Vikram Ispat Vs Commissioner of Central Excise, Raigad

Applicability of Central Excise and Service Tax Sections to CENVAT Credit: Sections 11A and 11AB will be applicable where the CENVAT credit in question has been utilised for payment of duty of excise on final products whereas Sections 73 and 75 of the Finance Act are applicable where the credit has been utilised for payment of service tax on output services.

Interpretation of Input Services: Any service to be brought within the ambit of definition of "input service" should be one which should specify the essential requirement contained in the main part of the definition. This requirement is equally applicable to the various items mentioned in the inclusive part of the definition as well.

CENVAT Credit: Company is not entitled to CENVAT credit on "services" in question. In respect of some of the said services, they have not adduced evidence to establish the nexus, if any, between the "services" and the manufacture/clearance of the final products. CENVAT Credit also denied as no documentary evidence is available on record for claiming credit.

[Order] - In these appeals of the assessee, the short question which arise for consideration, is whether CENVAT credits to the extent of Rs.19,584/- Rs.11,093/-, Rs.37,273/- and Rs.1,34,929/- taken by the assessee respectively on "subscription to SIMA (Sponge Iron Manufacturers' Association)", "security services at railway siding at Roha", "rent-a-cab service" and "mobile telephony service" are admissible to them under the provisions of the CENVAT Credit Rules, 2004. In a show-cause notice, which invoked Rule 14 of the above Rules and Section 11A of the Central Excise Act for recovery of the above amounts, the department alleged inter alia that the above services were not covered by the definition of "input service" under Rule 2(1) of the CENVAT Credit Rules, 2004. This definition reads 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, modernisation, renovation or repairs of a factory premises of provider of output services or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business such as accounting, auditing, financing requirement 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."

The allegation was denied and the demands contested. In adjudication of the dispute, the original authority denied the above CENVAT credits to the assessee and ordered recovery thereof under Section 11A read with Rule 14, imposed equal amount of penalty on them under Rule 15 and also ordered that interest be paid on the CENVAT credit under Section 11AB read with Rule 14. In appeals filed against the orders of the adjudicating authority, the first appellate authority held against the assessee. Hence the present appeals.

2. The learned counsel for the appellant raises what is called "preliminary objection", which is that it was not open to the department to invoke Section 11A of the Central Excise Act for recovery of any amount of CENVAT credit availed on input services. It is submitted that this objection was raised in the reply to the show-cause notices. It is fairly conceded that this objection was considered by the original authority. The grievance of the appellant is that their objection was overruled. Learned SDR refers to the text of Rule 14 of the CENVAT Credit Rules, 2004 and submits that Section 11A is very much applicable to a case where inadmissible CENVAT credit has been utilised for payment of duty of excise on final products. In the present case, the CENVAT credits in question were utilised for payment of such duty and, therefore, Section 11A was correctly invoked in the relevant show-cause notices. After giving careful consideration to the submissions, I have found a valid point with the SDR. Rule 14 was enacted to cover cases of wrong availment of CENVAT credit on inputs, capital goods or input services as also cases of erroneous refund of any amount of CENVAT credit initially denied. The rule also says that Sections 11A and 11AB of the Central Excise Act and Sections 73 and 75 of the Finance Act, 1994 may also be applied mutatis mutandis to a demand under the rule. It appears that Sections 11A and 11AB will be applicable where the CENVAT credit in question has been utilised for payment of duty of excise on final products whereas Sections 73 and 75 of the Finance Act are applicable where the credit has been utilised for payment of service tax on output services. The instant case is one in which, admittedly, the CENVAT credit in question was utilised for payment of duty on finished goods. On this basis, the so called preliminary objection is ruled out.

3. The learned counsel further refers to each of the four items on which the CENVAT credits in question were taken. He submits that these items are coming within the scope and ambit of the definition of "input service" given under Rule 2(1). The learned SDR has contested this claim. After considering the submissions, I find that the subscription given by the assessee to SIMA was in no way connected with the manufacture of final products or with clearance thereof from the factory. There is not even a remote connection between this item and anything contained in the definition of "input service". Security services were employed at the railway siding at Roha where the raw-material for the factory was unloaded from railway wagons and loaded on to the trucks which carried the goods by road to the factory. It is said that the security personnel were posted at that point to ensure the supply of the goods and the unloading/loading operations. The purpose of posting of security personnel must be discerned from the agreement between the appellant and security agency. But none is forthcoming. In this scenario, I am not in a position to accept the claim of the appellant that the security personnel were doing something, directly or indirectly, in or in relation to the manufacture or clearance of final product. In other words, the claim is unsustainable. Coming to "rent-a-cab services", I am told that these services were used by functionaries, officials and employees of the company for purposes connected directly or indirectly with the, manufacture or clearance of the final products. To a specific query from the Bench, the learned counsel submits that, if the representative of the company who is present in Court to assist him avails himself of "rent-a-cab service" for commuting between the administrative office of the company and this Court, CENVAT credit on the service is admissible to the appellant. This argument is farfetched inasmuch as, if it is accepted, CENVAT credit will have to be allowed to the assessee in respect of "rent-a-cab service," availed by the counsel himself to come to this Court to argue their case. It is understandable if the above service was used by functionaries/officials/employees of the company to commute between their administrative office and the factory for purposes connected with the manufacture and/or clearance of the finished goods. Even for this purpose, there must be documentary evidence. No document is available on record. "Mobile telephony service" has already been claimed to be an ‘input service’ defined under Rule 2(1). It is within anybody's knowledge that a mobile phone can be used by a person for multifarious purposes. No doubt, a functionary/official/employee of the company could use it for purposes connected with the manufacture and/or clearance of the final products, but the assessee has failed to establish that the mobile phones in question were dedicated to this purpose. The learned counsel has referred to the Tribunal's Larger Bench decision in CCE, Mumbai-V vs. GTC Industries Ltd. 2008 (12) STR 468 (Tri.-LB), wherein outdoor catering services used for supply of food in a factory canteen were held to be input services. The learned counsel has cited the above decision in support of his submission that the definition of "input service" should be construed liberally. It is his submission that some of the items mentioned in the inclusive part of that definition are comparable to one or the other of the services in question and, therefore, it should be held that the latter are also covered by the definition of "input service". I do not agree. Any service to be brought within the ambit of definition of "input service" should be one which should specify the essential requirement contained in the main part of the definition. This requirement is equally applicable to the various items mentioned in the inclusive part of the definition as well. In this view of the matter, I am constrained to hold that the appellant is not entitled to CENVAT credit on any of the four items of "services" in question. In respect of some of the said services, they have not adduced evidence to establish the nexus, if any, between the "services" and the manufacture/clearance of the final products.

4. The learned counsel has also raised the plea of limitation, which plea has also been contested. As I have already taken a decision on the substantive issue against the assessee, there is no scope for considering the limitation issue.

5. In the result, all the appeals stand dismissed.

(Pronounced in Court)