COMMISSIONER Vs. RELIANCE PORTS & TERMINALS LTD.

JUDGEMENT

(1.) In this appeal under Sec. 35G of the Central Excise Act, 1944 (hereinafter referred to as "the Act"), the appellant has called in question the order dated 17.12.2014 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad (hereinafter referred to as "the Tribunal"), by proposing the following three questions stated to be substantial questions of law:

(2.) Accordingly, a show cause notice dated 13.10.2011 came to be issued to the respondent, which culminated into an order -in -original dated 27.08.2012 passed by the Commissioner, Central Excise & Customs, Rajkot, who observed that the two issues to be decided were (i) whether the noticee is eligible to avail CENVAT credit of the service tax paid on input services as recipient during the period 2006 -07 to 2007 -08 under the category of "Consulting Engineers" and "Banking and other Financial Services", and (ii) whether the credit availed on capital goods without installation is proper or not. On the issue of CENVAT credit of the service tax paid on input service of "Consulting Engineers" and "Banking and other Financial Services", the Commissioner observed that the issue was examined by the Ministry who, after examining the provisions of law, had issued instructions in their letter dated 16.07.2009 whereby, it was clarified that the provisions under Sec. 66A state that in case service is provided from abroad and received in India, such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly, all the provisions of Chapter V of the Finance Act, 1994 would apply. Therefore, it is clear that Sec. 66A is not a charging Sec. by itself. In fact, it only creates a legal fiction to deem import of service as provision of service within India so that the provisions of Chapter V of the Finance Act, 1994 can be applied thereto. The charging Sec. remains Sec. 66 even for the service imported. In other words, the tax collected from the recipient in terms of Sec. 66A is also tax chargeable under Sec. 66 of the Finance Act, 1994. Therefore, there is no mistake or omission in the relevant provisions of the CENVAT Credit Rules, 2004 and that credit of tax paid on imported services should be allowed if they are in the nature of input services. The Commissioner placed reliance upon a clause (ixa) inserted in sub -rule (1) of rule 3 of the rules, with retrospective effect from 18.04.2006, thereby allowing credit of service tax paid under Sec. 66A of the Finance Act, 1994 and held that the respondent was eligible to take CENVAT credit of the service tax paid under Sec. 66A of the Finance Act, 1994.

(3.) On the second aspect of taking CENVAT credit on capital goods prior to its installation, the Commissioner found that the respondent could avail 50% CENVAT credit of duty paid on capital goods in the same financial year in which the capital goods were received and the balance 50% in the subsequent financial year under the provisions of rule 3(1), read with rule 4(2)(a) of the rules. The Commissioner further observed that rule 3(1) of the Cenvat Credit Rules, 2004 allows availment of the CENVAT credit of any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004. Rule 4(2)(a) of the Cenvat Credit Rules, 2004 provides that Cenvat Credit in respect of capital goods received in a factory or in the premises of the provider of output service at any point of time in a given financial year can be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year. After taking into consideration and discussing two Board's circulars dated 03.04.2000 and that of 28.04.2006, the Commissioner observed that, from the two circulars, it is clear that the condition of installation and usage for availing Cenvat credit on capital goods was effective till 09.09.2004 and not thereafter. In the present case, the capital goods have been procured after that date, in the year 2007 -08. The Commissioner further observed that there is no specific debarring provision in the Cenvat Credit Rules, 2004 and the only condition is that the capital goods must be used for manufacture of excisable goods or for providing output service. Placing reliance upon various decisions on the issue of availment of CENVAT credit on capital goods without installation, the Commissioner observed that there is no pre -condition of installation of capital goods for availing the CENVAT credit on the same in the Cenvat Credit Rules, 2004 which was also clarified by the CBEC vide the above referred circulars. He, accordingly, held that the allegations made in the show cause notice are not sustainable and dropped the demand on merits.