NEO Structo Construction Ltd Vs C.C.E. & S.T.-Surat-I (CESTAT Ahmedabad)
CESTAT Ahmedabad held that Cenvat Credit of duty paid on inputs used in manufacture of final products cleared without payment of duty and which is further utilized for manufacture of final products on which duty is paid is allowable.
Facts- The appellant had entered agreement with M/s L&T, Hazira for fabrication of ACN Reactor. The work essentially involved fabrication and assembly as per drawing provided by M/s L&T, Hazira. This ACN reactor fabricated by the appellant was to be used by M/s L&T, Hazira as part of the other plant and machinery such as offshore platform and jackets and ship building.
The appellant sub contracted some work to M/s Neetu Engineering, Surat and M/s Ebenezer Engineering, Surat. The sub-contractors completed the work and charged the service tax to the appellant and the appellant availed the cenvat credit of the said service tax charged by the sub-contractors. The current issue involved is the demand of the cenvat credit availed by the appellants on these services obtained from the sub-contractors.
Notably, the appellant had raised the bills to M/s L&T, Hazira but not charged the service tax amount on the same, whereas when the sub-contractor had raised the bills to the appellant they had charged the service tax. The revenue was of the view that since the activity of the appellant did not attract service tax, the appellant could not have availed the cenvat credit on input service used for their output service in terms of Rule 6(1) and 6(2) of Cenvat Credit Rules, 2004.
Conclusion- In the instant case, since the goods remain within the premises of principal manufacturer the need of challans for movement loses its relevance. Similarly, since the entire raw material as well as finished goods remains within the premises of the principle manufacturer, the need to undertaking payment of duty on the intermediate goods used by principal manufacturer for manufacture of dutiable finished goods loses much of the relevance.
Larger bench in the case of Sterlite Industries Limited has held that that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C.
Held that the ratio of the decision of the Larger Bench in the case of Sterlite Industries Limited is equally applicable to the current situation. Relying on the said decision, we are unable to sustain the impugned order. The same is set aside and appeal is allowed.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal has been filed by Neo Structo Construction Private Limited against demand of service tax on Erection Commissioning and Installation Service, Management, Maintenance & Repair Service, Manpower Recruitment & Supply Agency Service and Goods Transport Agency Service.
2. Learned counsel pointed out that they had entered agreement with M/s L&T, Hazira for fabrication of ACN Reactor during the period 2008-09 and 2009-10. He pointed out that work essentially involved fabrication and assembly as per drawing provided by M/s L&T, Hazira. This ACN reactor fabricated by the appellant was to be used by M/s L&T, Hazira as part of the other plant and machinery such as offshore platform and jackets and ship building. Learned counsel pointed out that they had sub contracted some work to M/s Neetu Engineering, Surat and M/s Ebenezer Engineering, Surat. The sub-contractors completed the work and charged the service tax to the appellant and the appellant availed the cenvat credit of the said service tax charged by the sub-contractors. The current issue involved is the demand of the cenvat credit availed by the appellants on these services obtained from the sub-contractors.
3. Learned counsel pointed out that during the course of CERA Audit, it was noticed that the appellant had raised the bills to M/s L&T, Hazira but not charged the service tax amount on the same, whereas when the sub-contractor had raised the bills to the appellant they had charged the service tax. The revenue was of the view that since the activity of the appellant did not attract service tax, the appellant could not have availed the cenvat credit on input service used for their output service in terms of Rule 6(1) and 6(2) of Cenvat Credit Rules, 2004. Consequently, a show cause notice was issued to the appellant demanding reversal of cenvat credit availed by the appellant in terms of Rule 6(2) of Cenvat Credit Rules, 2004. The said demand for reversal of cenvat credit was upheld by the Commissioner (Appeals) and as a result, the appellants are in appeal before this Tribunal.
4. Learned counsel argued that the activity carried out by the appellants viz. fabrication of ACN Reactor in the premises of M/s L&T, Hazira is an activity amounting to manufacture and the goods are covered under Chapter heading 7308 of Central Excise Tariff Act, 1985. He relied on the decision of Tribunal in the case of Mahindra & Mahindra 2005 (190) ELT 301 (Tri. LB) to assert that the product manufactured by them is a marketable commodity. He also relied on the decision of Tribunal in their own case reported at 2010 (19) STR 361 (Tri Ahd.), wherein in similar set of facts, it was held that the activity undertaken by the appellant is a manufacturing activity and therefore, the appellants are not liable to pay service tax.
5. Learned counsel further argued that the appellants are entitled to benefit of Notification 214/86-CE dated 25.03.1986. He pointed out that the appellants are job worker of M/s L & T Ltd. and therefore, they are entitled to avail the benefit of Notification 214/86-CE dated 25.03.1986 which exempts job workers from payment of excise duty subject to conditions. He pointed out that in the instant case, raw material was supplied by M/s L&T Limited, Hazira to the appellants and after performing the job work, the material was supplied back to M/s L&T In view of above, they are entitled to Notification 214/86-CE dated 25.03.1986 and not liable for payment of Central Excise duty.
6. Learned counsel argued that in the aforesaid background, it is apparent that the appellant are not liable to pay service tax and are exempt from central excise duty still they are entitled to the cenvat In this regard, they relied on the decision of Tribunal in the case of Sterlite Industries Limited 2005 (183) ELT 353 (Tri. LB) which was upheld by the Hon’ble High Court of Bombay as reported at 2009 (244) ELT A89 (BOM). The appellants also placed reliance on the decision of Tribunal in the case of Polycot Industries 2010 (19) STR 585, wherein under similar circumstances, the benefit of cenvat credit has been allowed. He also pointed out the decision of Sterlite Industries (supra) has been followed in the following decisions:
