CESTAT, NEW DELHI BENCH
Jayaswals Neco Industries Ltd. (Steel Plant Div.)
Commissioner of Central Excise
FINAL ORDER NO. 448 OF 2011 SM (BR)
APPEAL NO. E/323 OF 2009-SM
JULY 12, 2011
1. The dispute relates to disallowance of cenvat credit of Rs. 27,996/- towards service tax on insurance premium paid and service tax of Rs. 81,285/- paid against business auxiliary service availed by the appellant. Both the authorities held against the appellant finding that there was no evidence suggesting eligibility to the credit of service tax paid by the appellant. In case of insurance premium, the authorities opined that the evidence relating to payment of insurance was not in the name of the appellant and service tax paid in respect of clearing and forwarding service by Yadav Associates also does not relate to the appellant.
2.1 Ld. Counsel appearing for the appellant submits that necessary evidence in support of claim of the Service tax paid on insurance available at page 15 read with contents of page 24 of the appeal folder establishes that 25200 MT of Anthracite Coal was imported from Russia as is evident from agreement between the PEC and the appellant, available at page 56 of the appeal folder and insurance premium was paid on such import. The import quantity is also evidenced by bill of entry available in record of Revenue. When there is a co-relating transaction showing the payment of insurance premium through Bank Account exhibited by page 24 of the appeal folder and substantiated by page 15 of the said record, disallowance of cenvat credit of service tax of Rs.27,249/- is uncalled for.
2.2 On the second count of disallowance, Counsel submits that the bunch of evidence available at page 42 onwards in the appeal folder proves the methodology of working of the appellant with the clearing and forwarding agent M/s. Yadav Associates. The appellant’s name with address appeared in both evidence, so also service tax paid is verifiable. Once such evidence is on record, there is no question of disallowance of cenvat credit.
2.3. Further submission of the appellant was that the appellant acted under bona fide belief of admissibility of cenvat credit for which there shall not be any penal consequence of law. Also it was submitted by the appellant that the proceeding is time barred and there was no suppression of facts.
3. On the other hand ld. DR supports the order passed by both the authorities below bringing out the fact that when the credit of service tax paid by clearing and forwarding agent was availed, the appellant not being an Input Service Distributor, it is not entitled to the benefit of cenvat credit of the service tax paid on such services. He also explains that the appellant is not entitled to the credit on service tax paid on insurance policy since that was in the name of a different concern with whom the appellant made agreement in respect of the high seas sale claim.
4. Heard both sides and perused the records.
4.1. Show cause notice issued to the appellant as appearing in pages 9 to 12 of the appeal folder in para 5 requires the appellant to discharge its burden of proof to substantiate use of the input service in relation to the manufacture and clearance of excisable goods. Such an aspect which is basic requirement of law has not been examined by both the authorities below. Nor also there is any evidence to show that the appellant has discharged its burden of proof. So far as the service tax payment on insurance is concerned, it appears that the appellant has evidence to show payment of service tax, on the insurance policy taken against the goods in question as has been canvassed relying on pages 15 and 24 of the appeal folder. The Original Authority should not fail to examine original Bank statement to satisfy himself that the insurance premium was paid and that must relate to goods used in manufacture. Once he is so satisfied, his duty begin to examine the allegation in para 5 of the show cause notice. He has to provide opportunity to the appellant to plead its defence on that count.
4.2. So far as the service tax payment on the clearing and forwarding agent service is concerned, it appears the appellant has incurred certain expense as is reflected from page 42 to page 55 of the appeal folder. The Department is required to find out whether the service tax was realised by M/s Yadav Associates and if so, whether paid to the treasury. The appellant’s claim that the appellant’s name appears in the respective bill in the aforesaid pages shall not ipso facto entitle it to the claim but subject to verification of the records of Yadav Associates as to use of such service in or in relation to manufacture. Once the payment of service tax has been made by M/s. Yadav Associates to the Treasury, the appellant may not be denied the benefit of cenvat credit, subject to appropriate examination of the allegation in para 5 of the show cause notice and proving use of the service in accordance with law. The Original authority has to be satisfied that requirement of Rule 9(5) of the Cenvat Credit Rules is fulfilled and service tax paid was relating to input service that was ultimately used in manufacture of excisable goods. If he is satisfied that there is nexus, dependability, integrity, indispensability and inevitability, there may not be difficulty to consider the claim of the appellant. To do so, the original authority shall provide proper opportunity to the appellant to lead its defence and argue the matter on the basis of materials on record without any fresh material or evidence being inducted in the course of de novo proceeding.
4.3 Since the matter is proposed to be sent back to the Original Authority, the question of time bar shall be examined by that authority. So also appropriateness of claim should not escape his consideration. If he is satisfied about claim of the appellant to be proper, he shall pass appropriate order on the penalty aspect.
5. With the aforesaid directions the matter is remitted back to the Original authority for passing a reasoned and speaking order.
6. The appellant relied on the decision of Swill Ltd. v. CCE 2008 (232) E.L.T. 802 (Tri.- Ahmd.). Since the matter is remitted back, it is unprofitable to prevail over the mind of the adjudicating authority discussing the ratio of the said case at this stage. He may take into consideration the ratio laid down in the citations if the present case is within the four of the said decisions.