Commissioner of Central Excise vs Punjab Steels

Rajesh Bindal, J.—This order will dispose of the above mentioned three appeals, as common questions of law and facts are involved.

The facts have been extracted from C.E.A. No. 39 of 2010.

The revenue is in appeal before this Court against the order dated 25-6-2009, passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for short, ''the Tribunal'') raising the following substantial question of law :

Whether the credit of input service availed at the time of receipt of inputs is required to be reversed at the time of clearance of inputs as such when the said service tax credit is in respect of or related to such inputs ?

Briefly, the facts, as have been mentioned in the memo of appeal, are that the Respondent-Assessee is engaged in the manufacture of non-alloy steel ingots. It is registered under the Central Excise Act as well as for payment of service tax. Apparently finding that the Assessee contravened the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004 (for short, ''the Rules'') while not reversing the input credit on service tax paid on transportation of goods by road, the adjudicating authority vide order dated 13-10-2006 raised a demand of Rs. 2,75,684, besides imposing equal amount of penalty. The order was confirmed in appeal by the Commissioner (Appeals), Customs & Central Excise, Chandigarh. However, the Tribunal vide its order dated 25-6-2009 reversed the orders passed by the lower authorities and set aside the demand. It is against this order that the revenue is before this Court raising the aforesaid substantial question of law.

Learned Counsel for the revenue submitted that once the Assessee had reversed the Cenvat credit availed of on the goods purchased by him, which were brought in the factory but were disposed of without use or consumption, he was duty bound to reverse even the input credit availed of on account of service tax in respect of the transportation of goods. He referred to the provisions of Rule 3(5) of the Rules to submit that once the inputs or capital goods, on which Cenvat credit had been taken are removed as such from the factory, he is required to reverse the credit availed of to that extent even of service tax paid for availing transport services. Reliance was placed upon Rule 5 of the Rules, which deals with refund of Cenvat credit stating therein that when an Assessee is entitled to refund of the tax paid on inputs or input service, it is even bound to reverse the credit taken with respect to both things and cannot retain the benefit with regard to the input service while reversing the same with regard to excise duty of inputs.

On the other hand, learned Counsel for the Assessee submitted that there is material difference in the language used by the rule-making authority in Rule 3(5) and Rule 5 of the Rules. Rule 3(5) only talks about reversal of Cenvat credit on inputs or capital goods, whereas Rule 5 talks about Cenvat credit on input or input service. He further referred to Rule 2(k) and (l) of the Rules to show that ''input'' and ''input service'' have been separately defined under the Rules, where the ''input'' means certain materials, whereas the ''input service'' means the services availed of. The submission is that once there is no provision in the Rules for reversal of the credit taken on account of input service merely on analogy, the revenue cannot direct the Assessee to reverse the credit.

Heard learned Counsel for the parties and perused the paper book.

The Tribunal reversed the orders passed by the lower authorities with the following observations and relying upon its earlier order passed in Punjab Steels v. CCE [Final Order No. 666/2009 - SM(BR), dated 25-6-2009]:

"I have carefully considered the submissions from both the sides and perused the records. The Appellant had received certain inputs and for transporting those inputs to the factory, had availed GTA service in respect of which service tax paid was Rs. 2,75,684 and the credit of this service tax on GTA service had also been taken. Subsequently, when the Appellant removed those inputs as such, he reversed only the credit of excise duty paid on inputs. The Department''s contention is that on the removal of the goods as such, in addition to the credit of Central Excise Duty, the GTA service tax credit availed in respect of those inputs should also have been reversed. I find that on this very issue, the Tribunal in the case of Chitrakoot Steel & Power Ltd. v. CCE, Chennai (supra) has held that ''when the Cenvat availed inputs or capital goods are removed from the factory of the Assessee as such, Sub-rule 3(5) provides for recovery of the amount of the Cenvat credit availed in respect of such inputs or capital goods and there is no provision to reverse the credit of service tax availed in respect of such goods or capital goods''. Following the judgment of the Tribunal, I hold that the impugned order is not sustainable. The same is set aside. The appeal is allowed.

It has been specifically mentioned in the memo of appeal by the revenue that no appeal was preferred by it against the judgment relied upon by the Tribunal.

Be that as it may, however, still even on merits, this Court finds that the view as expressed by the Tribunal is strictly in conformity with the Rules. Rule 2(k) of the Rules defines ''input'', whereas Rule 2(1) defines ''input service'', meaning thereby both the terms have been defined independently. Rule 3 defines the term ''Cenvat credit'', which includes duty paid under various enactments and also the service tax leviable u/s 66 of the Finance Act, 1994. Rule 3(5) of the Rules only talks about the Cenvat credit taken on inputs or capital goods. It does not refer to the Cenvat on input service, whereas Rule 5, on which reliance is sought to be placed by the revenue, specifically talks about the Cenvat credit on any input or input service used in the manufacture of final product. This rule pertains to refund in case of exports, which stands altogether on different footings. ''Once the rule-making authority has defined the terms specifically and used the same in different provisions consciously, the argument of learned Counsel for the revenue that merely by analogy even if in one provision both the terms have been used, the same should be read in the other provision as well, where it has not been specifically mentioned, has no legs to stand, as the tax cannot be levied merely by inference or presumption''. It is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. Words cannot be added or substituted so as to give a particular meaning. Reference can be made to the observations of a Constitution Bench of Hon''ble the Supreme Court in Mathuram Agrawal Vs. State of Madhya Pradesh, :

The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the Legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the Legislature to do the needful in the matter.

In view of our aforesaid discussion, we do not find that any substantial question of law arises in the present set of appeals. Accordingly, the same are dismissed.