2015 (1) TMI CESTAT NEW DELHI

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1 2015 (1) TMI CESTAT NEW DELHI Other Citation: 2014 (36) S.T.R. 815 (Tri. - Del.) MOSER BAER INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NOIDA Denial of CENVAT Credit - Transfer of credit - Service tax paid by the head office under reverse charge - Appellants were availing the CENVAT credit of the service tax so paid by the head office and distributed by them and were utilising the same for discharge of their service tax liability - Bar of limitation - Held that:- On going through the provisions of Section 66, we find that the same is charging Section and provides for levy of service tax on the taxable services referred in Section 65(105). In respect of the services so specified in Section 65, clause 105, if provided by a person located in a country other than India and received by a person located in India, the same has to be treated as per Section 66A, as if the recipient of the services has himself provided the said services in India and he is required to pay service tax under Section 66A even though actually the said services do not stand provided by him. Merely because the recipient of the services in question has been made to be a deemed provider of such services, in terms of Section 66A, will not change the complexion of the said services from input services to output services for the purpose of Cenvat Credit Rules, If such services are otherwise used as input services by the manufacturer of an excisable product or provider of an output taxable service, the Cenvat credit of service tax paid by the service recipient would be available to him. A head office is entitled to get himself registered as input service distributor and then to issue invoices/bills for the purpose of distributing the credit of service tax. There is nothing in the said Rule to suggest that the head office or the office of the manufacturer should be himself in a position to provide any output service or to manufacture any excisable goods. The basic requisite condition for the distribution of the said credit is that he receives the invoices towards purchase of input services and pays the service tax. Admittedly, in the present case, the head office has received the disputed services of Intellectual Property Service, Consulting Engineering Service and Management Consultant Service and has discharged its service tax liability as a recipient of the said services. The head office is admittedly registered with the Department as input service distributor. Being a registered input service provider, the head office was admittedly entitled to distribute the credit to its manufacturing unit. If the appellants would have received the said services directly at their Nodia factory and would have paid the service tax themselves, they were admittedly entitled to the credit. Merely because the invoices by the foreign suppliers were raised in the name and address of the head office, who paid the entire consideration along with the service tax, credit cannot be denied on the said ground. It may be mentioned here that credit is available qua the manufacturer and not qua the factory. Admittedly, the manufacturer is M/s. Moser Baer India Ltd. Merely because their head office is located at a place different from the place of the factory cannot be adopted as a reason for denial of the credit. The factory as also the head office is belonging to the same manufacturer, i.e., M/s. Moser Baer India Ltd. and cannot be considered to be two separate entities. Otherwise also, it is a well settled law that the invoices raised in the name of the head office cannot be held to be a ground for denial of the credit. As such even if the head office was not registered as an input service

2 distributor, the appellants factory located at Noida was entitled to the credit of the service tax paid by them through their head office, as all the accounts are being maintained at the head office. Demand to be barred by limitation. Admittedly, the head office was a registered input service provider and was issuing invoices to the factory for the purpose of availing the credit. The credit so taken by the appellants was being reflected in their statutory records. We really fail to appreciate the reasoning of the Commissioner that as the appellants were availing the credit on the strength of the documents/advices issued by their head office, but they were fully aware of the every aspect related to the payment of service tax being made by the head office. Inasmuch as the credit was being availed on the basis of the invoices issued by registered input credit distributor and were being reflected by the assessee in their statutory returns, we find that no positive suppression having the colour of misstatement or with any mala fide can be attributed to them so as to invoke the longer period of limitation. Accordingly, we hold the demand as barred by limitation. - impugned order is set aside - Decided in favour of assessee. No. - E/56/2009-EX(DB) Order No. - Final Order No. A/52148/2014-EX(DB) Dated - May 16, 2014 Ms. Archana Wadhwa, Member (J) and Manmohan Singh, Member (T) Shri B.L. Narasimhan, Advocate, for the Appellant. Shri S.K. Panda, JCDR, for the Respondent. ORDER As per facts on records, the appellants are the manufacturer of CDR, CD Rom, DVDR and DVD Rom, falling under Chapter Heading 85 of the Central Excise Tariff Act, 1985, in their factory situated at A-164, Sector 80, Noida. They have their head office located at 43-A, Okhla Industrial Estate-II, Delhi. The said head office is registered as an input service distributer in terms of Rule 2(m) of the CENVAT Credit Rules, 2004 with effect from Various services like Management Consultant Service, Consulting Engineering Service and others, were being received by them from foreign country and as the recipient of the said services, service tax was being paid by the head office, in terms of the provisions of Section 68(2) read with Rule 2(1)(d)(v) of Service Tax Rules, The service tax so paid by them on the various services, which were actually being utilised by the appellants in their factory located at Noida, were being distributed by the head office to the appellants factory. Appellants were availing the CENVAT credit of the service tax so paid by the head office and distributed by them and were utilising the same for discharge of their service tax liability. It is seen that during the period August, 2005 to February, 2006, the appellants availed the CENVAT credit of 3,16,58,382/- on the basis of the invoices issued by their head office, transferring the entire service tax paid by them from the head office to the appellants factory.

3 2. Revenue entertained a view that inasmuch as the service tax was being paid by the head office, as a deemed service provider, on reverse charge basis and inasmuch as the head office was not engaged in the manufacture of any excisable goods or not providing any output services, they were not entitled to avail the said credit and in turn not entitled to pass on the said credit to the appellants factory located at Noida. Accordingly, proceedings were initiated against them by way of issuance of show cause notice, dated , proposing confirmation of 3,16,58,382/- by denying them the Cenvat credit availed by them during the period August, 2005 to February, The appellants contested the said proposal on merits as also on limitation. However, Commissioner rejected the appellants plea and contention and confirmed the denial of the credit along with confirmation of interest and imposition of penalty of identical amount in terms of provisions of Rule 15 of Cenvat Credit Rules, Hence, the present appeal. 3. We have heard Shri BL Narasimhan, ld. Advocate appearing for the appellants and Shri SK Panda, ld. Departmental Representative representing Revenue. 4. There does not seem to be much dispute on facts. The appellants factory is located at Noida with their head office being at Okhla Industrial Area, New Delhi. There also does not seem to be any dispute about the fact that the various services are falling under the category of input services and the same are being actually utilised by the appellants in their factory. The only reason for denial of the credit seems to be that the head office of the appellants has discharged its duty liability in respect of the services so received by them in terms of the provisions of Section 68(2) of the Act. In terms of the provisions of Rule 3(i) of the Cenvat Credit Rules, 2004, the manufacturer of the final products or a provider of taxable service shall be allowed to take Cenvat credit of service tax paid on any input service received by him. The Commissioner has observed that inasmuch as the head office is neither a manufacturer/producer of the final product, nor a provider of the taxable service and as such the head office will not be entitled to avail the credit of the amount of service tax so paid by them under Section 66(A) of the Act, being recipient of the services. For the above findings, the Commissioner has referred to the Board s clarifications as contained in Circular No. 345/4/2005-TRU, dated On going through the said circular, first of all we find that the same stands issued in relation to the liability of a person to discharge the service tax in respect of GTA services so received by a person who is neither a manufacturer nor service provider. It is seen that the issue as to whether a person who is liable to pay service tax under Section 68(2) would be entitled to the credit of the same or not stands clarified by the Board in subsequent circulars so issued by them. Circular No. 21/JAM/2008 (S. Tax), dated refers to the earlier clarificatory letter of the Board being F.No. B1/4/2006-TRU, dated , which is to the effect and makes it clear that where such services were used as an input for providing any taxable output, the service tax paid on such service can be taken as an input credit. The Commissioner has relied upon the earlier circular, dated , which is not on the issue and has ignored the other subsequent clarifications given by the Board. 5. On going through the provisions of Section 66, we find that the same is charging Section

4 and provides for levy of service tax on the taxable services referred in Section 65(105). In respect of the services so specified in Section 65, clause 105, if provided by a person located in a country other than India and received by a person located in India, the same has to be treated as per Section 66A, as if the recipient of the services has himself provided the said services in India and he is required to pay service tax under Section 66A even though actually the said services do not stand provided by him. Merely because the recipient of the services in question has been made to be a deemed provider of such services, in terms of Section 66A, will not change the complexion of the said services from input services to output services for the purpose of Cenvat Credit Rules, If such services are otherwise used as input services by the manufacturer of an excisable product or provider of an output taxable service, the Cenvat credit of service tax paid by the service recipient would be available to him. 6. When viewed from the above angle, the Commissioner s reasoning is that inasmuch as the head office was not providing any output service or was not manufacturing any excisable goods from his head office located at Okhla Industrial Area, they cannot be held entitled to the benefit of the Cenvat credit. It may be mentioned here that head offices are usually not engaged in providing any services or not engaged in the manufacture of the final product. It is, in this scenario that the provisions of Rule 2(m) of the Rules stand created allowing an office of the manufacturer to get himself registered as input service distributor. For better appreciation, the said Rule is reproduced below :- input service distributor means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchase of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be; Further, Rule 7 of the said Rules read as under :- RULE 7 Manner of distribution of credit by input service distributor. - The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following condition, namely :- (a) The credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; or (b) Credit of Service Tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of Credit shall be taken by the manufacturer on the basis of the invoice, bill or challan issued by the input service distributor. 7. In the light of the above Rules, a head office is entitled to get himself registered as input service distributor and then to issue invoices/bills for the purpose of distributing the credit of service tax. There is nothing in the said Rule to suggest that the head office or the office of the manufacturer should be himself in a position to provide any output service or to manufacture any excisable goods. The basic requisite condition for the distribution of the

5 said credit is that he receives the invoices towards purchase of input services and pays the service tax. Admittedly, in the present case, the head office has received the disputed services of Intellectual Property Service, Consulting Engineering Service and Management Consultant Service and has discharged its service tax liability as a recipient of the said services. The head office is admittedly registered with the Department as input service distributor. Being a registered input service provider, the head office was admittedly entitled to distribute the credit to its manufacturing unit. 8. In any case and in any view of the matter, we find that the services so received by the appellants head office were admittedly utilised by the appellants factory located at Noida. If the appellants would have received the said services directly at their Nodia factory and would have paid the service tax themselves, they were admittedly entitled to the credit. Merely because the invoices by the foreign suppliers were raised in the name and address of the head office, who paid the entire consideration along with the service tax, credit cannot be denied on the said ground. It may be mentioned here that credit is available qua the manufacturer and not qua the factory. Admittedly, the manufacturer is M/s. Moser Baer India Ltd. Merely because their head office is located at a place different from the place of the factory cannot be adopted as a reason for denial of the credit. The factory as also the head office is belonging to the same manufacturer, i.e., M/s. Moser Baer India Ltd. and cannot be considered to be two separate entities. Otherwise also, it is a well settled law that the invoices raised in the name of the head office cannot be held to be a ground for denial of the credit. As such even if the head office was not registered as an input service distributor, the appellants factory located at Noida was entitled to the credit of the service tax paid by them through their head office, as all the accounts are being maintained at the head office. 9. It may also be observed here that the credit on the input services is not dependent upon the actual receipt of the services in the factory unlike the credit of the duty paid on the inputs, which is dependent upon the actual receipt of the inputs or the capital goods in their factory. As such, when the services were first received by the head office and then transferred to the factory for further utilisation, cannot be made ground for denial of the credit. 10. Ld. Advocate appearing for the appellants has also relied upon various decisions of the Tribunal to support his plea that there is no restriction in availment of credit on the basis of the invoices issued by the input service distributor. Reliance stands placed upon the Tribunal s decision in the case of TVS Motors Co. Ltd. v. CCE, Chennai [2011-TIOL-455- CESTAT-MAD] laying down that there is no requirement to distribute the credit proportionately and one unit can avail more credit than the other factory. To the same effect is the Tribunal decision in the case of Ecof Industries Pvt. Ltd. v. CCE, Bangalore [2010 (17) S.T.R. 515 (T)] by laying down that there is no restriction which can be applied in limiting distribution of service tax credit made in respect of Malur unit on the ground that services were used in respect of Cuttack unit. The said decision stands upheld by the Hon ble High Court of Karnataka reported in 2011 (23) S.T.R. 337 (Kar.) = 2011 (271) E.L.T. 58 (Kar.). Further reference has also been made to the Hon ble High Court of Punjab & Haryana in the case of CCE, Ludhiana v. Ambika Overseas [2012 (25) S.T.R. 348 (P & H)] laying down that the services provided by overseas commission agents where activities

6 relating to sales promotion and the assessee is entitled to take CENVAT credit of service tax paid by them as recipient of those services. Though the above decisions do not cover the disputed arena directly, but it emerges that even where an assessee has paid service tax, as recipient of the services from a foreign country, he is entitled to take the credit of service tax actually paid by him. Further, whether such credit stands availed on the basis of registered input service distributor, the same is in accordance with law. By applying the principles as enunciated in the above referred decisions of the Tribunal, the appellants are admittedly entitled to the Cenvat credit of Service Tax paid by their head office in respect of services received from outside India. Further, Tribunal in a number of cases held that where the documents are in the name of head office, credit can be availed in the factory belonging to the same manufacturer. Reference can be made to the Tribunal s decision in the case of Modern Petrofils v. CCE, Vadodara [2010 (20) S.T.R. 627 (Tri. - Ahmd.)] as also to the decision in the case of CCE, Vapi v. DNH Spinners [2009 (244) E.L.T. 65 (Tri. - Ahmd.)] = 2009 (16) S.T.R. 418 (Tri. - Ahmd.). For all the reasons, we do not find any merits in the reasonings of the impugned order. 11. Apart from holding in favour of the assessee on merits of the case, we also find the demand to be barred by limitation. Admittedly, the head office was a registered input service provider and was issuing invoices to the factory for the purpose of availing the credit. The credit so taken by the appellants was being reflected in their statutory records. We really fail to appreciate the reasoning of the Commissioner that as the appellants were availing the credit on the strength of the documents/advices issued by their head office, but they were fully aware of the every aspect related to the payment of service tax being made by the head office. Inasmuch as the credit was being availed on the basis of the invoices issued by registered input credit distributor and were being reflected by the assessee in their statutory returns, we find that no positive suppression having the colour of misstatement or with any mala fide can be attributed to them so as to invoke the longer period of limitation. Accordingly, we hold the demand as barred by limitation. Reliance can be made to two leading decisions of the Hon ble Supreme Court in the case of Collector of Central Excise v. Chemphar Drugs & Liniments [1989 (40) E.L.T. 276 (S.C.)] as also to the decision in the case of Pushpam Pharmaceuticals Company v. CCE, Bombay [1995 (78) E.L.T. 401 (S.C.)], laying down that for invocation of extended period of positive suppression or mis-statement with an intent to evade payment of duty is pre-requisite condition. 12. In view of the foregoing, the impugned order is set aside and the appeal is allowed with consequential relief to the appellants, on merits as also on limitation. (Pronounced on )

C. B. MOR CELLULAR COMMISSIONER OF CENTRAL EXCISE, NAGPUR

C. B. MOR CELLULAR COMMISSIONER OF CENTRAL EXCISE, NAGPUR [2015] 85 VST 58 (CESTAT) [CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL] (MUMBAI BENCH) C. B. MOR CELLULAR V. COMMISSIONER OF CENTRAL EXCISE, NAGPUR RAMESH NAIR Judicial Member January 16, 2015 HF