Case Law Details
Ramakrishna Electricals Winding Works Vs Commissioner of Central Excise (CESTAT Hyderabad)
The CESTAT Hyderabad considered whether the appellant, engaged in rewinding electrical motors, was entitled to the benefit of Notification No. 12/2003-ST after remand and whether the adjudicating authority could deny the exemption on grounds beyond the scope of the remand order. The dispute arose from a Show Cause Notice covering April 2005 to March 2010, invoking the extended limitation period and proposing penalties under Sections 76, 77 and 78 of the Finance Act, 1994. In an earlier round, the Tribunal had already held that the appellant was entitled to exclude the value of goods and materials deemed to have been sold while rendering repair and maintenance services, subject only to production of proof regarding such value, and remanded the matter for that limited purpose. During de novo proceedings, the appellant produced a Cost Accountant’s certificate and contended that Cenvat credit of ₹2,18,669 taken for a later period had been reversed with interest, amounting to non-availment of credit. The Tribunal held that reversal of Cenvat credit satisfied the condition of non-availment and that the adjudicating authority had exceeded the scope of the remand by re-examining eligibility under Notification No. 12/2003-ST. It further held that claiming the benefit of an exemption notification could not be treated as suppression of facts for invoking the extended limitation period. Accordingly, the impugned order was set aside and the appeal was allowed by way of remand only for the limited purpose of recalculating the demand for the normal period.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
M/s Ramakrishna Electricals Winding Works (hereinafter referred to as appellant) has filed this appeal against the impugned order / Order-in-Original No.VIZ-EXCUS-002-COM-010-14-15 dated 26.06.2012 passed by Commissioner of Central Excise & Customs, Visakhapatnam.
2. The fact in brief, the appellant is engaged in the activity of carrying out rewinding of the various kinds of Electrical Motors. The appellant’s claimed the benefit of Notification No. 12/2003-ST, dated 20.06.2003 and reflected the same in the invoices raised during the disputed period. The appellant’s filed their ST-3 Returns, disclosing the total value of Service Tax payable and paid by claiming the benefit of Notification 12/2003-ST. The value of goods sold or deemed to have been sold, requires to be exclude for the purpose of computing the value of service rendered by the appellant.
3. The Show Cause Notice was issued to the appellant by dated 19.10.2010 for the period of disputes April 2005 to March 2010, invoking extended period of limitation along with proposal to impose penalty under Section 76, 77 and 78 of Finance Act, 1994. The Adjudicating Authority by the O-I-O No. 6/2012 dated 27.01.2012 confirming the entire demand with interest and imposed penalty against appellant. The appellant filed an Appeal No.ST/953/2012, before the Tribunal.
4. The Tribunal vide Final Order No. 2722 of 2013 dated 31.12.2013 and held that the appellant is entitled to claim exclusion of the value of the goods and raw materials claimed to have been sold to the recipient of the service as part of their repair and maintenance service. The matter was remanded for Denovo consideration only for the purpose of producing the proof with regard to the value of goods and materials deemed to have been sold. In principle, the Tribunal has held that the appellant is entitled for the benefit of Notification No.12/2003-SST in the proceeding, the appellant produced, the cost Accountant’s Certificate, evidencing the value of goods or material used and sold or transferred to the customers of the appellant while rendering the service of repair and maintenance. The appellant also submits their submissions against invocation of limitation.
5. The Adjudicating Authority vide impugned order confirming the entire demand raised in Show Cause Notice, apart from imposing equal amount of penalty under Section, 78 of the Finance Act, 1994.
6. Learned Counsel for the appellant submits that the impugned order in the Denovo proceeding has been passed contrary to the decision of this Tribunal in the appellant’s case for the very same period. Final Order dated 31.12.2013 has attained finality and the impugned order is beyond the scope of the said Final Order of this Tribunal. The Commissioner has traversed beyond the Final Order dated 31.12.2013 and denied the benefit of Notification No. 12/2003-ST, which was already held to be available for the appellant. Therefore, the finding of the Learned Commissioner is not sustainable.
7. Learned Counsel for the appellant submits that there is no suppression with intent to evade payment of Service Tax. The issue is only with regard to the eligibility of benefit of Notification. It is well settled that claim of benefit of exemption notification cannot be considered as suppression with interest to evade payment of Tax. The Department had full knowledge about the appellant’s claim. Therefore, the demand is barred by limitation.
8. Learned Counsel for the appellant relied on the following decisions:
(i)Commissioner of Central Excise, Agra Vs Okay Glass Industries reported in [2015 (330) E.L.T. 872 (All)]
ii. Safety Retreading Co (P) Ltd., Vs Commissioner of Central Excise, Salem reported in 2017 (48) S.T.R. 97 (S.C.)]
iii. Commissioner of Customs and Central Excise Vs Balaji Tirupati Enterprises reported in [2013 (32) S.T.R. 530 (All)]
iv. Commissioner of Central Excise, Mumbai-I Vs Indian Oil Tanking Pvt Ltd., reported in [2017 (6) G.S.T.L. 417 (Tri-Mum)]
v. Tree House Hotel Club & Spa Vs Commissioner of Central Excise, Jaipur – I reported in [2017 (4) G.S.T.L. 39 (Tri-Del)]
vi. Jct Ltd., Vs Commissioner of Central Excise, Jallandhar, reported in [2015 (318) E.L.T. 275 (Tri-Del)]
vii. Balaji Manpower Services Vs Union of India, reported in [2019 (31) G.S.T.L. 418 (P&H)]
(viii) Hospitech Management Consultants Pvt Ltd., Vs Commissioner of Service Tax, New Delhi, reported in [2023 (385) E.L.T. 575 (Tri-Del)]
9. Learned Counsel for the appellant relied on the following judgment in this regard:
i. Commissioner of Central Excise, Agra Vs Okay Glass Industries reported in [2015 (330) E.L.T. 872 (All)]
ii. Safety Retreading Co (P) Ltd., Vs Commissioner of Central Excise, Salem reported in 2017 (48) S.T.R. 97 (S.C.)]
iii. Commissioner of Customs and Central Excise Vs Balaji Tirupati Enterprises reported in [2013 (32) S.T.R. 530 (All)]
iv. Commissioner of Central Excise, Mumbai-I Vs Indian Oil Tanking Pvt Ltd., reported in [2017 (6) G.S.T.L. 417 (Tri-Mum)]
v. Tree House Hotel Club & Spa Vs Commissioner of Central Excise, Jaipur – I reported in [2017 (4) G.S.T.L. 39 (Tri-Del)]
vi. Jct Ltd., Vs Commissioner of Central Excise, Jallandhar, reported in [2015 (318) E.L.T. 275 (Tri-Del)]
vii. Balaji Manpower Services Vs Union of India, reported in [2019 (31) G.S.T.L. 418 (P&H)]
viii. Hospitech Management Consultants Pvt Ltd., Vs Commissioner of Service Tax, New Delhi, reported in [2023 (385) E.L.T. 575 (Tri-Del)]
10. Learned AR reiterates the finding of the Adjudicating Authority.
11. Heard Learned Counsel for the appellant Shri T. Ramesh & Ms. Viswapriya and Learned Representative of the Department Shri V. Srikanth Rao and perused the records with their submissions.
12. Learned Counsel for the appellant is mainly arguing that in this case the remand was made by the Tribunal vide Final Order No.27221/2013 dated 31.12.2013, only for limited purpose of computing amount of deemed sale and excluding the same for the purpose of charging Service Tax. Subsequently thereto they have produced the necessary documents and the Adjudicating Authority was also satisfied with the amount of deduction claimed by them on account of deemed sale. However, he raised another issue that in terms of said notification, no credit should have been taken in respect of said material, whereas, in their case apparently they have taken some credit and therefore, they are not entitled for notification benefit. Learned Counsel for the appellant also pointed out that when they have approached the Tribunal in the first round of litigation, in their grounds it was clearly mentioned that during the period 01.04.2005 to 30.09.2007, they had taken any credit of 2,18,669/-. Thus, while passing order, the Tribunal was aware of this fact that they had taken credit and also reversed the same, which tantamounted to having not taken the credit. Therefore, now apparently the Commissioner has gone beyond the scope of the remand order by denying them the benefit of notification. It is obvious that in this case the dispute was regarding taking of credit of Rs. 2,18,669/- as is apparent from earlier O-I-O and also grounds of appeal. There is letter dated 17.08.2012 produced by the appellant wherein, it clearly mentioned the amount of credit taken and reversal thereof. Thus, it would tantamount to having not taken the credit at all as or adjourned by judicial pronouncement.
13. In view of the above submissions, we find that in this case, the only issue is whether reversal of credit of Rs. 2,18,669/- makes them eligible for the said notification or otherwise as there is no other dispute as regards quantification of amount relating to deemed sale for the purpose of levy of Service Tax.
14. Appellant had taken the ground in previous appeal that during the period 01.04.2005 to 30.09.2007, they have not taken any input credits on the input used for the remaining service and for the subsequent period from 01.10.2009 to 31.03.2010, they have taken Cenvat Credit of Rs 2,18,669/- and reversed the same with interest. In this regard the relevant para of the previous appeal as thus:
“T. It is submitted that during the period 01.04.2005 to 30.09.2007 the appellants have not taken any input credits on the input used for the rewinding service. Therefore, the appellants have satisfied the condition of the notification 12/2003. Under the said notification the bar of CENVAT Credit is relatable only to the CENVAT Credit of duty paid on the inputs or the materials used. In the circumstances the condition of notification regarding non availment of CENVAT Credit on the duty paid on the input has been satisfied. For the subsequent period from 01.10.2009 to 31.03.2010, though the appellants have taken CENVAT Credit of Rs. 2,18,669/- the appellants have reversed the same with interest. It is well settled that the moment CENVAT Credit availed is revered; the same has to be treated as not taken. Thus, the appellants satisfy the condition of notification no. 12/2003 even for the period 01.10.2009 to 31.03.2010. Moreover, the Commissioner has not disputed the above said fact in the impugned order.”
15. Tribunal vide Final Order, dated 31.12.2013 in Appeal No.ST/953/2012 had upon remanded the matter with observation for the value of goods and material deemed to have been sold is liable to exclusion either under the provision of under Section 67 or qua Notification No.12/2003. The relevant para of the Final Order is reproduced as follow:
“5. The appellant’s claim for the benefits of Notification No. 12/2003 dated 20/06/2003 were negated by the Adjudicating Authority on the ground that neither this Notification nor provisions of Section 67 of the Act (on a true and fair construction of this Notification) accommodate exclusion of the value of goods deemed to have been sold from the scope of the taxable value to be arrived at on the basis of provisions of Section 67 of the Act. In paragraph 6(b) of the adjudication order the Adjudicating Authority notes that the appellant failed to mention the exact quantity and details of the materials/ equipment or their make used/ consumed/ sold in the invoices raised on the service recipient and only a lumpsum figure is reflected in the invoices towards the material and service charges on which VAT is said to have been discharged at 4% on the 70% of the invoice value and the Service Tax on 30% of the value of the invoice is claimed to have been remitted. In paragraph 6(c) of the order, the authority notes that as per the details available in the balance sheet of the appellant, the cost of the material consumed during the years 2005-06 to 2009-2010 is reflected as 34% on an average for the said period, and is at variance with the 70% of the value of the goods deemed to have been sold, as claimed by the appellant.
6. In the light of the recent decision of the Delhi High Court in G.D. Builders & Others Vs Union of India 2013-TIOL-908-HC-DEL-ST, it is clear that wherever there are complex transactions including components of service and sale of goods (actual or deemed), the taxable value for levy of Service Tax would be only the component of service but excluding the component of sale of goods. Accordingly, on this interpretation of the provisions of Section 67 the value of goods sold or deemed to have been sold, requires to be excluded from the taxable value for computation of Service Tax liability. Consequently, provisions of Notification No. 12/2003 merely explicate the inherent intent of Section 67 of the Act.
7. As a consequence of the preceding analysis, the appellant is entitled to claim exclusion of the value of the goods and raw materials claimed to have been sold to the recipient of the service as part of the management, maintenance or repair agreements and works executed in pursuance thereof. The appellant is entitled to such exclusion on producing proof of the value of the goods and materials deemed to have been sold to the service recipient.
8. Since, the adjudication order proceeds on the flawed premise and presumes that the value of goods and material deemed to have been sold is not liable to exclusion either under the provisions of Section 67 or qua Notification No. 12/2003, the order invites invalidation and is accordingly quashed. The matter is however, remitted to the Adjudicating Authority for denovo disposition the appellant is at liberty to submit proof, of the value of the goods and material deemed to have been sold while executing the repair and maintenance service, within of four weeks from the date of receipt of this order. After this period, if the appellant furnishes any material in support of its claim for exclusion of value of such goods or material, the Learned Commissioner shall consider such material and pass an order of adjudication afresh. If the appellant produces no such material within the time stipulated, the Commissioner is at liberty to proceed with passing of the adjudication order, on the basis of the material available on record.”
16. Tribunal Mumbai, in the case of Indian Oil Tanking Pvt Ltd., supra, held that the reversal is sufficient compliance with condition of non-availment of Cenvat Credit.
17. In the case of JCT Ltd., supra, the Co-ordinate Bench, New Delhi held that the reversal of Cenvat Credit amounts to non-taking of credit on inputs. The benefit of exemption notification cannot be denied. The relevant para as follows:
“6. The core issue in these appeals is as to whether in the circumstances of the case, the assessee would be eligible for benefit of exemption Notification No.30/04-C.E. There is no dispute that the benefit of the exemption notification is subject to the condition that no duty credit that is taken but the assessee during November and December, 2005 had taken Cenvat Credit of Rs. 6,622/- in respect of certain inputs and during January to March, 2006 had taken Cenvat Credit of Rs. 2,753/- in respect of certain inputs. However, the assessee’s claim that this credit had not been utilised and had been reversed as soon as this irregularity was pointed out by the Department is not refuted by the Department. Since the credit taken was reversed without being utilised, in our view, the judgment of Hon’ble Allahabad High Court in the case of Hello Minerals Water (P) Ltd., Vs Union of India (supra) which is based on the Apex Court’s judgment in the case of Chandrapur Magnet Wires (P) Ltd., Vs CC, Nagpur (supra) would be applicable to the facts of this case and the assessee have to be treated as not having taken the Cenvat Credit and would be eligible for the exemption benefit. In view of this, the impugned order denying the benefit of exemption Notification No. 30/04-C.E. and confirming the duty demand on this basis against the assessee is not sustainable and the same is set aside. Since the duty demand itself has been set aside the Revenue’s appeals regarding denial of cum-duty benefit exemption and penalty also would not survive. Thus, while the appeal Nos. E/330-331f of 2009 are allowed and the appeal Nos. E/555-556 of 2009 and 1048-1049 of 2009 filed by the Revenue are dismissed.”
18. The decision in the case of Tree House Hotel Club & Spa, supra, and JCT Ltd., supra, are squarely applicable in the instant appeal and we find that appellant is eligible for the above mention Notification No. 12/2003-ST dated 20.06.2003.
19. Learned Counsel for the appellant also submits that Commissioner has gone beyond the scope of remand order by denying the benefit of notification. In this regard, he is relied on Hon’ble Allahabad, High Court decision Commissioner of Central Excise, Agra Vs Okay Glass Industries [2015 (330) E.L.T. 872 (All.)] wherein, held that it was not open for Adjudicating Authority to pass order ignoring remand direction and confirm the demand of same grounds as taken in first O-I-O which was set aside by the Tribunal. The Relevant para of the decision as are reproduced as thus:
“24.In the case of Commissioner of Income Tax, Bhopal Vs Ralson Industries Ltd., (2007) 2 SCC 326=2007 (214) E.L.T. 166 (S.C.) = 2007 (7) S.T.R.497 (S.C.), Hon’ble Supreme Court held that when an order is passed by a Higher Authority, the Lower Authority is bound thereby keeping in view the principles of judicial discipline. In the case of Bhopal Sugar Industries Ltd., Vs I.T.O., AIR 1961 SC 182, Hon’ble Supreme Court held that if a subordinate Tribunal refuses to carry out directions given to it by a superior Tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice.
25. In the case of Smt. Kausalya Devi Bogra and others Vs Land Acquisition Officer, Aurangabad and another, (1984) 2 SCC 324, Hon’ble Supreme Court held that judicial discipline requires and decorum known to law warrants that appellate directions should be taken as binding and followed. In the hierarchical system of Courts which exist in this country, it is necessary for each lower tier, including the Courts of Appeal, to accept loyally the decisions of the higher tiers.
26. In the case of Namit Sharma Vs Union of India, (2013) 1 SCC 745, Hon’ble Supreme Court held that it is not only the Higher Court’s judgments that are binding precedents for the Information Commission, but even those of the Larger Benches of the Commission should be given due acceptance and enforcement by the smaller Benches of the Commission. The rule of precedence is equally applicable to intra-court appeals or references in the hierarchy of the Commission.”
20. Principal Bench CESTAT, New Delhi in the case of Hospitech Management Consultants Pvt Ltd., held that “the extended period of limitation could have been invoked only if there was suppression of facts with intent to evade payment of Service Tax”. The claim of benefit of exemption notification cannot be considered as suppression of fact with intent to evade payment of Tax.
21. Therefore, invoking of limitation in the instant case is also not sustainable.
22. In view of the above discussion, we find that the order of the Adjudicating Authority is not sustainable and liable to set aside.
23. Appeal is allowed by way of remand only for limited purposes to recalculate the demand accordingly for normal period.
(Pronounced in the open court on 09.01.2026 )
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