CESTAT, MUMBAI BENCH
Deepak Fertilizers & Petrochemicals Corpn. Ltd.
Commissioner of Central Excise, Belapur
ORDER NO. A/900/12/EB/C-II
APPEAL NO. E/2083/2010-MUM
NOVEMBER 12, 2012
1. This is an appeal filed by M/s. Deepak Fertilizers & Petrochemicals Pvt. Ltd. (hereinafter referred to as appellants) against the order-in-original No. Belpaur/13/Tal/R-IV/COMMR/SLM/10-11 dated 03.09.2010.
2. The appellants are engaged in the manufacture of excisable goods falling under Chapter 28,29 & 31 of the Central Excise Tariff Act, 1985. They also hold service tax registration for providing output services as per Service Tax Rules 1994. The appellants vide their letter dt. 17/11/2008 informed the Assistant Commissioner Central Excise that they were in the process of installation of Ammonia Storage tank facility at their premises at Plot No.01, JNPT, Tal-Uran, Dist-Raigad for storage of imported Ammonia. They also informed that they are eligible for Cenvat Credit of service tax paid on input services used for said ammonia storage tank installed at JNPT for storage of input/raw material meant for manufacturing of final product at their Taloja factory. The appellant availed the service tax of Cenvat Credit in respect of services of Consulting Engineers, Technical Inspection and certification service, Construction service, erection, commissioning and installation service towards installation of ammonia storage tank at Jawaharlal Nehru Port Trust facility. The department felt that services received in connection with the activity of installation of storage tank which is immovable property and outside factory premises does not fall under the category of input services and accordingly show cause notice dt. 31.7.2009 was issued to the appellants for demanding the CENVAT Credit of Rs. 2,78,88,383/-under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act along with interest under the provisions of Section 11AB of the Central Excise Act and it was also proposed to impose the penalty under Rule 15A of the said Rules. The show cause notice was adjudicated by the Commissioner by the impugned order and duty as demanded in the show cause notice was confirmed along with interest and a penalty of Rs. 5,000/- was imposed on the appellants under Rule 15A of the Cenvat Credit Rules. The appellants are in appeal against the impugned order before this Tribunal.
3. The learned Advocate appearing for the appellants submitted that the Cenvat Credit has been denied to them on the ground that storage tanks are attached to earth and therefore are immovable property and also on the ground that the services are being used outside the factory premises. He submitted that under Rule 4(1) of the Cenvat Credit Rules only inputs are to be received in the factory of the manufacturer whereas in respect of input services under Rule 4(7) of the Cenvat Credit Rules there is no such restriction about use of input services inside the factory. He submitted that only the input services received for outward transportation and storage of final products beyond the place of removal are not eligible for the Cenvat Credit and place of receipt of input service is not relevant for the other services and therefore the ground of service being rendered and availed outside the factory is irrelevant and incorrect for denying the credit of service tax. He further submitted that the definition of input service is very wide and would cover all services required for business of manufacturer. The appellants stored t he inputs in the storage tanks which are used in the manufacture of dutiable final products and, therefore services received for setting up of his storage tanks are required for the business of appellants and therefore the finding of the Commissioner that service received by the appellants are not used in the final products is legally unsustainable. He further contended that the services on which the appellants have availed the credit are used in or in relation to the manufacture/clearance of final product. Therefore, the said services are covered by the “means” portion of the definition of input service under Rule 2(l) of the Cenvat Credit Rules. He further pointed out that cost of production of the final products includes the depreciation on the storage tanks and thus the cost of input services used for setting up of a storage tanks form the part of the assessable value of the final product on which duty is paid. Therefore, the Cenvat Credit cannot be denied to them. He further pointed out that since they have correctly availed the Cenvat Credit of Service Tax paid on the services used in or in relation to installation of ammonia storage tank, the penalty is not imposable on them and similarly interest is also not recoverable from them. In view of this submission he submitted that the impugned order needs to be set aside. The learned Advocate relied upon the following decisions:
[i] Endurance Technologies (P.) Ltd. v. CCE [Order Nos. A/286-287/2011/SMB/C-IV, dated 13-7-2011]
[ii] CCE v. Alidhara Textool Engineers (P.) Ltd.  21 STT 60 (Ahd. – CESTAT)
[iii] Autoprint Machinery Mfrs. (P.) Ltd. v. CCE [Final order No. 140 of 2010, dated 22-1-2010]
[iv] CCE v. Ultratech Cement Ltd. [Final order No. A/321 of 2010 – WZB/C-IV, dated 7-7-2010]
[v] CCE v. Ultratech Cement Ltd. [Final order No. A/469/2010-WZB/C-IV/SMB, dated 8-9-2010]
[vi] Maharashtra Seamless Ltd. v. CCE  34 STT 493/18 taxmann.com 112 (Mum. – CESTAT)
[vii] CCE v. ICL Sugars Ltd. 2011 (271) ELT 360 (Kar.)
[viii] CCE v. SLR Steels Ltd. 2012 (280) ELT 176 (Kar.).
4. The learned Additional Commissioner authorized representative appearing for the Revenue reiterated the findings of the Commissioner and submitted that the storage tank is located outside the factory premises of the appellants and therefore they cannot avail the Cenvat Credit in respect of input services which are used outside their factory. Since the storage tank is attached to the earth and becomes immovable property and hence not excisable, therefore, the credit of service tax paid on input services used is non-excisable goods cannot be allowed. He, therefore submitted that service tax has rightly been denied to them by the Commissioner.
5. Heard both sides.
6. Wd find that Revenue has denied the credit of service tax paid by the appellant on Consulting Engineer Service, Technical Inspection and Certification Service, Construction Service and erection, commissioning and installation service. These services were used in installation of Ammonia Storage Tank facility at JNPT which is outside registered premises of the appellants. Revenue’s contention is that these services used in the installation of storage tanks which is immovable property and is outside the factory premises are not eligible for the service tax credit.
7. The input service are defined under Rule 2(l) of the Cenvat Credit Rules as under:
“input service” means any service,-
(i) used by a provider of taxable service for providing an output service, or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal.
and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place or removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal”.
8. As per definition of final products under Rule 2(h) of the Cenvat Credit Rules final products means excisable goods manufactured or produced from inputs or using input service. Combined reading of the Rule 2(l) and 2(h) shows that input service means any service used by the manufacturer whether directly or indirectly in or in relation to manufacture of excisable goods manufactured or produced from input or said service. That means that only those services will qualify for the input services which are used after input stage or those input services are used in the manufactured or produced from input or said service. That means that only those services will qualify for the input services which are used after input stage or those input services are used in the manufacture of excisable goods by the manufacturer.
9. Further from the definition of input services the inclusive definition covers various services. The services used in respect of inputs are specifically mentioned in the inclusive definition. We find that the procurement of input and inward transportation of input or capital goods are specifically mentioned in the inclusive definition of the input services and will therefore qualify for the eligible input services for the Cenvat Credit. The legislature restricted the benefit of the Cenvat Credit for input services used in respect of inputs for these two categories only. Whenever legislature wanted to give the credit of service tax paid on input services in relation to inputs, it has clearly stated so in the Rule.
10. The learned Advocate has submitted that under Rule 4(7) of the Cenvat Credit Rules, there is no restriction about the use of input services outside the factory premises. We find that under Rule 4(7) there is no such restriction about the use of input services outside the factory but Rule 4(7) is to be read with definition of input service under Rule 2(l) of the Cenvat Credit Rules.
11. We find that Ammonia is imported by the appellant and after goods are cleared from the port and the goods are delivered to the appellants. Procurement of the input is over after taking delivery of the goods. Thereafter appellants are eligible for credit of service tax paid on inward transportation of the inputs as per definitions of the input service.
12. We find that these services are used in installation of storage tanks outside the factory. Inclusive definition of input service also includes input services used in relation to storage upto the place or removal. Storage upto place of removal will include the storage of final products and not storage of inputs because whenever legislature wanted to give the benefit, in respect of inputs it has done so by specifically mentioning as procurement of inputs and inward transportation of the inputs. We therefore, take a view that input services used in relation to storage of inputs outside the factory will not be eligible for the credit.
13. The learned Advocate relied upon the decision of the Tribunal in the cases of:
[i] Endurance Technologies (P.) Ltd.’s case (supra)
[ii] Alidhara Textool Engineers (P.) Ltd.’s case (supra)
[iii] Autoprint Machinery Mfgr. (P.) Ltd.’s case (supra)
[iv] Ultratech Cement Ltd.’s case (supra)
[v] Ultratech Cement Ltd.’s case (supra)
[vi] Maharashtra Seamless Ltd.’s case (supra)
We find that these decisions are Single Member decisions and are not binding on the Division bench. Moreover we also find that in none of the cases cited by the Advocate input services were used in the shortage of inputs outside the factory. Therefore these cases are distinguishable from the facts of the present case.
14. As regards the decision of the Hon’ble Karnataka High Court in the cases of ICL Sugars Ltd. (supra) and SLR Steels Ltd. (supra) these decisions are in respect of denial of credit on inputs used in the storage tank on the ground of immovable property and the court has held that the storage tanks are covered under the definitions of capital goods and credit of inputs cannot be denied to the assessee. In these cases the storage tanks were inside the factory premises. In the present case before us the dispute is regarding the Cenvat credit on input services used in the storage tank outside the factory. Therefore these judgments of Hon’ble High Court are distinguishable from the facts of the present case.
15. Since the appellants were not eligible for the Cenvat Credit penalty under Rule 15A and also the interest has rightly been confirmed by the adjudicating authority.
16. In view of the above, we dismiss the appeal.