them for providing these services. The show cause notice has not brought forth any evidence that the vehicles in question were not used for cargo handling services. When a show cause notice was issued, the burden of proving facts and allegations in the show cause notice rests on the department and not on the noticee. Apart from this, it would stand to reason that the motor vehicles would be used for cargo handling as well as for other services within port. Having bought motor vehicles it is unlikely that the appellant would use exclusively them for one service and not for the other. As long as the appellant has used motor vehicles for rendering Cargo Handling Services on which they have paid service tax, they are entitled to CENVAT Credit on capital goods. The motor vehicles need not be used exclusively for providing cargo handling or other listed services. The mere fact that they have also used motor vehicles for some other purposes does not deprive them of their CENVAT Credit on motor vehicles.
FULL TEXT OF THE CESTAT JUDGEMENT
1. This appeal is filed against Order-in-Appeal No. VIZ-EXCUS-001-APP-019-18-19, dated 20.04.2018.
2. Heard both sides and perused the records.
3. Facts of the case in brief are the appellant is a service provider registered with Service Tax Department for payment of service tax on Steamer Agent, Custom House Agent, Cargo Handling Services, Port Services-Major Port and Storage and Warehouse Service. They have been rendering the services under various heads and discharge service tax accordingly. In respect of some services, their total value of services is nominal whereas for other services it is substantial. The appellant avails CENVAT Credit on capital goods as well as on inputs and input services. A show cause notice dated 14.10.2016 was issued to the appellant seeking to deny them CENVAT Credit on motor vehicles used by them for providing these services on the ground that motor vehicles are not entitled for capital goods CENVAT Credit except in respect of some services. The relevant definition of “capital goods” under Rule 2(B) of CCR 2004 is as follows:
“Motor Vehicle registered in the name of provider of output service as specified in sub clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of Clause (105) of Section 65 of the Finance Act.”
4. It is a case of the Revenue that the motor vehicles of which the appellant has availed CENVAT Credit were not used for any of these services but were used for Port services which is their main service. Hence, they are not entitled to CENVAT Credit.
5. After following due process, the Ld. Asst. Commissioner by his Order-in-Original dated 07.03.2017 disallowed the CENVAT Credit on capital goods, amounting to Rs. 10,72,422/- on the motor vehicles availed by the appellant and ordered its recovery under Rule 14 of CENVAT Credit Rules, 2004, read with proviso to Section 73(1) of the Finance Act, 1994. He also demanded interest under Rule 14 of CCR 2004 read with Section 75 of the Finance Act, 1994 on the above amount. He imposed penalty equal to the amount of CENVAT Credit disallowed under Rule 15(3) of CCR 2004 read with Section 78 of the Finance Act, 1994. Aggrieved, the appellant appealed to the first appellate authority who, by the impugned order, rejected the appeal and upheld the order of the lower authority. Hence this appeal.
6. Ld. Counsel for the appellant submits that they are rendering various services including Cargo Handling Service under section 65(105)(zr) of Finance Act, 1994 which would cover them squarely under clause (B) of Section 2(a) for availing CENVAT Credit on capital goods on the motor vehicles. He would submit that they entered into contracts with their clients to provide services such as receiving cargo from the railway siding at Marripalem and other places outside the Port, unloading the cargo, transporting it to the yard, unloading it from the yard and at the appropriate time shifting it to the port for further shipment. These activities involve various services such as Steamer Agency Service, Custom House Agency service, Cargo Handling Service, Port services, storage & warehousing services etc. During the period in dispute they had paid service tax under the heads of “Custom House Agency Service”, “Cargo Handling Service”, “Port Service” and “Storage & Warehousing Service”. Of these, the major portion of tax was paid under “Cargo Handling Service” and “Port Service”. He would submit that motor vehicles in question were used by them for transporting and shifting the goods from one place to another. Such activity falls under the definition of Cargo Handling Service if it is undertaken outside the Port and would fall under the definition of Port Services if it is undertaken inside the Port. The vehicles in question were used for both activities. However, the department seeks to deny them the CENVAT Credit on the ground that the major activity was in the Port and therefore the vehicles in question were used for Port services. It is further the assertion of the Department that they were not able to produce any evidence that the vehicles were used for Cargo Handling Services. He would submit that this view of the Department is due to their misunderstanding of the nature of their activity. It is not in dispute that they had undertaken Cargo Handling Service and also paid service tax under this head. The Department has never declined their service tax paid under this head. It is also true that they have also rendered Port services and other services on which they paid service tax separately. He would assert that the vehicles in question were used for cargo handling services also and therefore they are eligible for CENVAT Credit on capital goods on these motor vehicles. Therefore, their appeal may be allowed and the impugned order be set aside with consequential relief.
7. Per contra, Ld. DR asserts that CENVAT Credit on capital goods can be allowed in the normal course on all goods. However, as far as the motor vehicles are concerned, the eligibility is confined to only such cases where the motor vehicles are used for the specified services. Although it is true that the appellant has paid service tax both under “Cargo Handling Service” and under “Port Services”, a perusal of the work orders shows that they are essentially composite orders to take care of the entire loading and unloading and transportation activity which appeared to be primarily undertaken in the Port area. It is his assertion that if the assessee wants to claim CENVAT Credit on capital goods on the motor vehicles used, he needs to prove that the vehicles have been used for rendering one of the services listed in Rule 2(a) (B) of CCR 2004. The appellant has failed to prove that the motor vehicles in question were used for providing Cargo Handling Service. Therefore, their appeal may be rejected.
8. I have considered the arguments on both sides and perused the records.
9. It is evident from the records that the appellant has rendered both Port service and Cargo Handling Service as well as several other services and paid service tax on these services. The vehicles in question were not used by them for providing these services. The show cause notice has not brought forth any evidence that the vehicles in question were not used for cargo handling services. When a show cause notice was issued, the burden of proving facts and allegations in the show cause notice rests on the department and not on the noticee. Apart from this, it would stand to reason that the motor vehicles would be used for cargo handling as well as for other services within port. Having bought motor vehicles it is unlikely that the appellant would use exclusively them for one service and not for the other. As long as the appellant has used motor vehicles for rendering Cargo Handling Services on which they have paid service tax, they are entitled to CENVAT Credit on capital goods. The motor vehicles need not be used exclusively for providing cargo handling or other listed services. The mere fact that they have also used motor vehicles for some other purposes does not deprive them of their CENVAT Credit on motor vehicles.
10. In view of the above, I find that the impugned order is unsustainable and is liable to be set aside and I do so.
11. The impugned order is set aside and the appeal is allowed with consequential reliefs, if any.
(Dictated and pronounced in open court)
