CENVAT - Rule 2(l) - Shipping fee paid on tugs and barges used for carting raw materials from mother vessel to jetty - ST paid under port services - whether Input service - stay granted: CESTAT
By TIOL News Service
MUMBAI, OCT 11, 2013: THE appellants are manufacturers of hot briquetted iron and sponge iron. They paid shipping fees on the tugs and barges operated and used by them for the transportation of raw materials from the mother vessel to the jetty at Revdanda Port. For operating the vessel, they paid shipping fee under the category of “port services” and discharged the service tax liability thereon and availed CENVAT credit of service tax paid.
The Revenue was of the view that the appellant is not eligible for the credit as there was no nexus with the manufacturing activity undertaken by the appellant. Accordingly, a notice dated 04/02/2009 was issued proposing to deny the CENVAT credit of Rs.1,65,353/- availed by the appellant during the period January to June 2008. Another SCN also found its way and which sought to deny the CENVAT credit of Rs.1,01,467/- availed by the appellant during the period December 2008 to July 2009. Probably, something also happened in the interregnum period.
Be that as it may, both the notices were adjudicated under separate orders denying the CENVAT credit along with imposition of interest and also penalty. The appeals filed against each of these orders also suffered rejection at the hands of the Commissioner (A) and, therefore, appeals were filed before the CESTAT.
Stay applications filed against each of these orders passed by the Commissioner(A) were heard separately by the Bench, recently.
The appellant submitted that - in Revdanda port, the mother vessel can come only at the high seas and therefore, they have engaged barges and tugs for transportation of the goods from the mother vessel and without transportation of these raw materials, their manufacturing activity cannot be undertaken and therefore, there is a direct nexus between the transportation of the goods using tugs and barges and the manufacturing activity and therefore, service tax paid on shipping fee for the tugs and barges is an eligible input service as defined in Rule 2 (l) of the CENVAT Credit Rules. Reliance is also placed on Order no. A/235-240/13/SMB/C-IV dated 08/03/2013 passed in their case.
The Revenue representative submitted that the aforesaid activity has no nexus with the manufacturing activity undertaken by the appellant; that the barges are operated by the appellant for bringing the goods from the high seas to the jetty and the cost of transportation becomes part of the assessable value of the imported goods. The shipping fee has been paid for operating the barges and, therefore, it is in relation to the transportation of the goods from the high seas to the jetty and hence it cannot be taken as a service which has nexus with the manufacturing activity undertaken by the appellant. Inasmuch as it is submitted that the appellant should be put to terms.
The Bench made the following similar observation in both the cases –
“6.1 The shipping fee has been paid for the usage of tugs and barges for the transportation of the goods from the high seas to the jetty. If the service has been provided by an outside agency and not by the appellant themselves, the question of taking CENVAT credit by the appellant of the service tax paid by the provider of such services would not have arisen at all. Therefore, there is merit in the contention of the Revenue that the service tax paid on shipping fee is not an eligible input service as defined in Rule 2(l) of the CENVAT Credit 2004. Merely because the appellant had undertaken the operation of the tugs and barges, it cannot be said that such services would be an eligible input service as defined in Rule 2 (l) of the CENVAT Credit Rules, 2004. However, this issue will have to be examined in depth at the time of final disposal of the appeal. Inasmuch as in appellant's own case for the previous period, credit has been allowed without examining the issue in detail, at the interim stage of stay, I grant waiver from pre-deposit of dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal.”
(See 2013-TIOL-1499-CESTAT-MUM & 2013-TIOL-1500-CESTAT-MUM)
