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Travancore Titanium Products Ltd V/S Commissioner of Central Excise

    Appeal No. E/21387/2015 (Arising out of Order-in-Original No. TVM-EXCUS-000-54-14-15, Dated: 9.2.2015 Passed by Commissioner of Central Excise Customs, Thiruvananthapuram) and Final Order No. A/22349/2017

    Decided On, 27 September 2017

    At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore

    By, THE HONORABLE JUSTICE: S.S. GARG
    By, MEMBER

    For Petitioner: G. Shivadass, Advocate And For Respondents: Pakshirajan, Asst. Commissioner (AR)



Judgment Text


1. The present appeal is directed against the impugned order dt. 09/02/2015 passed by the Commissioner whereby the Commissioner has confirmed the demand of irregular CENVAT credit availed by the appellant to the extent of Rs. 7.48,587/- out of the total amount of Rs. 50,58,381/- under Rule 14 of CENVAT Credit Rules, 2004(CCR) read with proviso to Section 11(1) of the Central Excise Act, 1944 (CEA) along with interest and equal penalty. Brief facts of the present case are that the appellant is engaged in the manufacture and clearance of Titanium Dioxide, Sulphuric Acid and Potassium Titanate falling under heading Nos. 282300.10, 280700.10 and 284190.00 respectively of the Schedule to the Central Excise Tariff Act, 1985 (CETA) and are availing CENVAT credit of duty paid on input and capital goods as well as service tax paid on input services. A show-cause notice dt. 01/08/2014 was issued to the appellant for recovery of wrongly availed CENVAT credit on input services amounting to Rs. 50,58,381/-. After following the due process of law, the Commissioner confirmed the proposal in the show-cause notice. However reduced the demand from Rs. 50,58,381/- to Rs. 7,48,587/- along with applicable interest and penalty. Commissioner vide Order-in-original held that the management consultancy services received by the appellant having ceased to be input service on account of subsequent abandonment of the project, for which project, the said services were originally availed and the CENVAT credit availed and utilised in relation to the above services is irregular and in contravention of provisions of Rule 2(l) of CCR.

2. Heard both sides and perused records.

3.1. Learned counsel for the appellant submits that the impugned order passed by the Commissioner is not sustainable in law. He further submitted that the management consultancy services were rendered for modernisation of existing plant and is eligible for CENVAT credit as per the definition of input service in CCR, 2004. He further submitted that the credit was taken and utilised in 2005-07 and it is not the case of the Department that the credit was not taken correctly. He further submitted that the expenditure incurred for Acid Recovery Plant (ARP, for short) is in relation to the parent plant. He further submitted that due to financial constraints, one of the plants (ARP) in Phase -I was abandoned on 01/03/2011. He also submitted that the there was no suppression on the part of the appellant as the appellants have been regularly filing ER-1 monthly returns. He also submitted that the modernisation, renovation or repair of the factory is allowed as credit even if they are not an activity relating to business as long as the input service is able to satisfy the requirements of the definition of input service. for this submissions, he relied upon the following decisions:-

i. Coca Cola India Pvt. Ltd. Vs. CCE, Pune-III [2009 (242) ELT 168 (Tri. Bom.)]

ii. CCE, Nagpur Vs. Ultratech Cement Ltd.

3.2. He further submitted that the appellants had availed the credit of service tax paid for services received from M/s. Mecon ltd. for preparation of three pollution control plants including the ARP and at the time of availment of credit, there is no dispute that the said credit was taken correctly. He also submitted that the subsequent development after taking the credit cannot vitiate the credit already availed. This proposition has been settled in favour of the appellant in catena of decisions, inter alia, the following:-

i. CCE, Bangalore Vs. Tafe Ltd. (Tractor Division) [2011(268) ELT 49 (Kar.)]

ii. CCE Vs. Asian Paints India Ltd.

iii. Khurana Woolen Mills (P) Ltd. Vs. CCE, Ludhiana [2013 (289) ELT 153 (P&H)]

iv. CCE, Bangalore Vs. Tata Advance Materials Ltd. [2011 (271) ELT 62 (Kar.)]

3.3. He further submitted that in the present case extended period of limitation cannot be invoked as there was no suppression on the part of the appellant as the appellant has filed ER1 returns monthly and in the impugned order, the Department has not able to set up a case against the appellant with intention to evade tax. He further submitted that the demand is based on an audit objection and the audit was conducted in 2010-11 and in spite of the Department having knowledge, the show-cause notice was only issued on 01/08/2014 after nearly 9 years of the availment of the same. He also submitted that the provisions for remission of duty under Central Excise Act, 2002 and CCR, 2004 are not attracted in the present case.

4. On the other hand, Revenue has also filed the written submissions whereby they have reiterated the findings of the impugned order. Revenue has also stated in the written submissions that the Chartered Accountant vide their letter dt. 17/11/2014 certified that due to serious financial crisis, the main plant can work at 45 tons per day production level and hence the ARP project was abandoned. However, all the equipments imported or procured for ARP were kept safely in the store of the company with necessary upkeep. The services rendered by M/s Mecon were discontinued in 2008 and the Government of Kerala Vide their Order dt. 01/03/2011 abandoned the ARP. Learned AR further submitted that the appellant suppressed the fact of abandoning the project which was noticed during the audit conducted by the Department in 2010-11. He also justified the invoking of the extended period of limitation on account of suppression by the appellant. The appellant never communicated the decision of the Government of Kerala dt. 01/03/2011 that the ARP project has been abandoned and therefore there is a clear suppression on the part of the appellant. He also submitted that when the appellant choose to repay the EPCG duty foregone on the ARP project along with interest as per their order dt. 01/03/2011 and decided to dispose of the imported goods. Therefore it was incumbent upon them to reverse the service tax credit in respect of the said ARP project which was not done by them.

5. In reply to the objections raised by the Department, learned counsel for the appellant submitted that the said case was for a completely different purpose and related to all the parts imported under EPCG licence. He further submitted that the estimated cost of the project was Rs. 129.4 crore and the appellant spent Rs. 225.8 crores for setting up the plant. Since the cost exceeded the budget of the appellant, the ARP was abandoned and at the time of availment of credit, there was no irregularity and the said credit was for the intended purpose and therefore there was no requirement to reverse the credit. He further submitted that the Department was aware of the fact that the Government has abandoned the project and the audit objection was raised in 2010-11 wherein it was pointed out that the appellant had availed irregular credit of service tax paid on consultancy services but in spite of that, show-cause notice was issued on 01/08/2014.

6. After considering the submissions by both sides and perusal of material on record, I find that the management consultancy service was taken for all the plants but one of the plant i.e. ARP was abandoned on 01/03/2011 and during the audit in 2010-11, an objection was raised by the Department that the appellant has availed irregular credit but thereafter no show-cause notice was issued till 01/08/2014, which is beyond the period of limitation of one year. Further I also find that the credit was availed and utilised in 2005-07 and it is not the case of the Revenue that the same was wrongly availed. Further I also find that the CENVAT credit once rightly availed is indefeasible and subsequent development of abandoning of plant will not make the appellant liable to reverse the CENVAT credit which was rightly availed by them. Further I also find that the appellants have been filing the ER1 returns regularly in which they wer

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e showing the CENVAT credit availed by them and invoking the extended period of limitation in the facts and circumstances of this case is not legal and unsustainable. Therefore I hold that the entire demand in the present case is barred by limitation. Further I also find that the credit was rightly availed during the period 2005-07 for the purpose of availing the management consultancy service received by the appellant during the said period. I also find that the decisions relied upon by the appellant cited supra it has been held that if the credit is rightly availed and utilised then subsequent development after taking of the credit cannot vitiate the credit already availed. In view of my discussion above, I am of the view that the impugned order is not sustainable in law and therefore I set aside the same by allowing the appeal of the appellant with consequential relief, if any.
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