PGP GLASS PRIVATE LIMITED VERSUS C.C.E. & S.T.-SURAT-II

Customs, Excise & Service Tax

 Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Service Tax Appeal No. 10873 of 2013

 

(Arising out of OIO-1-ST-COMMR-SURAT-II-2013 dated 16/01/2013 passed by Commissioner of Central Excise, Customs and Service Tax-SURAT-II)

 

PGP GLASS PRIVATE LIMITED

VERSUS

C.C.E. & S.T.-SURAT-II

 

WITH

 

Service Tax Appeal No. 10874 of 2013

 

(Arising out of OIO-1-ST-COMMR-SURAT-II-2013 dated 16/01/2013 passed by Commissioner of Central Excise, Customs and Service Tax-SURAT-II)

 

PGP GLASS PRIVATE LIMITED

VERSUS

C.C.E. & S.T.-SURAT-II 

AND

 

Service Tax Appeal No. 10874 of 2013

 

(Arising out of OIO-1-ST-COMMR-SURAT-II-2013 dated 16/01/2013 passed by Commissioner of Central Excise, Customs and Service Tax-SURAT-II)

PGP GLASS PRIVATE LIMITED

VERSUS

C.C.E. & S.T.-SURAT-II 

APPEARANCE:

Shri S.S Gupta & Shri Mehul Jiwani, Chartered Accountants for the Appellant Shri Tara Prakash, Deputy Commissioner (AR) for the Respondent

 

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L. MAHAR

 

Final Order No. A/ 11523 – 11525 /2023

 

 

RAMESH NAIR

DATE OF HEARING: 15.03.2023 DATE OF DECISION: 14.07.2023

 

 

The brief facts of the case are that the appellant are engaged in the manufacture of glass bottles. They have received the services namely Market Survey fees, Export Promotional Expenses, Technical fees and Consultant fees, Legal and Professional Consultancy from person located outside India. The appellant have been paying service tax on services received from outside India. But during investigation by the department, it was ascertained that on the various invoices for the aforesaid services the tax was not paid. During investigation, the appellants have paid the entire amount of tax. However, the show cause notice was issued proposing demand of service tax which was already paid and appropriated. The show cause notice also proposed demand of interest and imposition penalties. The Adjudicating Authority confirmed the proposal made in the show cause notice. Being aggrieved by the Order-In-Original the appellant filed the present appeals.

2. Shri S.S. Gupta, Learned Chartered Accountant along with Shri. Mehul Jiwani, Chartered Accountant appearing on behalf of the appellant submits that though the appellant have admittedly paid the service tax interest but despite of such payment the Adjudicating Authority has imposed penalties. Therefore, the appellant now challenging the taxability of the service. Since the service tax is itself not payable, the penalty cannot be imposed. In this regard, he submits that the appellant received the services which were exclusively in relation to export of goods. Accordingly, in terms of Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 the servicesused for export is not taxable in the case of service recipient. He placed reliance on the following judgments :-

 

• GenomBiotech Ltd – 2016(42) STR 918 ( Tri. Mumbai)
• IPCALaboratories Ltd – 2019 (21) GSTL 502 (Tri. Mumbai)
• WanburyLtd – 2019 (21) GSTL 154 (Tri.- Mumbai)
• 3iInfotech Ltd – 2017 (51) STR 305 (Tri. Mumbai)
• EnsoSecutrack Ltd – 2011 (23) STR 465 (Tri.- Bang)

 

• He further submits that the service tax paid by the appellant was available as cenvat credit and in fact the service tax paid has been taken as cenvat credit. Therefore, the entire situation is revenue neutral. For this reason also the demand is not sustainable. He placed reliance on the following judgments:-
  • M/s. Harbans Lal Malhotra& Sons Private Ltd reported in 2002 -141- ELT-521(T)
  • GujaratGlass Pvt Ltd – 2013 (290) ELT 538 (Guj.)
  • IndeosAbs Ltd – 2010 (254) ELT 0628 (Guj.)

 

• Healso submits that the demand is time bar as per following judgments:-
  • M/s.Pannu Property dealers reported in 2011-24-STR-173
  • M/s. Chanasma Taluka Sarvoday Mazdoor reported in 2012 –TIOL- 41- CESTAT- Ahmed.

He further submits that in view of above since the tax itself was not payable the penalty being consequential the demand of service tax will also not sustain.

3. On the other hand, Shri Tara Prakash, Learned Deputy Commissioner (AR)appearing for the Revenue reiterates the finding of the impugned 
4. We have carefully considered the submission made by both sides and perused the records. We find that the appellant have challenged the taxability only for setting aside the penalties. We find that without going into merit of taxability the issue of penalty or otherwise also can be decided on thesubmission of revenue  The appellant being a manufacturer and

 

exporter of the goods all the services received by the appellant are in relation to export of goods. The details of the services are given below:-

 

Sr No.	Description of Service	Nature of Service	Category of Service	Amount
1.	Market Survey fees	Procuring orders, helping in execution of order, other promotional activities	Business Auxiliary Service	1,08,58,300/-
2.	Export Promotional Expenses	Exhibition expenses and export commission expenses	Business Auxiliary Service	95,85,455/-
3.	Technical Fees and Consultant Fees	Service related to home management ,logistic management, procurement management etc	Management & Business Consultants	55,91,830/-
4.	Legal and Professional Consulttancy	Services relates to home management, logistic management, Procurement Management etc	Management & Business Consultants	4,44,065/-
	TOTAL			2,64,80,650/-

 

• From the above it can be seen that all the services were used in relation to export of goods. Therefore, the appellants were eligible for availing the cenvat credit on the service tax payableon the aforesaid services on reverse charge mechanism. The Learned Chartered Accountant also submitted that entire service tax was paid by them and the same has been taken cenvat credit. In this fact the entire situation is revenue neutral. Dealing with the situation of revenue neutral the following judgments were passed :-
  • of C.Ex. & Cus., Vadodara –II vs. IndeosAbs Ltd. – 2010(254) ELT 628 (Guj.)

“This appeal, preferred by Appellant-Revenue proposes following three questions stated to be substantial questions of law :

 

• “Whether in the facts and circumstances of the case, CESTAT is right in allowing appeal filed by the assessee on the groundof revenue neutrality which issue has been kept opened by the Hon‟ble Supreme Court in the two cases relied upon by CESTAT?

 

• Whether CESTAT is right in ignoring the main issue of undervaluation adopted by the assessee?

 

• “Whether determination of correct assessable value for the purpose of charging central excise duty can be done away with simply on the ground of revenue neutrality?”

 

2. Heard learned Counsel for the appellant. It was submitted that the Tribunal has committed an error in not dealing with the aspect of undervaluation of goods manufactured by assessee despite the fact that the Adjudicating Authority had discussed the said issue at length in the adjudication order.

 

3. As can be seen from order of the Tribunal dated 10-11-2008 impugned in this appeal, the Tribunal has disposed of the appeal holding that the goods manufactured by the assessee were being cleared to its own sister concern, who is availing the benefit of Modvat Credit. The Tribunal has further found that as such whatever duty the assessee was paying was available as credit to its own unit (sister concern) and hence the entire exercise was revenue neutral.

 

4. Theaforesaid findings of facts are not disputed. The grievance was that the aspect of undervaluation has not been considered by the Tribunal at all. Grievance would have merited acceptance if the ultimate exercise would have benefited the Revenue by collection of duty in the coffers of the exchequer. In the facts of the present case, admittedly no such benefit accrues to the exchequer. In the circumstances, if the Tribunal has chosen not to determine an academic issue, it is not possible to state that any legal infirmity exists in the impugned order of the Tribunal.

 

5. In the circumstances, in absence of any substantial question of law, the Appeal is dismissed.”

 

The above decision has been upheld by Hon’ble Supreme Court reported at 2011 (267) ELT A155(SC)

• Commissionerof Ex. , Pune vs. Coca-Cola India Pvt Ltd – 2007

(213) ELT 490(SC)

 

“The Revenue has filed the present appeals against Order No. C- 1/3873-74/00WZB, dated 13th October, 2000 in Appeal Nos. E/3926R/98-Bom & E/1042R/99-Bom. passed by the Customs, Excise and Gold (Control) Appellate Tribunal, West Zonal Bench, Mumbai [for short “the Tribunal”].

 

2. The Tribunal by the impugned order has set aside the order passed by the Commissioner (Appeals) and held that the “non-alcoholic beveragebases or concentrates” manufactured by the respondents are classifiable under sub-heading 10 of Chapter Heading 33.02, as has been claimed by the respondent-assessee.

 

3. M/s. Britoo Food Company Limited was a wholly owned subsidiaryof Coca Cola Company which has changed its name to Coca Cola India Limited. The assessee filed an application for such change in its name, which was allowed.

 

4. Assesseeis the manufacturers of, inter alia, their products, namely,

„Non-alcoholic beverages bases/concentrates‟, which the Assessee or their bottlers required for making beverages and aerated waters, and which, in turn, were sold by the bottlers under the name of Coca-Cola, Thumps Up, Gold Spot, Limca, Citra, etc.

 

5. The assessee in paragraph No. 3 of its counter-affidavit has stated, as under :

 

”3. The present appeal has no Revenue implication. The dispute relates to classification of beverage bases/concentrates manufactured by the Respondent, which are supplied to bottlers, who in turn use the same as raw material in the manufacture of beverages. They duty payable in respect of beverage basis/concentrates is modvatable. Since the duty payable by the Respondent is modvatable, there is no revenue implication. The issue of classification is therefore, academic. No purpose would be served by entertaining the present appeal.”

 

(page 86 of the Paper book)

 

6. It is stated by the learned counsel for the assessee that the excise duty paid and the Modvat credit availed under Notification No. 5/94- C.E.(N.T.), dt. 1-3-1994 were identical and therefore consequences of payment of excise duty after availing Modvat credit was revenue

 

7. In view of the stand taken by the assessee in the counter-affidavit and the statement made by the learned counsel for the assessee, the appeals are dismissed leaving the question of law open. However, there shall be no order as to costs.

 

8. If upon verification, the submission of the counsel for the assessee is found to be incorrect, liberty is granted to the appellant-Revenue to mention the matter before this Court.”

 

• Texyard International Vs. Commissioner of C.Ex., Trichy – 2015 (40)STR 322 (Tri. Chennai)

“8. It is further pertinent to mention that appellants are manufacturer-exporters. Service tax if any payable under reverse charge is permissible to be availed as Cenvat credit and that may be refundable under Notification No. 41/2007 unless otherwise deniable by law. The provision made in Central Excise Rules and Cenvat Credit Rules ensures that tax is not added to the cost of export so that Indian exporter can compete with overseas market. The Hon‟ble Supreme Court in CCE v. Coca Cola India (Pvt.) Ltd. – 2007 (213) E.L.T. 490 dismissed Revenue‟s appeal holding that when an assessee is eligible to Modvat credit, the situation becomes revenue-neutral. In the present case, service tax demanded entitles the appellants to the credit thereof and claim refund thereof under 41/2007 since it is stated by appellants that they have no other liability for which the exercise may become revenue-neutral.

 

9. Therefore, in view of the above discussions, the demand of service taxunder reverse charge confirmed against the appellants is set aside. As regards Revenue‟s appeal on imposition of penalty, since demand of tax itself is set aside, the question of imposing penalty does not arise. Revenue‟s appeal is rejected accordingly and the Assessees‟ appeals are allowed.”

 

 

 

Commissioner of Cus. & C. Ex. Vs. Textile Corpn. Marathwada Ltd – 2008

(231) ELT 195 (SC)

 

“The point involved in the present case is as to whether the facilities in the factory of the assessee-respondent for carrying out bleaching, dying, printed and mercerising of textile fabrics would invite levy of excise duty at each stage of manufacture.

 

2. The Tribunal by its impugned order has accepted the appeal of the assessee and set aside the orders of the Commissioner (Appeals) and Assistant Commissioner levying excise duty at each stage relying upon its own judgment in the case of Indian Rayon and Industries Ltd. v. CCE,Calcutta – 2000 (119) L.T. 636 (T) = 2000 (37) RLT 154

(CEGAT). In Indian Rayon and Industries Ltd. (supra), the Tribunal had relied upon a judgment of this Court in the case of Empire Industries Ltd. v. UOI – 1985 (20) E.L.T. 179 (S.C.) and held that the assessee would be entitled to Modvat credit if duty is paid at each stage of the manufacturing and, therefore, the entire exercise would be revenue neutral.

 

3. Admittedly,against the decision of the Tribunal in Indian Rayon and Industries Ltd. (supra), Revenue did not file any appeal and accepted the decision and in our view rightly so. Admittedly, assessee has paid duty at the final stage. If assessee has to pay the excise duty at each and every stage of manufacturing, it would be entitled to Modvat credit and the whole exercise would be revenue neutral.

 

4. TheAppeal is dismissed  No costs.”

 

• In view of the above decisions it is found that whenever there is a revenue neutral situation no malafide should be attributed to the assessee. Consideringthe aforesaid settled legal position in the present case the

 

penalties imposed by the Adjudicating Authority are not sustainable. Hence, the same are set aside. However, the service tax paid by the appellant is maintained on conceding by the learned Chartered Accountant. Consequently, the interest on service tax demand is also sustained and the same is recoverable from the appellant.

5. As a result, the impugned order stands modified to the above 

 

Appeals are allowed in the above terms.

 

(Pronounced in the open court on 14.07.2023 )

 

RAMESH NAIR MEMBER (JUDICIAL)

 

C.L.MAHAR MEMBER (TECHNICAL)