AHMEDABAD: THE Appellants are providing services in relation to Port.
They availed CENVAT Credit on inputs, capital goods and input services used in various output services.
Credit has been denied on the following by the adjudicating authority -
(a) Inputs viz. Cement and Steel.
(b) Other inputs and Capital Goods,
(c) Input services.
The appellants are before the CESTAT.
After considering the exhaustive submissions made by both sides, the Bench observed thus -
Cement
and Steel: The Tribunal in the Appellants own case -
2008-TIOL-1691-CESTAT-AHM disallowed the CENVAT credit on cement and
steel. However, the Gujarat High Court- 2015-TIOL-1288-HC-AHM-ST allowed
the appeal of the Appellant. The Appellant would, therefore, be
entitled to avail input credit on Cement and Steel, the Bench opined.
Nonetheless,
the AR submitted that as per amendment to Explanation 2 of the
definition of inputsunder Rule 2(k) of the CCR, by Notification No.
16/2009-CE (NT) dated 07.07.2009, the Appellant is not eligible to avail
CENVAT credit on cement and steel items after 07.07.2009.
The Bench, therefore, reproduced the Explanation 2 of Rule 2(k), as amended on 07.07.2009 -
Explanation
2. Input include goods used in the manufacture of capital goods which
are further used in the factory of the manufacturer but shall not
include cement, angles, channels, Centrally Twisted Deform bar (CTD) or
Thermo Mechanically Treated bars (TMT) and other items used for
construction of factory shed, building or laying of foundation or making
of structures for support of capital goods.
And observed -
"On
plain reading of Explanation-2 of the definition of Input, as amended
on 07.07.2009, we find that the said explanation would apply in respect
of the goods used in the manufacture of capital goods, which are further
used in the factory of the manufacturer. Thus, it is clear that input
Cement and Steel used in the factory of manufacturer shall not be
eligible input credit. This explanation is applicable only to the
manufacturer and not the service provider. It is to be read strictly as
per plain meaning of the statute. There is no indication in the
Explanation that it would apply to the service provider. The Hon'ble
Gujarat High Court in the appellants own case held that amendment in
Explanation-2 in Notification No. 16/2009-CE (NT) (supra) was not
clarificatory in nature and the amended definition will not be
applicable to the service providers. So, the denial of input credit on
Cement and Steel before and after amendment of Explanation 2 of
definition Input, cannot be sustained."
Other
input/capital goods: The adjudicating authority observed that the inputs
and capital goods were used in the construction of Port Jetty, Port
buildings and Warehouse services, which are not output service i.e. Port
services; that inputs and capital goods were used for maintenance
repair of machines used in the Port area and for other general use in
the Port area; that construction of Port is exempted service in view of
the Notification No. 25/2007-ST dated 22.05.2007 and no CENVAT credit is
eligible on exempted services. [Period April 2005 to September 2011]
After
extracting the definitions of Capital Goods, Input and Input Service
appearing in Rule 2 of the CCR, 2004 & as prevailing during the
material period, the Bench observed -
+ It is well
settled that literal interpretation would prevail, where the plain words
of statute are clear, unambiguous and not absurd or unjust.
+
When words of statute are clear and meaning is unambiguous, intention
of statute gets irrelevant; the plain meaning of the statute should not
be distorted by following the interpretation based on intention.
+
Following case laws were adverted to - Sai Samhita Storages (P) Limited
- 2011-TIOL-863-HC-AP-CX , Reliance Infratel Ltd Vs CST, Mumbai-II -
2015-TIOL-516-CESTAT-MUM , Laxmi Enterprise Vs CCE & ST, Vadodara -
2014-TIOL-2042-CESTAT-AHM , Navratna S. G. Highways Prop. Pvt. Ltd Vs
CCE Ahmedabad - 2012-TIOL-1245-CESTAT-AHM .
Thereafter, the CESTAT reproduced the dictionary meaning of "port"& "Jetty" -
Port:
++
A harbour where ships load and unload cargo; any place where persons
and cargo are allowed to enter a country and where customs officials are
stationed.[Blacks Law Dictionary, 7th & 8th Eds.].
++
A place for the loading and unloading of the cargoes of vessels, and
the collection of duties or customs upon imports and exports.[Blacks Law
Dictionary, 5th Ed.].
++ A port is a place intended
for loading or unloading goods; hence includes the natural shelter
surrounding water, as also sheltered water produced by artificial
jetties, etc. [The Baldhill CCANY, 42 F 2d 123, 125].
++
A port is a place where a vessel can lie in a position of more or less
shelter from the elements, with a view to the loading or discharge of
cargo. [Hunter v Northern Marine Insurance Co. Ltd. (1888)13 App Cas
717, 726, per Lord Herschell].
++ The word port must be
construed in its usual and limited popular or commercial sense as a
place where ships are in the habit of coming for the purpose of loading
or unloading, embarking or disembarking. [The Mowe (1915) P 1, 15, per
Evans]."
Jetty. A pier or breakwater constructed to
protect or defend a harbour, coast, etc.; a structure in a body of water
serving to control or divert a current, protect a harbour or the like,
or as a wharfor pier; a projection of stone or other material serving as
a protection against the waves; a kind of pier for loading and
unloading cargo from a vessel. Jetty is used for loading and unloading
of goods. [Mitras Legal and Commercial Dictionary (6th Edition)]
The Bench further observed -
"…The
definition of Port service under Section 65 (82) of the said Act, 1994
covers any service rendered by a port in any manner in relation to a
vessel or goods. Thus, jetty is used within the port for loading and
unloading of the goods from the vessel. Port cannot function without
jetty. So, CENVAT credit on the inputs and capital goods used in the
construction of jetty is eligible for output service namely port
service. It is noticed from the above decisions that the test of input
and capital goods in respect of output service is whether it is used for
providing output service. In the present case, it is clearly evident
that the inputs and capital goods were used in construction of jetty for
rendering port service. There is no reason to deny CENVAT credit on
such input and capital goods."
In the context of the
submission by the AR that construction of Port is an exempted service
and, therefore, CENVAT is not admissible, the Bench held -
"In
the present case, the Port was constructed by the contractor appointed
by the Appellant for construction of Jetty, the exemption 25/2007-ST is
applicable to the contractor. The contractors are not eligible to avail
CENVAT credit. On the other hand, the appellant paid service tax on Port
service. Hence, the Appellants are entitled to avail CENVAT credit on
the inputs used for taxable output services, Port service."
Input services: It has been alleged that the input services have no nexus with output service. The Bench held -
"…From
an analysis of the statutory provisions, definitions, and the decisions
of the Hon'ble High Courts and the Tribunal, it is evident that any
service used by a service provider for providing Port Service in any
manner, is eligible for credit. The definition of Input service by way
of "means","and includes" also amplify the scope of the same. Further,
the definition also mentions certain specific services. The definition
also includes services used in relation to activities relating to
business. These further enlarge the scope of the input services. The net
result of such a wide definition as rightly held by the High Courts and
Tribunal, is that any input service which has any nexus or is in
relation to the output services in any manner whatsoever, or is in
relation to the activities relating to business would be eligible for
credit. Therefore, the appellants would be eligible to take credit on
the input services where they are able to satisfy the above criteria."
Keeping
the above guidelines in mind, the Adjudicating authority was directed
to examine the same whether the services are eligible to be treated as
input services for providing the output services viz. Port Service.
Observing
that the appeal concerns eligibility of CENVAT Credit on input, input
service and capital goods and most of the items are admissible,
imposition of penalty was held as not warranted.
The appeals were disposed of.