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BRIEF FACTS OF THE CASE:

M/s. Mundra Port & Special Economic Zone Ltd. (formerly known as Gujarat Adani Port Ltd.), Mundra Port, Mundra Now M/s Adani Port & Special Economic Zone Ltd., Adani House, Mithakhali Six Circle, Navrangpura, Ahmedabad-380009 (hereinafter referred to as 'the noticee') are holding service tax registration No. AR/GIM/PS-01/2003-04 and providing Port Services, under Section 69 of Chapter V of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as 'the Act'). The noticee have also taken Centralised registration bearing No. AAACG7917KSD002.

2.1 During the course of scrutiny of the records, it appeared that the noticee had availed and utilised Cenvat Credit of Rs. 18,03,98,839/-, Education Cess of Rs. 36,07,353/- and Secondary and Higher Education Cess Rs. 18,02,934/-, totalling to Rs. 18,58,09,125/- during the period from October, 2008 to March, 2009 as per Rule 3 of Cenvat Credit Rules, 2004 as shown below:

TABLE “A”(Amount. in Rs.)

STATEMENT OF CENVAT CREDIT/ CREDIT OF SERVICE WRONGLY AVAILED DURING THE PERIOD ( October, 2008 to March, 2009)

S.No. Name of Capital Goods/ Inputs/ Input Services

Excise Duty/ Service Tax

Edu. Cess

S& HSE Cess

Total:

1 Steel 10287720 205776 102856 105963522 Cement 1665949 33319 16659 17159273 CHA Services 37908 758 379 390464 Rent-a-Cab 1211033 24221 12110 12473645 Mobile Phone 374250 7485 3743 3854786 Survey Services 1863126 37263 18631 19190207 Other Inputs- Excise

Duty10276680 204897 102118 10583695

8 Other Inputs- Capital 23677542 473541 236765 243878489 Other Inputs Services 131004631 2620094 1309671 134934396  Total: 180398839 3607354 1802932 185809125

(I) The amount of Rs. 1,05,96,352/- ( i.e. Duty Rs. 1,02,87,720/- Education Cess Rs. 2,05,776/- and S& HE Cess Rs. 1,02,856/-) was availed as Cenvat credit on Steel.

(II) The amount of Rs. 17,15,927/- ( i.e. Duty Rs. 16,65,949/- Education Cess Rs. 33,319/- and S& HE Cess Rs. 16,659/-) was availed as Cenvat credit on Cement used in the construction of new jetties and buildings

(III) The amount of Rs. 39,046/- ( i.e. Credit of Service Tax Rs. 37,908/- Education Cess Rs. 758/- and S& HE Cess Rs. 379/-) paid by them was availed as input services viz ‘ Custom House Agent’ which was said to have been used for their business purpose.

(IV) The amount of Rs. 12,47,364/- (i.e. Credit of Service Tax Rs. 12,11,033/- Education Cess Rs.24,221/- and S& HE Cess Rs. 12,110/-) paid by them was availed as input services viz ‘ Rent- a- Cab which was

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said to have been used for their business purpose.

(V) The amount of Rs. 3,85,477/- ( i.e. Credit of Service Tax Rs. 3,74,250/- Education Cess Rs. 7485/- and S& HE Cess Rs. 3743/-) paid by them was availed as input services viz ‘ Mobile Phone which was said to have been used for their business purpose.

(VI) The amount of Rs. 19,19,020/- ( i.e. Credit of Service Tax Rs. 18,63,126/- Education Cess Rs. 37,263/- and S& HE Cess Rs. 18,631/-) paid by them was availed as input services viz Surveyor Services which was said to have been used for their business purpose.

(VII) The amount of Rs. 1,05,83,695/- ( i.e. Duty of Rs. 1,02,76,680/- Education Cess Rs. 2,04,897/- and S& HE Cess Rs. 1,02,118/-) paid by them was availed as Cenvat Credit on various products such Tarpaulin, Oil Lube, Bitumen, Blower, Rope Wire, said to be used as inputs

(VIII) The amount of Rs. 2,43,87,848/- ( i.e. Duty of Rs. 2,36,77,542/- Education Cess Rs. 4,73,541/- and S& HE Cess Rs. 2,36,765/-) paid by them was availed as Cenvat Credit on various goods said to be Capital Goods.

(IX) The amount of Rs. 13,49,34,397 ( i.e. Credit of Service Tax Rs. 13,10,04,631/- Education Cess Rs. 26,20,094/- and S& HE Cess Rs. 13,09,671/-) paid by them was availed as other input services viz Cargo Handling Agency Service, Manpower Recruitment Agency Service, Maintenance & Repairs Service, Clearing & Forwarding Agent Service, Consulting Engineer Service, Goods Transport Agency, Profession Fees, Construction, Soil Testing, Bank Charges, Labour Charges, Installation etc. which was said to have been consumed for their business purpose.

2.2 Rule 2 (a) of the Cenvat Credit Rules, 2004, defines “Capital Goods” as

(A)The following goods, namely:- (i) all goods falling under chapter 82, Chapter 85, Chapter 90,

heading No.68.02 and sub heading No. 6801.1 of the first schedule to the Excise Tariff Act;

(ii) pollution control equipment;(iii) components spares and accessories of the goods specified at (i)

and (ii); (iv) moulds and dies, jigs and fixtures; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank,

used–

(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in the office; or (2) for providing output service;

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And whereas, as per Rule 2 (k) of the said Cenvat Credit Rules, 2004, “Input” means:- (i) All goods, except light diesel oil, high speed diesel oil and motor spirit

commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;

(ii) all goods, except light diesel oil, high speed diesel oil and motor spirit commonly known as petrol and motor vehicles, used for providing any output service.

And whereas as per rule 2(1) was as follows: Rule 2(l) “ Input service” means any service (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation

to the manufacture of final products and clearance of final products, upto the place of removal; ( The words ‘from the place of removal’ has been replaced by ‘ upto the place of removal’ w.e.f 1.04.2008).

and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.

2.3 As per Rule 3 of the Cenvat Credit Rules, 2004, the credit of Cenvat of service tax is available only on the inputs, capital goods and input services as defined under Rule 2 of the Cenvat Credit Rules, 2004 the credit availed by the noticee is not admissible to them due to following reasons:

(i) It appeared that the noticee has availed Cenvat Credit on Steel & Cement as input for providing out service. The definition of Rule 2 (k) (ii) of the Cenvat Credit Rules, 2004 stipulates that “input” means all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Plain reading of the aforesaid definition clearly indicates that only goods directly used will be eligible for Cenvat Credit. On this premise, Cement & Steel cannot be said to be used directly for providing output service i.e. Port Services, as the noticee has used Cement & Steel for construction of various terminals, jetty and other civil structures, which are nothing but immovable property. Also, the definition of “input” of goods in respect of service provider is restrictive. In case of definition of ‘input’ in respect of manufacturer, the words used are ‘in or in relation to the manufacture’, whether

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directly or indirectly’, and ‘whether contained in final product or not’. In case of input goods for service providers, the words used are ‘used for providing an output service’. Thus, only those goods used directly for providing output service will be eligible for Cenvat credit. In the instant case, the notice has got the work of construction by their contractor. Therefore, service provider is the said contractor for construction of jetty/ port. The bills raised by the contractor indicates that with effect from 07.06.2005 service tax was not being collected by the said contractors on account of service tax is being wholly exempted vide notification 16/2005-ST. Therefore, Steel & Cement are being used by independent contractors for construction of Jetty (the work of construction of jetty/ port is specified service and exempted from payment of service tax vide notification no. 16/2005-ST). Thus, on this premise also the Cenvat Credit on such Steel & Cement used for providing exempted service is not available to the notice. (ii) It appeared that from the above said Rule 2(a), 2(k) and 2(l) that the said Cement & Steel used in construction of new jetties and other building used as “ Capital Goods” do not fall within the purview of “Capital Goods”, “Inputs” and “Input Service”. Further, as per Rule 2 of the Cenvat Credit Rules, 2004, Cement & Steel do not fall within the purview of the said category of input for availing credit, the goods used toward the construction of such things also cannot be termed as eligible for availing credit of duties and taxes.

(iii) Services provided to importers by the Custom House Agents are not their input services therefore CENVAT credit is not admissible, as these Custom House Agents services are separately notified services for the purpose of service tax and does not fall within the purview of Port Services. The imported goods cleared by the Custom House Agents are not related/ belong to the tax payer as all the documents such as Bills of Entry, Bills of Lading, Invoices and other related import documents are in the name of importers and the Custom House Agents are directly providing the services to importers and not to the noticee. Thus, the services rendered by the Custom House Agents do not fall within the purview of “Input Services” as per Rule2(1) of CENVAT Credit Rule, 2004.

(ix) The noticee has availed the credit of service tax paid to the Rent-a-Cab operators who are operating within the port area and to the nearby cities as well as from port colony to port for transporting of persons/employees/workers. This has no relationship in respect of their "Input Service" as this facility is given to their persons. Therefore, it is outside the purview of the definition of input service vis-à-vis the output services provided by the noticee.

(v) The noticee availed credit of Service Tax paid on Mobile phones which is not admissible to them as they failed to prove that these are used for providing any output services provided by them on which they have discharged the service tax. Hence it appeared that Cenvat credit of mobile phone services is not admissible to the notice.

(vi) The notice has availed the credit of service tax paid to the Surveyors as their “Input Services” Service Tax paid by the noticee on the services rendered by the surveyors in respect of draft survey of the vessels before and after loading/unloading of cargo as well as in respect of cargo stored in their storage tanks in their port premises. This service is not related to as "Input Service" as per rule 2(l) of CENVAT Credit Rule, 2004.

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(vii) The noticee has availed the Cenvat credit on various input goods such as Paint, Plastic sheet, Grease, Cable, Fan, Engine Oil, Furnace Oil, Bitumen, Transformer, Electric Items, Rope Wire etc., which are not their valid "Input" or "Capital Gods" as per Rule 2(a) or 2(k) of CENVAT Credit Rule, 2004. Therefore, CENVAT credit is not admissible on these goods.

(viii) The noticee has availed the Cenvat credit on various inputs/ Capital goods such as UPS, M/s Pipe, Pipes, Electric Items, Trucks, Excavator, Filters, Crane, Generator, Pump, Tractors, Journal Purchases, etc. which are not their "Input" or "Capital Goods" as per Rule 2(a) or 2(k) of CENVAT Credit Rule, 2004. Therefore, CENVAT credit is not admissible on these goods.

(ix) The noticee has availed the credit service tax on various categories of services such as Cargo Handling Agency Services, Clearing & Forwarding Agent Services, Business Auxiliary Services, Erection, Commissioning or Installation Services, Manpower Recruitment and Supply, Technical Testing & Analysis Services, Construction Services etc. which are not their “ Input Services” as defined under Rule 2(l) Cenvat Credit Rules, 2004.

2.4 It appeared from the above discussion that the noticee have taken credit of Central Excise duty paid on inputs and capital goods and service tax paid on input services, wrongly in violation of Rule 2(a) for capital goods, 2(k) for inputs and 2(l) for inputs services by wrongly declaring the input and capital goods used in providing in output services. Similarly, the noticee has taken the credit of input services wrongly by mis-declaring the fact that the said input services are used for providing the output services. The Cenvat Credit so availed and utilised was accordingly mis-declared in ST-3 returns filed under the provisions of Section 70. Thus, the said noticee has suppressed the facts with a wilful intention to wrongly avail Cenvat credit and evade payment of service tax and therefore they are liable for penalty under Section 78 of the Act. It further appeared that the noticee has contravened the provisions of Rules 2(a), 2(k) and 2(l) of the Cenvat Credit Rules, 2004, Section 68 of the Act read with Rule 6 of the Service Tax Rules, 1994 in as much as they have wrongly utilised inadmissible Cenvat credit for payment of service tax. The noticee also appeared to have contravened the provisions of Section 70 of the Act in as much as they have furnished to the Department incorrect returns and have deliberately withheld the full details on which the credit was availed as described in paras supra. This act of contravention of the provisions of Sections 68 and 70 of the Finance Act, 1994 read with Rules 6 & 7 of the Service Tax Rules, 1994 by the noticee appears to be punishable under the provisions of Section 76 and 78 of the Finance Act, 1994.

2.5 It also appeared from the above that the noticee has wrongly availed and utilised Cenvat Credit of Rs. 18,03,98,839/-, Education Cess of Rs. 36,07,353/- and Secondary and Higher Education Cess of Rs. 18,02,934/- totalling to Rs. 18,58,09,125/- during the period from October, 2008 to March, 2009 on the capital goods, inputs and input services as defined under Rules 2(a), 2(k) and 2(I) of the Cenvat Credit Rules, 2004. Hence, the Cenvat Credit of Rs. 18,58,09,125/- is required to be recovered from them alongwith interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 and Section 75 of the Finance Act, 1944. Further by contravention of aforesaid lawful provisions, they have also rendered themselves liable for penal action under Rule 15 of the Cenvat Credit Rules, 2004.

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2.6 Therefore, a show cause notice was issued vide SCN No. V.ST/AR.Gndham/Commr./95/2010 dated 22.04.2010 by the Commissioner, Customs & Central Excise Rajkot as to why the wrongly availed Cenvat Credit of Rs. 18,58,09,125/- ( i.e. Credit Rs. 18,03,98,839/- Education Cess Rs. 36,07,353/- and S& SHE Cess Rs. 18,02,934/- S& SHE Cess) during the period from October, 2008 to March, 2009 should not be disallowed and recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 and 68 of the Finance Act, 1994 along with interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994. Penalty under Rule 15 read with Section 78 and Section 76 is also proposed in the notice.

3. Similar show cause notices were also issued on the similar ground to the noticee, the details of the are as under:

TABLE ‘A1”SL No.

Show Cause Notice No. and date

Period Involve Amount of Cenvat Credit Demanded (Amount in Rs.)

1. STC/4-80/O&A/10-11 dated, 15/10/2010

April, 09 to Sept, 09

20,73,02,447/-

2. STC/4-147/O&A/10-11 dated, 12/04/2011

Oct, 09 to March, 2010

12,32,05,067/-

3. STC/4-56 /O&A / 11-12 dated, 08/09/2011

April, 2010 to Sept, 2010

14,67,16,943/-

3.1 The brief facts of the above show cause notices are as under:

Show Cause Notice No. STC/4-80/O & A/10-11 dated, 15/10/2010

4. During the course of scrutiny of the records for the period April-09 to Septmber-09, it was observed that the Noticee had availed & utilized the CENVAT Credit of Rs.20,12,70,526 /-, Education Cess of Rs. 40,22,018/- and Higher Secondary Education Cess of Rs.20,09,903/- totalling to Rs.20,73,02,447/- as per Rule 3 of CENVAT Credit Rules, 2004 as shown below :

TABLE “B”(Amount in Rs.)

STATEMENT OF CENVAT CREDIT/CREDIT OF SERVICE TAX WRONGLY AVAILED FOR THE PERIOD (April ’09 to September ’09)Sr.No.

Name of Capital Goods,

Inputs/Input Services

Ex. Duty/

Service Tax

Edu.

Cess

HSS

Cess

Total

1. Steel 1,35,52,976 2,71,050 1,35,359 1,39,59,384

2. Cement 10,61,864 21,237 10,619 10,93,720

3. A. C. 58,053 1160 580 59,793

3. CHA Services 23,020 460 230 23,710

4. Rent-A-Cab 2,70,183 5404 2702 2,78,289

5. Surveyor Services 6,81,238 13,625 6,812 7,01,675

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6 Tele/Mobile Phone 7,54,097 15,082 7,541 7,76,720

7. Other Inputs- Excise Duty.

1,25,67,269 2,47,873 1,23,766 1,29,38,909

8. Other Inputs- Capital 4,44,11,966 8,88,330 4,43,876 4,57,44,172

9 Other inputs services 12,78,89,860 25,57,798 12,78,418 13,17,26,075

TOTAL 20,12,70,526 40,22,018 20,09,903 20,73,02,447

(I) It was observed that the amount of Rs. 1,35,52,976/- duty and Ed.Cess Rs.2,71,050/- and Higher Secondary Education Cess Rs.1,35,359/- totaling to Rs.1,39,59,384/- was availed as CENVAT credit on steel;

(II) that the amount of Rs.10,61,864/- duty and Ed. Cess Rs.21,237/- and Higher Secondary Education Cess Rs. 10,619/- totaling to Rs.10,93,720/- was availed as CENVAT Credit on Cement used in the construction of new jetties and buildings;

(III) ) that the Noticee had availed the CENVAT credit of Rs.58,053/- and Ed. Cess Rs.1,160/- and Higher Secondary Education Cess Rs. 580/- totaling to Rs.59,793/- during the period April’09 to September’09 on Air Conditioners;

(III) that the Noticee had availed and utilized credit of service tax of Rs.23,020/- and Ed. Cess Rs.460/- and Higher Secondary Education Cess Rs.230/- totaling to Rs.23,710/- paid by them for availing input services viz. Custom House Agent which was said to have been consumed for their business purpose paid by them and claimed as input services;

(IV) that the Noticee had availed and utilized credit of service tax of Rs.2,70,183/- and Ed. Cess Rs.5,404/- and Higher Secondary Education Cess Rs.2,702/- totaling to Rs.2,78,289/- paid by them for availing input services viz. Rent-a-Cab which was said to have been consumed for their business purpose paid by them and claimed as input services;

(V) that the Noticee had availed and utilized credit of service tax of Rs.6,81,238/-, Ed. Cess Rs.13,625/- and Higher Secondary Education. Cess Rs.6,812/- totaling to Rs.7,01,675/- paid by them for availing input services viz. Surveyor Services which was said to have been consumed for their business purpose paid by them and claimed as input services;

(VI) that the Noticee had availed and utilized credit of service tax of Rs.7,54,097/-, Ed. Cess Rs.15,082/- and Higher Secondary Education Cess Rs.7,541/- totaling to Rs.7,76,720/- paid by them for availing input services viz. Mobile Phone which was said to have been consumed for their business purpose paid by them and claimed as input services; (VII) that the amount of Rs.1,25,67,269/-, Ed. Cess Rs.2,47,873/- and Higher Secondary Education Cess Rs.1,23,766/- totaling to Rs.1,29,38,909/- was availed as CENVAT Credit on various products such as Tarpaulin, Oil Lube, Bitumen, Blower, Rope Wire, Oil Lube claimed as inputs;

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(VIII) that the amount of Rs.4,44,11,966/-, Ed. Cess Rs.8,88,330/- and Higher Secondary Education Cess Rs.4,43,876/- totaling to Rs.4,57,44,172/- was availed as CENVAT Credit on various capital goods;

(IX) that the Noticee had availed and utilized credit of service tax of Rs.12,78,89,860/-, Ed. Cess Rs.25,57,798/- and Higher Secondary Education Cess Rs.12,78,418/- totaling to Rs.13,17,25,075/- paid by them for availing other input services such as Cargo Handling Agency Service, Manpower Recruitment Agency Service, Maintenance & Repairs Service, Clearing & Forwarding Agent Service, Consulting Engineer Service, Goods Transport Agency, Profession Fees, Construction, Soil Testing, Bank Charges, Labour Charges, Installation etc. which was said to have been consumed for their business purpose paid by them and claimed as input services.

4.1 It appeared that the noticee has wrongly availed the Cenvat Credit for the reasons shown below:

(i) The said noticee has availed Cenvat Credit on Steel & Cement as input for providing output service. The definition of Rule 2(k) (ii) of the Cenvat Credit Rules, 2004 stipulates that “input” means all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Plain reading of the aforesaid definition clearly indicates that only those goods that are directly used for providing output service will be eligible for Cenvat Credit. On this premise, Cement & Steel cannot be said to be used directly for providing output service i.e. Port Services, as the noticee has used Cement & Steel for construction of various terminals, jetty and other civil structures, which are nothing but immovable property. Also, the definition of “input” as given in Rule 2(k) of Cenvat Credit Rules, 2004 in respect of service provider is restrictive and uses the phrase ‘used for providing an output service’. Thus, it is clear that only those goods used directly for providing output service will be eligible for Cenvat credit. It appears that the goods in question i.e. cement and steel have been used in the construction of jetty and port building and therefore appear to be used for providing the output service of construction of building and are not used in providing the port service.

(ii) It also appeared that in the instant case, the noticee has got the work of construction done by their contractor. Therefore, service provider is the said contractor for construction of jetty/port. The bills raised by the contractor indicates that with effect from 07.06.2005 service tax was not being collected by the said contractors as the service tax was wholly exempted vide Notification No.16/2005-ST. Therefore, it appears that the “inputs” such as Steel and Cement were used by independent contractors for construction of jetty (the work of “construction of jetty/port” is specified service and exempted from payment of service tax vide Notification No.16/2005–ST). Thus, on this premise also it appeared that the Cenvat Credit on such Steel & Cement used for providing exempted service is not available to the noticee. Therefore, it appeared that the Cenvat Credit availed by the noticee on these goods as “inputs” is also inadmissible and thus liable to be recovered along with interest.

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(iii) Similarly, the credit availed on cement and steel also doesn’t falls under the definition of “Input Service” under Rule 2(l) of the said CENVAT Credit Rules, 2004.

(iv) It also appeared that the credit availed on cement and steel falling under chapter 25, 72 and 73 of CETA, 1985 used for construction of jetty and other civil structures are not covered in clause (i) of the definition of ‘capital goods’ as given in Rule 2(a) of Cenvat Credit Rules, 2004 where there is a mandatory requirement for the goods to be classifiable under specific chapter headings. It also appeared that the said goods do not even fall under clause (ii), (iv),(v),(vi) or (vii) of Rule 2(a) of Cenvat Credit Rules, 2004. It further appeared that these goods do not even fall under clause (iii) as the said goods cannot be associated to any capital goods falling in clause A (i) of Rule 2(a) of Cenvat Credit Rules, 2004 so as to be called as components, spares or accessories of a capital goods specified in clause A (i) of Rule 2(a) of Cenvat Credit Rules, 2004. Thus, it appears that cement and steel do not come within the ambit of any of the clauses from (A) (i) to (vii) of the definition given in Rule 2 (a) of the Cenvat Credit Rules, 2004. Therefore, the Cenvat Credit availed by the said noticee on these goods appears to be inadmissible as capital goods also and liable to be recovered along with interest.

4.2 Thus, it appeared from the above said Rule 2(a), 2(k) and 2(l) that the said Cement & Steel used in construction of new jetties and other building used as “Capital Goods” do not fall within the purview of “Capital Goods”, “Inputs” and “Input Service”.

4.3 The Credit of Service Tax taken by the said noticee for the services provided to importers by the Custom House Agents, cannot be termed as input services for providing an output service of “port service”. Custom House Agents services are separately notified services for the purpose of Service Tax and do not fall within the purview of Port Services. The imported goods cleared by the Custom House Agents are not related/belong to the tax payer as all the documents such as Bills of Entry, Bills of Lading, Invoices and other related import documents are in the name of importers and the Custom House Agents are directly providing the services to importers and not to the noticee. Thus, the services rendered by the Custom House Agents do not fall within the purview of “Input Services” as per Rule 2(l) of Cenvat Credit Rules, 2004.

4.4 The said noticee has availed the credit of Service Tax paid to the Rent-a-Cab operators who are operating within the port area and to the nearby cities as well as from port colony to port for transporting of persons/employees/workers. This has no relationship/nexus with the provision of output service of “port service”. Hence, does not appeared to be an “Input Service” within the meaning of Rule 2(l) of Cenvat Credit Rules, 2004 as this facility/service is given to their persons and not for providing the taxable service.

4.5 Credit of Service Tax availed on Telephone/Mobile Phones is not admissible in light of Ministry’s Circular No. 59/8/2003 issued from F.No.B3/7/2003-TRU dtd. 26/06/2003, wherein it is clarified that amount of credit

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of Mobile Phones is not admissible for credit purpose. The noticee is required to pay the said amount taken in view of said Circular.

4.6 The noticee has availed the credit of Service Tax paid to the Surveyors as their “Input Services”. The Service Tax is paid by the noticee on the services rendered by the surveyors in respect of survey/draft survey of the vessels before and after loading/unloading of cargo as well as in respect of cargo stored in their storage tanks in their port premises. This service cannot be termed as “Input Service” within the meaning of Rule 2(l) of Cenvat Credit Rules, 2004.

4.7 The noticee has availed the Cenvat Credit on various goods such as Paints, Plastic Sheet, Grease, Cable, Engine Oil, Furnace Oil, Bitumen, Transformer, Electric Items, Rope wire etc. claiming them to be inputs. However, it appeared that these goods are not their valid “Inputs” as per Rule 2(k) of Cenvat Credit Rule, 2004.as the said goods are not used for providing output services of “Port Services”..

4.8 The noticee has availed the Cenvat Credit on various Capital goods such as UPS , MS Pipe, Pipes, Electric Items, Trucks, Excavator, Filters, Crane, Generator, Pump, Tractor Journal Purchases etc. which are not their valid “Capital Goods” as per Rule 2(a) of Cenvat Credit Rules, 2004.

4.9 It appeared that Port jetty does not fall within the definition of capital goods as given in Rule 2(a) of Cenvat Credit Rule, 2004. Thus, it appeared that these goods claimed to be the capital goods by the said assessee do not come within the ambit of any of the clauses from (A) (i) to (vii) of the definition given in Rule 2 (a) of the Cenvat Credit Rules, 2004. Therefore, the Cenvat Credit availed by the said noticee on these goods appeared to be inadmissible as capital goods also and liable to be recovered along with interest. The noticee are further barred from availing the credit on inputs of the so called capital goods in view of explanation to Rule 2(k)(ii) which reflects only inputs used in the manufacture of the capital goods which are further used in the factory of the manufacturers to be eligible inputs. Since the notice’s premise is not a factory so the credit which is indirectly used in any infrastructure required for rendering the port services is not permissible.

4.10 The noticee has availed the credit of Service Tax on various categories of services such as Cargo Handling ,Clearing and Forwarding ,Business Auxiliary Service, Erection Commissioning or Installation Services ,Manpower Recruitment and Supply ,Technical testing & Analysis Service ,Construction Services etc. which are not their valid “Input Services” as per Rule 2(l) of Cenvat Credit Rules, 2004 as “input services” should be strictly construed as per the definition given in Rule 2(l) of Cenvat Credit Rule, 2004 and must have nexus with the provision of output service.

4.11 In view of the above, it appeared that the noticee has wrongly availed/utilized the CENVAT credit of Rs. 20,73,02,447/- during the period from April ’09 to September ’09.

4.12 As per Rule 14 of the Cenvat Credit Rules, 2004, the CENVAT credit, taken or utilized wrongly, shall be recovered along with interest from the provider of the

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output service and provisions of Section 11A of the Central Excise Act, 1944 or sections 73 and 75 of the Finance Act, 1994 shall apply mutatis mutandis for effecting such recoveries.

4.13 Therefore, it appeared that the CENVAT credit of Rs. 20,73,02,447/- availed/utilized by the said assessee during the period from April ’09 to September ’09, is liable to be recovered along with interest under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 and 75 of the Finance Act, 1994. They are also liable to penalty under sub Rule (1) and (3) of the Rule 15 of Cenvat Credit Rules, 2004.

4.14 Therefore, M/s Mundra Port & SEZ Limited, Mundra were called upon to show cause, vide show cause notice bearing F. No. STC/4-80/O&A/10-11 dated 15/02/2010 by the Commissioner of Service Tax demanding wrongly availed and utilized Cenvat credit Rs. 20,73,02,447/- under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994; alongwith interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994. Penalty is also proposed in the SCN under Rule 15(1) and 15(3) of the Cenvat Credit Rules, 2004

Show Cause Notice No. STC/4-147/O & A/10-11 dated, 12/04/2011

5. A letter was written to M/s Mundra Port and Special Economic Zone on 15 th

February, 2011 for the figure of October-2009 to March-2010, thereafter reminder sent on 22.02.2011, 28.02.2011. M/s Mundra Port & Special Economic Zone Ltd., Ahmedabad submitted required information vide their letter dated.24.03.2011. As per information provided by the noticee M/s Mundra Port & Special Economic Zone Ltd., Ahmedabad, it was observed that the noticee had availed & utilised the CENVAT Credit of Rs.12,13,73,310/-, Education Cess of Rs.24,31,671/-, and Higher Secondary Education Cess of Rs.11,38,142/- totalling to Rs.12,49,43,123/- as per Annexure “A” of the Show Cause Notice, during the period from October -2009 to March-2010 as per Rule 3 of CENVAT Credit Rules, 2004, Cenvat credit availed regarding other Input-Excise Duty – Bitumen, figure has already included in the Show Cause Notice F.No. STC/4-96/10-11 dated 20.10.2010 issued by the Commissioner, Service Tax, Ahmedabad for the period April-2009 to March-2010. Hence, Cenvat availed on BITUMEN for the period April -2009 to March-2010 was not included in this Show Cause Notice.

5.1 Hence, after deducting the Cenvat on Bitumen, noticee had availed & utilised the CENVAT Credit of Rs.11,96,85,877/-, Education Cess of Rs.23,97,922/-, and Higher Secondary Education Cess of Rs.11,21,268/- totalling to Rs.12,32,05,067/- as per Annexure “B” of the Show Cause Notice, during the period from October -2009 to March-2010 as per Rule 3 of CENVAT Credit Rules, 2004, Cenvat availed as shown below:

TABLE “C”

(Amount in Rs.)STATEMENT OF CENVAT CREDIT/CREDIT OF SERVICE TAX WRONGLY AVAILED FOR THE PERIOD (OCT-2009 TO MARCH-2010)

Sr Name of the Ex/Duty/ Edu. Cess HSS Cess Total

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No Capital Goods , Inputs/ Input Services

Service Tax

1 Steel 8,04,364 16,067 8,077 8,28,507

2 Cement 1,53,140 2,984 1,492 1,57,617

3 CHA Service 58,907 1,178 5,89 60,674

4 Rent-A-Cab 4,79,455 9,589 4,795 4,93,839

5 Surveyor Service 13,61,518 27,230 13,615 14,02,364

6 Tele/Mobile Phone

3,24,950 6,499 3,249 3,34,698

7 Other Inputs- Excise Duty

59,33,195 1,19,247 59,390 61,11,832

8 Other Inputs- Capital

9,52,609 19,052 9,514 9,81,175

9 Other Input Services- Port Service

6,86,90,654 13,77,533 6,16,622 7,06,84,809

10

Other Inputs services –Rule 6(5) credit as per CCR 2004

3,07,78,940 6,15,579 3,02,426 3,16,96,946

11

Other Inputs Services

1,01,48,144 2,02,963 1,01,499 1,04,52,606

Total 11,96,85,877 23,97,922 11,21,268 12,32,05,067

(i) It was observed that the amount of Rs.8,04,364/- duty and Ed. Cess Rs.16,067/- and Higher Secondary Education Cess Rs.8,077/- totalling to Rs.8,28,507/- was availed as CENVAT Credit on steel;

(ii) that the amount of Rs.1,53,140/- duty and Ed. Cess Rs.2,984/- and Higher Secondary Education Cess Rs.1,492/- totalling to Rs.1,57,617/- was availed as CENVAT Credit on Cement used in the construction of new jetties and buildings;

(iii) that the Noticee had availed and utilised credit of service tax of Rs.58,907/- and Ed. Cess Rs.1,178/- and Higher Secondary Education Cess Rs.589/- totalling to Rs.60,674/- paid by them for availing input services viz. Custom House Agents which was said to have been consumed for their business purpose paid by them and claimed as input services;

(iv) that the Noticee had availed and utilised credit of service tax of Rs.4,79,455/- and Ed. Cess Rs.9,589/- and Higher Secondary Education Cess Rs.4,795/- totalling to Rs.4,93,839/- paid by them for availing input

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services viz. Rent-a-Cab which was said to have been consumed for their business purpose paid by them and claimed as input service;

(v) that the Noticee had availed and utilised credit of service tax of Rs.13,61,518/- Ed. Cess Rs.27,230/- and Higher Secondary Education Cess Rs.13,615/- totalling to Rs.14,02,364/- paid by them for availing input services viz. surveyor services which was said to have been consumed for their business purpose paid by them and claimed as input services;

(vi) that the Noticee had availed and utilised credit of service tax of Rs.3,24,950/- Ed. Cess Rs.6,499/- and Higher Secondary Education Cess Rs.3,249/- totalling to Rs.3,34,698/- Paid by them for availing input services viz. Telephone/ Mobile Phone which was said to have been consumed for their business purpose paid by them and claimed as input services;

(vii) that the amount of Rs.59,33,195/-, Ed. Cess Rs.1,19,247/- and higher secondary education cess Rs.59,390 Totalling to Rs.61,11,832/- was availed as CENVAT Credit on various products such as Tarpaulin, Oil Lube, Blower, Rope Wire, Oil Lube claimed as inputs;

(viii) that the amount of Rs.9,52,609/- Ed. Cess Rs.19,052/- and higher secondary education cess Rs.9,514/- Totalling to Rs.9,81,175/- was availed as CENVAT Credit on various capital goods;

(ix) that the amount of Rs.6,98,90,654/- Ed. Cess Rs.13,77,533/- and higher secondary education cess Rs.6,16,622/- totalling to Rs.7,06,84,809/- was availed as CENVAT Credit on Port Service claimed as inputs;

(x) that the amount of Rs.3,07,78,940/- Ed. Cess Rs.6,15,579/- and higher secondary education cess Rs.3,02,426/- totalling to Rs.3,16,96,946/- was availed as CENVAT Credit on other Inputs Services-Rule 6(5) credit as per CCR 2004.

(xi) that the Noticee had availed and utilised credit of service tax of Rs.1,01,48,144/-, Ed. Cess Rs.2,02,963/- And Higher Secondary Education Cess Rs.1,01,499/- totalling to Rs.1,04,52,606/- Paid by them for availing other input services such as Outdoor Catering Services, Authorised service station service, passenger embarking for foreign travel, Commercial Training & Coaching, Pandal Shamiana service, Manpower Recruitment Agency Service, Maintenance & Repairs Services, Cleaning service, consulting engineer service, Goods Transport Agency, Advertising Agency service, Construction, Courier services, Chartered Accountant service, Sponsorship, Internet etc. which was said to have been consumed for their business purpose paid by them and claimed as input services.

5.2 It appeared that the noticee has wrongly availed the Cenvat Credit for the reasons shown below:

(i) The said noticee has availed the Cenvat Credit on steel & Cement as input for providing output service. The definition of Rule 2(k) (ii) of the Cenvat Credit Rules, 2004 stipulates that “input’ means all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Plain reading of the aforesaid definition clearly indicates that only those goods that are directly used for providing output service will be eligible for Cenvat Credit. On this premise, Cement & steel cannot be said to

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be used directly for providing output service i.e. Port Services, as the noticee has used Cement & steel for construction of various terminals, jetty and other civil structures, which are nothing but immovable property. Also the definition of “input” as given in Rule 2(k) of Cenvat Credit Rules, 2004 in respect of service provider is restrictive and uses the phrase ‘used for providing an output service. Thus, it is clear that only those goods used directly for providing output service will be eligible for Cenvat Credit. It appeared that the goods in question i.e. cement and steel have been used in the construction of jetty and port building and therefore appear to be used for providing the output service of construction of building and are not used in providing the port service.

(ii) Similarly, the credit availed on cement and steel also doesn’t fall under the definition of “Input Service” under Rule 2(l) of the said the Cenvat Credit Rules, 2004.

(iii) Whereas, it appeared that the credit availed on cement and steel falling under chapter 25, 72 and 73 of CETA, 1985 used for construction of jetty and other civil structures are not covered in clause (i) of the definition of ‘capital goods’ as given in Rule 2(a) of The Cenvat Credit Rules, 2004 where there is a mandatory requirement for the goods to be classifiable under specific chapter headings. It also appears that the said goods do not even fall under clause (ii), (iv),(v), (vi) or (vii) of Rule 2(a) of Cenvat Credit Rules, 2004. It further appeared that these goods do not even fall under clause III as the said goods cannot be associated to any capital goods falling in clause A (i) of Rule 2(a) of Cenvat Credit Rules, 2004 so as to be called as components, spares or accessories of a capital goods specified in clause A(i) of Rule 2(a) of the Cenvat Credit Rules, 2004. Thus, it appeared that cement and steel do not come within the ambit of any of the clauses from (A) (i) to (vii) of the definition given in Rule 2(a) of the Cenvat Credit Rules, 2004. Therefore, the Cenvat Credit availed by the said noticee on these goods appeared to be inadmissible as capital goods also and liable to be recovered along with interest.

5.3 Thus, it appeared from the above said Rule 2(a), 2(k) and 2(1) that the said Cement & Steel used in construction of new jetties and other building used as "Capital Goods" do not fall within the purview of "Capital Goods", "Inputs" and "Input Service".

5.4 The Credit of Service Tax taken by the noticee for the services provided to importers by the Custom House Agents cannot be termed as input services for providing an output service of "port service". Custom House Agents services are separately notified services for the purpose of Service Tax and do not fall within the purview of Port Services. The imported goods cleared by the Custom House Agents are not related/belong to the tax payer as all the documents such as Bills of Entry, Bills of Lading, Invoices and other related import documents are in the name of importers and the Custom House Agents are directly providing the services to importers and not to the said Noticee. Thus, the services rendered by the Custom House Agents do not fall within the purview of "Input Services" as per Rule 2(l) of the Cenvat Credit Rules, 2004.

5.5 The noticee has availed the credit of Service Tax paid to the Rent-a-Cab operators who are operating within the port area and to the nearby cities as well as

15

from port colony to port for transporting of persons/employees/workers. This has no relationship/nexus with the provision of output service of "port service". Hence, does not appeared to be an "Input Service" within the meaning of Rule 2(l) of the Cenvat Credit Rules, 2004 as this facility/service is given to their persons and not for providing the taxable service.

5.6 Credit of Service Tax availed on Telephone/Mobile Phones is not admissible in light of Ministry's Circular No.59/8/2003 issued from F.No.B3/7/2003-TRU dated 26/06/2003, wherein it is clarified that amount of credit of Mobile Phones are not admissible for credit purpose. The noticee is required to pay the said amount taken in view of said Circular.

5.7 The noticee has availed the credit of Service Tax paid to the Surveyors as their "Input Services". The Service Tax is paid by the noticee on the services rendered by the surveyors in respect of survey/draft survey of the vessels before and after loading/unloading of cargo as well as in respect of cargo stored in their storage tanks in their port premises. This service cannot be termed as "Input Service" within the meaning of Rule 2(l) of the Cenvat Credit Rules, 2004.

5.8 The noticee has availed the Cenvat Credit on various goods such as Paints, Plastic Sheet, Grease, Cable, Engine Oil, Furnace oil , Bitumen, Transformer, Electric Items, Rope wire etc. claiming them to be inputs. However, it appeared that these goods are not their valid “Inputs” as per Rule 2(k) of Cenvat Credit Rule, 2004 as the said goods are not used for providing output services of “Port Services”.

5.9 The noticee has availed the Cenvat Credit on various Capital goods such as Tune up kit, Gasket, Battery charger, Radiator, Timer, UPS, M. S. Pipe, Pipes, Electric items, Excavator, Filters, Generator, Pump, Cylinder, Software Journal Purchases etc. which are not their valid "Capital Goods" as per Rule 2(a) of Cenvat Credit Rules, 2004.

5.10 It appeared that Port jetty does not fall within the definition of capital goods as given in Rule 2(a) of Cenvat Credit Rule, 2004. Thus, it appeared that these goods claimed to be the capital goods by the said assessee do not come within the ambit of any of the clauses from (A) (i) to (vii) of the definition given in Rule 2 (a) of the Cenvat Credit Rules, 2004. Therefore, the Cenvat Credit availed by the said noticee on these goods appeared to be inadmissible as capital goods also and liable to be recovered along with interest. The noticee are further barred from availing the credit on inputs of the so called capital goods in view of explanation to Rule 2(k)(ii) which reflects only inputs used in the manufacture of the capital goods which are further used in the factory of the manufacturers to be eligible inputs. Since the notice's premise is not a factory so the credit which is indirectly used in any infrastructure required for rendering the port services is not permissible.

5.11 The said Noticee has availed the credit of Service Tax on various categories of services such as Cargo Handling, Clearing and Forwarding, Business Auxiliary Service, Erection Commissioning or Installation Services, Manpower Recruitment and Supply / Technical testing & Analysis Service / Construction Services etc. which are not their valid "Input Services" as per Rule 2(1) of Cenvat Credit Rules, 2004 as "input services" should be strictly construed as per the

16

definition given in Rule 2(1) of Cenvat Credit Rule, 2004 and must have nexus with the provision of output service.

5.12 In view of the above, it appeared that the said notice has wrongly availed/utilized the CENVAT credit of Rs.12,32,05,067/- (Rupees Twelve Crores Thirty two Lakh Five thousand Sixty seven only) during the period from October-2009 to March-2010.

5.13 As per Rule 14 of the Cenvat Credit Rules, 2004, the CENVAT credit, taken or utilized wrongly, shall be recovered along with interest from the provider of the output service and provisions of Section 11A of the Central Excise Act, 1944 or sections 73 and 75 of the Finance Act, 1994 shall apply mutatis mutandis for effecting such recoveries.

5.14 Therefore, it appeared that the CENVAT credit ofRs.12,32,05,067/- availed/utilized by the said assessee during the period from October -2009 to March-2010, is liable to be recovered along with interest under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 and 75 of the Finance Act, 1994. They are also liable to penalty under sub Rule (1) and (3) of the Rule 15 of the Cenvat Credit Rules, 2004.

5.15 Therefore, a show cause notice bearing F. No. STC/4-147/O&A /10-11 dated 12/04/2011 was issued to M/s Mundra Port & SEZ Limited, Mundra by the Commissioner of Service Tax, having his office at 1st Floor, Central Excise Bhavan, Ambavadi, Ahmedabad for disallowing and recovery of Cenvat Credit Rs. 12,32,05,067/- (inclusive of Education Cess and SHE Cess) wrongly availed and utilised by them along with interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73(1) and Section 75 of the Finance Act, 1994. Penalty on the said noticee under Rule 15(1) and 15(3) was also proposed in the above show cause notice.

Show Cause Notice No. STC/4-56/O & A/11-12 dated, 08/09/2011

6. The jurisdictional Range Superintendent vide letter dated 11.04.2011, asked M/s MPSEZ was to submit figures relating to CENVAT Credit/ Service Tax availed by them during the period April-2010 to September-2010. Thereafter, a reminder was issued on 06.05.2011.

6.1 M/s MPSEZ submitted following information vide their letter dated 18.05.2011.

TABLE “D”(Amount in Rs.)

STATEMENT OF CENVAT CREDIT/CREDIT OF SERVICE TAX WRONGLY AVAILED FOR THE PERIOD (April-2010 to September-2010 )

Sr.No.

Name of the Capital Goods , Inputs/ Input Services

Ex/Duty/Service Tax

Edu. Cess HSS Cess Total

1 Steel 15,97,284 33,304 16,640 16,47,227

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2 Cement 92,220 1,844 922 94,9873 A.C. 10,275 206 103 10,5834 CHA Service 2,35,828 4,717 2,358 2,42,9035 Rent-A-Cab 1,89,795 3,796 1,898 1,95,4896 Surveyor Service 13,58,210 27,164 13,582 13,98,9577 Tele/Mobile Phone 3,11,003 6,220 3,110 3,20,3338 Other Inputs- Excise

Duty -BITUMEN42,553 851 426 43,829

9 Other Inputs- Excise Duty

56,78,891 1,13,635 56,791 58,49,316

10 Other Input –Capital Goods

4,50,898 9,014 4,500 4,64,412

11 Other Inputs – Capital Goods –On hold during F.Y.2009-10

32,17,498 64,313 32,002 33,13,814

12 Other Inputs Services- Port Service

8,94,67,337 17,89,345 8,94,673 9,21,51,355

13 Other Input Services –Rule 6(5) Credit as per CCR 2004

1,74,50,873 3,48,967 1,74,485 1,79,74,325

14 Other Input Services 2,23,39,233 4,46,783 2,23,398 2,30,09,413Total 14,24,41,898 28,50,158 14,24,887 14,67,16,943

6.2 M/s MPSEZ has availed CENVAT Credit/Credit of Service Tax on the following Capital Goods, Inputs/Input Services during the period April-10 to September-10.

i Steel An amount of Rs.16,47,227/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on steel

ii Cement An amount of Rs.94,987/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on Cement used in the construction of new jetties and buildings.

iii A.C. An amount of Rs.10,583/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on A.C.

iv CHA Service They had availed and utilised credit of Service Tax of Rs.2,42,903/- (including Ed. Cess and Higher Secondary Education Cess) paid by them for availing input services viz. Custom House Agents which was said to have been consumed for their business purpose paid by them and claimed as input services.

v Rent-A-Cab They had availed and utilised credit of service tax of Rs.1,95,489/- (including Ed. Cess and Higher Secondary Education Cess) paid by them for availing input services

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viz. Rent-a-Cab which was said to have been consumed for their business purpose paid by them and claimed as input service

vi Surveyor Service

They had availed and utilised credit of service tax of Rs.13,98,957/- (including Ed. Cess and Higher Secondary Education Cess) paid by them for availing input services viz. surveyor services which was said to have been consumed for their business purpose paid by them and claimed as input services

vii Telephone / Mobile Phone

They had availed and utilised credit of service tax of Rs.3,20,333/- (including Ed. Cess and Higher Secondary Education Cess) paid by them for availing input services viz. Telephone/ Mobile Phone which was said to have been consumed for their business purpose paid by them and claimed as input services

viii Other Inputs – Excise Duty – Bitumen

An amount of Rs.43,829/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on Bitumen.

ix Other Inputs – Excise Duty

An amount of Rs.58,49,316/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on Other inputs Excise duty.

x Other Input – Capital Goods

An amount of Rs.4,64,412/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on Other inputs Capital goods.

xi Other Inputs – Capital Goods – On hold during F.Y 2009-10

An amount of Rs.33,13,814/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on Other inputs Capital goods – on hold during F.Y. 2009-10.

xii Other Input Services – Port Service

An amount of Rs.9,21,51,355/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on Port Services

xiii Other Input Services – Rule 6(5) Credit as per CCR 2004

An amount of Rs.1,79,74,325/- (including Ed. Cess and Higher Secondary Education Cess) was availed as CENVAT Credit on Other input services Rule 6(5) Credit as per CENVAT Credit Rules, 2004.

xiv Other Input Services

They had availed and utilised credit of service tax of Rs.2,30,09,413/- (including Ed. Cess and Higher Secondary Education Cess) paid by them for availing other input services such as Outdoor Catering Services, Authorised service station service, passenger embarking for foreign travel, Commercial Training & Coaching, Pandal Shamiana service, Manpower Recruitment Agency

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Service , Maintenance & Repairs Services , Cleaning service, consulting engineer service, Goods Transport Agency, Advertising Agency service, Construction, Courier services, Chartered Accountant service, Sponsorship, Internet etc. which was said to have been consumed for their business purpose paid by them and claimed as input services.

6.3 Other input service mainly covers Outdoor Catering Services, Authorised service station service, passenger embarking for foreign travel, Commercial Training & Coaching, Pandal Shamiana service, Manpower Recruitment Agency Service , Maintenance & Repairs Services , Cleaning service, consulting engineer service, Goods Transport Agency, Advertising Agency service, Construction, Courier services, Chartered Accountant service, Sponsorship, Internet etc.

6.4 It is evident from the above table that M/s MPSEZ have availed & utilised the CENVAT Credit of Rs.14,24,41,898/-, Education Cess of Rs.28,50,158/-, and Higher Secondary Education Cess of Rs.14,24,887/- totally amounting to Rs.14,67,16,943/- during the period from April-2010 to September-2010 as per Rule 3 of the Cenvat Credit Rules, 2004.

6.5 It appeared that M/s MPSEZ has wrongly availed the CENVAT Credit for the reasons shown below:

6.5.1 M/s MPSEZ has availed CENVAT Credit on steel & Cement as input for providing output service. The definition of Rule 2(k) (ii) of the CENVAT Credit Rules, 2004 stipulates that “input” means all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Plain reading of the aforesaid definition clearly indicates that only those goods that are directly used for providing output service will be eligible for CENVAT Credit. On this premises, Cement & steel cannot be said to be used directly for providing output service i.e. Port Services, as M/s MPSEZ has used Cement & Steel for construction of various terminals, jetty and other civil structures, which are nothing but immovable property. Also the definition of “input” as given in Rule 2(k) of CENVAT Credit Rules, 2004 in respect of service provider is restrictive and uses the phrase “used for providing an output service”. Thus, it is clear that only those goods used directly for providing output service will be eligible for CENVAT Credit. It appears that the goods in question i.e. Cement and Steel have been used in the construction of jetty and port building and therefore appear to be used for providing the output service of construction of building and are not used in providing the port service.

6.5.2 Similarly, the credit availed on cement and steel also doesn’t falls under the definition of “Input Service” under Rule 2(l) of the said CENVAT Credit Rules ,2004.

6.5.3 It appeared that the credit availed on cement and steel falling under chapter 25, 72 and 73 of CETA, 1985 used for construction of jetty and other civil

20

structures are not covered in clause (i) of the definition of “capital goods” as given in Rule 2(a)(A) of CENVAT Credit Rules, 2004 where there is a mandatory requirement for the goods to be classifiable under specific chapter headings. It also appears that the said goods do not even fall under clause (ii), (iv), (v), (vi) or (vii) of Rule 2(a) (A) of CENVAT Credit Rules, 2004. It further appeared that these goods do not even fall under clause (III) as the said goods cannot be called as components, spares or accessories of a capital goods specified in clause A (i) of Rule 2(a) of CENVAT Credit Rules, 2004. Thus, it appeared that Cement and Steel do not come within the ambit of any of the clauses from (A) (i) to (vii) of the definition given in Rule 2 (a) of the CENVAT Credit Rules, 2004. Therefore, the CENVAT Credit availed by M/s MPSEZ on these goods appeared to be inadmissible as capital goods also and liable to be recovered along with interest.

6.5.4 Thus, it appeared from the above said Rule 2(a), 2(k) and 2(l) of the CENVAT Credit Rules, 2004, that the said Cement & Steel used in construction of new jetties and other building used as “Capital Goods” do not fall within the purview of “Capital Goods”, “Inputs” and “Input Service”.

6.5.5 The Credit of Service Tax taken by M/s MPSEZ for the services provided to importers by the Custom House Agents cannot be termed as input services for providing an output service of “Port Service”. “Custom House Agents services” are separately notified services for the purpose of Service Tax and does not fall within the purview of Port Services. The imported goods cleared by the Custom House Agents are not related/belong to the tax payer as all the documents such as Bills of Entry, Bills of Lading, invoices and other related import documents are in the name of importers and the Custom House Agents are directly providing the services to importers and not to M/s MPSEZ. Thus, the services rendered by the Custom House Agents do not fall within the purview of “Input Services” as per Rule 2(l) of CENVAT Credit Rules, 2004.

6.5.6 M/s MPSEZ has availed the credit of Service Tax paid to the Rent-a-Cab operators who are operating within the port area and to the nearby cities as well as from port colony to port for transporting of persons/employees/workers. This has no relationship/nexus with the provision of output service of “Port Service”. Hence, does not appear to be an “Input Service” within the meaning of Rule 2(l) of CENVAT Credit Rules, 2004 as this facility/service is given to their persons and not for providing the taxable service.

6.5.7 Credit of Service Tax availed on Telephone/Mobile Phones is not admissible in light of Ministry’s Circular No. 59/8/2003 issued from F.No.B3/7/2003-TRU dtd. 26/06/2003, wherein it is clarified that amount of credit of Mobile Phones is not admissible for credit purpose. M/s MPSEZ is required to pay the said amount taken in view of said Circular.

6.5.8 M/s MPSEZ has availed the credit of Service Tax paid to the Surveyors as their “Input Services”. The Service Tax is paid by M/s MPSEZ on the services rendered by the surveyors in respect of survey/draft survey of the vessels before and after loading/unloading of cargo as well as in respect of cargo stored in their storage tanks in their port premises. This service cannot be termed as “Input Service” within the meaning of Rule 2(l) of CENVAT Credit Rules, 2004.

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6.5.9 M/s MPSEZ has availed the CENVAT Credit on various goods such as Paints, Plastic Sheet, Grease, Cable, Engine Oil, Furnace oil , Bitumen, Transformer, Electric Items, Rope wire etc. claiming them to be inputs. However, it appears that these goods are not their valid “Inputs” as per Rule 2(k) of CENVAT Credit Rule, 2004 as the said goods are not used for providing output services of “ Port Services”.

6.5.10 M/s MPSEZ has availed the CENVAT Credit on various Capital goods such as UPS , MS Pipe, Pipes, Electric Items, Excavator, Filters, Generator, Pump, Cylinder, Software Journal Purchases etc. which are not their valid “Capital Goods” as per Rule 2(a) of CENVAT Credit Rules, 2004.

6.5.11 It appeared that Port jetty does not fall within the definition of capital goods as given in Rule 2(a) of CENVAT Credit Rule, 2004. Thus, it appeared that these goods claimed to be the capital goods by M/s MPSEZ do not come within the ambit of any of the clauses from (A) (i) to (vii) of the definition given in Rule 2 (a) of the CENVAT Credit Rules, 2004. Therefore, the CENVAT Credit availed by M/s MPSEZ on these goods appeared to be inadmissible as capital goods also and liable to be recovered along with interest. M/s MPSEZ are further barred from availing the credit on inputs of the so called capital goods in view of explanation to Rule 2(k)(ii) which reflects only inputs used in the manufacture of the capital goods which are further used in the factory of the manufacturers to be eligible inputs. Since M/s MPSEZ’ s premise is not a factory so the credit which is indirectly used in any infrastructure required for rendering the port services is not permissible.

6.5.12 M/s MPSEZ has availed the credit of Service Tax on various categories of services such as Cargo Handling , Clearing and Forwarding , Business Auxiliary Service, Erection Commissioning or Installation Services , Manpower Recruitment and Supply /Technical testing & Analysis Service /Construction Services etc. which are not their valid “Input Services” as per Rule 2(l) of CENVAT Credit Rules, 2004 as “input services” should be strictly construed as per the definition given in Rule 2(l) of CENVAT Credit Rule, 2004 and must have nexus with the provision of output service.

6.6 Perusal of the ST-3 return filed by M/s MPSEZ with the jurisdictional range office, it revealed that they have declared a total CENVAT credit availed by them in a particular month. The details of month-wise CENVAT credit availed by them are as follows:

TABLE “D 1”(Amount in Rs.)

F.Y 2010-2011 CENVAT credit availed

Month Service TaxEdu. Cess and Sec & Higher

Edu. Cess TotalApril 20741110 504608 21245718May 20862768 580334 21443102June 24057182 666560 24723742July 23861635 544847 24406482

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August 28734738 762486 29497224September 24675907 724768 25400675TOTAL 142933340 3783603 146716943

6.7 In view of the above, it appeared that M/s MPSEZ has wrongly availed/utilized the CENVAT credit of Rs.14,67,16,943/- (Rupees Fourteen Crore Sixty Seven Lakh Sixteen Thousand Nine Hundred Forty Three Only) during the period from April-2010 to September-2010.

6.8 It is further revealed from the ST-3 return filed by M/s MPSEZ that they have not provided details of CENVAT credit availed by them. Hence, the details as regards the nature of CENVAT credit availed by M/s MPSEZ are not forthcoming from the ST-3 return filed by them. The details of CENVAT Credit availed by M/s MPSEZ were provided by them only after the jurisdictional Range Superintendent issued letters dated 11.04.2011 and 6.05.2011 asking for the details thereof. Thus, the details were suppressed from the department even though show cause notices have been issued to M/s MPSEZ earlier on the same issue. The details of CENVAT credit availed by M/s MPSEZ are discussed in para 6 supra.

6.9 A comparative chart of the Cenvat Credit figures appearing in the ST-3 return filed by M/s MPSEZ with the department and the CENVAT Credit figures provided by MPSEZ (reference para 2 supra) has been prepared. The same is as under:

TABLE “ D 2”(Amount in Rs.)

Particulars Service Tax Edu.CessSec. &

Higher Sec. Edu. Cess

Total

As per ST-3 return 142933340 2522525 1261079 146716943

As per Cenvat Credit Details provided by

MPSEZ

142441898 2850158 1424887 146716943

Difference +491442 -327634 -163808 0

6.10 M/s MPSEZ was asked to explain the reason for the difference in the figures mentioned by them in the ST-3 returns and the ones provided by them to the Department. They have vide their letter dated 30.8.2011 submitted as follows:

“ ... While giving effect of CENVAT credit reversal as per Rule 6(3) in Form ST-3, we have shown total of Service Tax, education cess and second & higher secondary cess amount in 5B(l)(c)(vi) line of ST-3 return, as there is no separate provision for mentioning such reversal of education cess and second & higher secondary cess in 5B(l)(c)(vi) line of ST-3 form.

Please find herewith relevant pages of ST-3 returns for your ready reference as Annexure l and statement of reconciliation which also reflects that total CENVAT Credit of Rs. 14,67,16,943/- which match with CENVAT Credit Register vis-a-vis ST-3 return. Hence, overall there will be NIL difference in ST-3 return versus CENVAT credit Register for the period of Apr-2010 to Sep-10.”

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6.11 In view of the above explanation given by M/s MPSEZ the present demand is raised on the basis of figures provided by M/s MPSEZ as discussed above.

6.12 As per Rule 14 of the CENVAT Credit Rules, 2004, the CENVAT credit, taken or utilized wrongly, shall be recovered along with interest from the provider of the output service and provisions of Section 11A of the Central Excise Act, 1944 or sections 73 and 75 of the Finance Act, 1994 shall apply mutatis mutandis for effecting such recoveries.

6.13 Therefore, it appeared that the CENVAT credit of Rs.14,67,16,943/- (Rupees Fourteen Crore Sixty Seven Lakh Sixteen Thousand Nine Hundred Forty Three Only) availed/utilized by M/s MPSEZ during the period from April-2010 to September-2010, is liable to be recovered along with interest under the provisions of Rule 14 of the CENVAT Credit Rules, 2004 read with Section 73 and 75 of the Finance Act, 1994. They are also liable to penalty under sub rule (1) and (3) of the Rule 15 of CENVAT Credit Rules, 2004.

6.14 Therefore, a show cause notice bearing F. No. STC/4-56/O&A/ 11-12 dated 08/09/2011 was issued to M/s Mundra Port & SEZ Limited, Mundra by the Commissioner of Service Tax, having his office at 1st Floor, Central Excise Bhavan, Ambavadi, Ahmedabad for disallowing and recovery of Cenvat Credit Rs. 14,67,16,943/- (inclusive of Education Cess and SHE Cess) wrongly availed and utilised by them along with interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73(1) and Section 75 of the Finance Act, 1994. Penalty on the said noticee under Rule 15(1) and 15(3) was also proposed in the above show cause notice.

DEFENCE:

Written Submissions:

7. The noticee, in reply of the above show cause notices submitted written submission dated, 14.06.2010, 14/09/2011, 17/10/2011 and 02/06/2011. The submissions made by the noticee under above letters in brief are as under:

7.1 The noticee is a port registered under the Indian Ports Act, 1908 and renders services in relation to port. The Notice holds Centralized Service Tax registration bearing No. AAACG7917KSD002 under Section 69 of the Finance Act, 1994. In addition to Port Services, the noticee also renders Storage and Warehousing Services and Cargo Handling Services and is accordingly also registered for the same.

7.2 The noticee entirely operates the port and its services encompass the entire range of activities right from the berthing of a ship to the storing of the goods and subsequent dispatch to customer thereafter in case of imported goods and vice versa in case of goods meant for export. To illustrate, the activities carried out by the noticee in the case of import of goods inter alia includes:

Co-ordination with the Master of the vessel for berthing Provisions of tugs and the berthing of the vessel /ship

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Survey of vessel/ goods Unloading of goods from the vessel/ ship Customs Clearance

Unloading and storing of the goods Warehousing (wherever required) Loading of goods on trucks/ railway wagons Transportation for final delivery to the customers

7.3 The Noticee however does not itself carry out all of the activities mentioned above and has appointed various service providers for carrying out specific activities such as CHAs, cargo handlers, surveyors, transporters etc. The noticee utilises the service of these service providers for effectively discharging its obligations to its customers.

7.4 A port is one of the basic infrastructures necessary for the functioning of foreign trade. It is a medium/ facilitator through which the foreign trade of India is carried out. Given the sheer volume of the goods that it is expected to handle, a port is required to be fully equipped with all the necessary facilities for the smooth movement of goods into and out if India. This inter alia requires jetties/berths for berthing of ships/vessels, adequate storage and warehousing facilities and unhindered movement of men and material within the port.

7.5 The port facilities of the noticee are spread over an area of approximately 300 acres which shows the sheer size of operations of the noticee. Given this size, the noticee uses various services for the seamless movement of men and material within the port premises.

7.6 In reference to SCN No. V ST/AR-Gndham /Commr/95/2010 dated 22/04/2010 the noticee in their reply dated, 14/06/2010 submitted that they have not been provided with any of the Annexure referred to in the body of the SCN therefore they are unable to effectively reply the SCN. Further they have stated that the impugned SCN has been issued without application of mind and that they are entitled to avail Cenvat credit in respect of certain services. 7.7 The noticee has discussed the definition of Rule 3(1) of the Cenvat Credit Rules, 2004 and submitted that an Output Service provider is eligible to avail Cenvat Credit of Excise duty paid on Inputs and Capital Goods and Service tax paid on Input Services under the said rule.

7.8 The noticee has reproduced the provisions of Rule 3(1) of CENVAT Credit Rules, 2004 and also reproduced definition of “input” as defined under Rule 2(k) of the Cenvat Credit Rules, 2004 and argued that in so far as it relates to provision of services, it covers all goods used for providing an output service. The noticee also reproduced definition of “capital goods” as defined under Rule 2(a) of the Cenvat Credit Rules, 2004 and argued that it covers specified goods used for providing any output service. The notice further also reproduced definition of “input services” as defined under Rules 2(l) of Cenvat Credit Rules, 2004 and argued that it covers any service used for providing any output service.

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7.9 The noticee also cited the decision in the case of D.C.M. Shriram Consolidated Ltd. [2006 (4) S.T.R. 610 (Commr. Appl.) wherein it was held that the definition of input service not only include services used in manufacture of final products but also services used in post manufacturing activities or activities which are necessary to run day to day business and accordingly allowed the Cenvat credit availed of Service tax paid on security services and photography services for photographs taken at different occasions/activities.

7.10 The noticee submitted that the definition of Input Services defined under Credit Rules is in three parts:

Part I: Service used by the provider for providing Output Services Part II: Services used by the manufacturer, either directly or indirectly... Part III: Certain specified services

7.11 The notice submitted that to avail the Credit of Service tax, the services received by the noticee should either be covered by Part I or Part III of the definition of the Input Services. Under Part I of the definition, the services should be:

1. Used by the provider of taxable services; and 2. Such services should be used for providing an Output Service.

7.12 The notice argued that in the present case, the services are used by the noticee as a provider of taxable service. The services have been used for providing an output service. Thus both the conditions have been fulfilled.

7.13 The notice, by referring the term 'output service' as defined in Rule 2(p) of the Credit Rules, submitted that they are providing output service viz. 'Port Services' as defined under section 65(82) of the Finance Act, 1994 '(the Act') and also submitted that the Section 65(82) defines "Port Services" as 'any service rendered by a port or other port or any person authorised by such port or other port, in any manner, in relation to a vessel or goods ' and Section 65(105)(zzl) of the Act defines taxable services in relation to 'Other Port Services' as "any service provided or to be provided to any person, by other port or any person authorized by that port, in relation to port services, in any manner". They also submitted that the terms used in the definition of taxable services are ‘in relation to port services’ and ‘in any manner’. The usage of these phrases in the in the definition have widened the scope of the taxable service to include any kind of service provided by a port authority or person authorised by port in relation to vessels or goods. They argued that therefore any tax paid on the input services would be eligible to be availed as credit by the said taxable service provider.

7.14 The noticee also referred CBEC Circular No. F. No. B-II/I/2000-TRU dated 09.07.2001, wherein the scope of the activities in respect of Port Services is clarified and argued that it is clear from a plain reading of the said circular, that the Government itself recognised the fact that a port carries out a very wide range of activities. The noticee submitted that given the wide range of activities that a port is required to carry out, it also requires a wide range of input services in order to carry out the activities specified in the said circular.

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7.15 The definitions of the terms "input", "capital goods" and input service" require that the input/ capital goods/ input services must be "used for providing output service". The term 'used for providing an output service' has not been defined. Insofar as service providers are concerned, it can be said that they are in the business of providing taxable service. They relied on the decision of the Hon'ble Commissioner (Appeals) in the case of DCM Shriram Ltd. (supra) wherein in the context of the definition of "input service" it has been held that it includes services which are used to run the day to day business. It is, therefore, submitted that insofar as service providers are concerned, the term "used for providing output service" in the definitions of input / capital goods / input service can be read as "used for the purpose of business". They have cited following decisions in support of their contention.

(i) Victor Gaskets India Ltd. v/s CCE, Pune I (2008(10) STR 369 (tri.-Mum)(ii) CCE, Mumbai v/c GTC Industries Ltd (2008(122 STR 468(Tri.-LB).(iii) Dell International Services India Pvt. Ltd v/s CCE Bangalore(2010(17) STR

540(Tri)(iv) Coca Cola India Pvt. Ltd v/s CCE Pune III [2009(242) ELT 168].(v) ABB Ltd. v/c CCE &ST, Banglore [2009(15) STR 239Tri.-LB]

7.16 The noticee relied upon following decisions of Hon'ble Supreme Court wherein term "for the purpose of business"/ "used for the purpose of ...” has been discussed:

(i) Commissioner of Income tax Vs. Malyalam Plantation Ltd(1964) 7 SCR693.

(ii) State of Punjab & Another VS. British India Corporation Ltd. (1964) 2 SCR 114.

(iii) Liquidators of Pursa Limited Vs. CIT, Bihar [(1954) 25 ITR 265 at p. 272 (SC)] .

Relying on the above citation, they argued that if the input, capital goods and input service are used for business of purpose then the Cenvat credit would be available. In the present case, they are Port and providing Port Services, Storage and Warehousing Service and cargo Handling Service. The submitted following submission in respect of credit of duty/tax paid on certain goods and services which are under dispute in the proceedings. 7.17 CENVAT CREDIT ON CEMENT AND STEEL

7.17.1 The noticee has submitted that the some of the terms used in the definition of taxable services of the taxing entry of the port service are “in relation to port services” and “in any manner”. They further submitted that the usage of this phrases have widened the scope of the taxable service to include any kind of service provided by port authority or person authorised by Port in relation to vessels and goods. A Port provides services in relation to import and export cargo and vessels related services such as loading and unloading, warehousing, repairs of ship,

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transportation of goods from jetty to warehouse and vice versa etc. It therefore follows that all the activities carried out by port are in relation to vessels or goods and are covered under taxable services.

7.17.2 They further submitted that they have used the cement and steel in the construction of jetty within the port. The purpose of a jetty is to enable the movement of the cargo from the vessel to the port and vice versa for providing output service. Therefore, goods and services used for the construction of the jetty qualify as 'Inputs' used for construction of jetty for providing output services. It is also an admitted position in the SCN that the cement and steel have been used by the Noticee for the purpose of construction of the jetty. In view of the above, cement and steel qualify as “Inputs’ used for construction of jetty which is ultimately used for providing output services.

7.17.3 The noticee submitted that the definition of “Input” begins with the words “all goods” and then goes on to set out certain specific exclusions which are light diesel oil, high speed diesel oil, motor spirit. The noticee argued that therefore follow that besides these exclusions, all other goods would qualify as “ Inputs” if they are used for providing Output Services. In the facts of the present case, steel and cement are used for construction of the jetty, which are covered by the term’ all goods’. They further submitted that the cement and steel used for construction of Jetty is for the purpose of providing Port services on which the noticee are liable for service tax. They submitted that Cement and Steel is used for providing output services of Port, the credit on the inputs used is to be correctly allowed.

7.17.4 The noticee submitted that the cement and steel have been used by the noticee for the purpose of construction of the jetty for purpose of providing port services. The amended definition of ‘input’ in Rule 2(k) of the Cenvat Credit Rules, 2004 would not apply to the noticee. Going by a strict reading of the language of the amended explanation, those manufacturers who are using the Cement and Steel for construction of factory, shed, building or laying of foundation of making structure of support of capital goods are not entitled to avail Cenvat credit. The specific disentitle the service providers from claiming credit on cement and steel as they are eligible inputs and credit has been correctly taken by the noticee.

7.17.5 The noticee also submitted that the definition of ‘Input Service’ under Rule 2(l) of the credit Rules specifically includes services used in relation to setting up, modernization, renovation or repairs of a factory, premise of provider of output service on an office relating to such factory or premises. They argued that the intention of the legislature is to include services in relation to setting up of factory or office as input service, even though such services would never be directly used in the manufacture of finished goods or provision of output services. They further argued that taking an analogy from the above, if services in relation to setting up of factory or office can form part of ‘Input services’ then cement and steel used in setting up of jetty (ies) which is essential and integral part of a port, would clearly fall under the definition of ‘input’ as defined under the credit Rules. The noticee cited the decision of CCE, Visakha patnam IIv/s Sai Sahmita Storages (P) Ltd. [2011(270) ELT 33 AP-HC] in support of their contention.

7.18 CENVAT CREDIT ON CUSTOM HOUSE AGENT CHARGES &

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SURVEYORS FEES

7.18.1 The noticee submitted that they are registered under Port Services for providing various port related services. The noticee invoices to its customers as per agreed charges which is a lump sum consolidated charge, which includes charges for all services provided either directly or through various contractors or service providers including CHA services and Surveyors services.

7.18.2 The noticee has entered into the contract with individual customers for clearance, storage, and handling of goods upto the point of loading of the goods for the dispatch outside the port. The contract stipulates a lump sum amount, which includes various services provided by noticee through various contractors! service agents. These services are rendered by noticee through the service agents! contractors like labour contractors, CHA, Surveyor, handling contractors, transport agents, stevedore etc.

7.18.3 As regards CHA, the Noticee has entered into an agreement with its customer for providing the entire gamut of port services including CHA services. Since the noticee is not a CHA itself, it had appointed CHA's to carry out the activities in respect of customs. In order to discharge its contractual obligation, the noticee in turn procures the services of other service providers. The services from CHA are received by the noticee. The CHA has a privity of contract with the Noticee. The essence of the entire transaction is that the noticee has entered into an agreement for providing a wide range of services. One of the services was sub-contracted by it to CHA's for which the CHA has charged service tax on the gross amount charged by it to the client. The noticee discussed the relevant extracts of the various contracts between the noticee and CHA.

7.18.4 They have submitted that they have entered enters into similar kind of agreements with various other customers for the clearance of goods at an all inclusive rate which inter alia includes charges towards customs clearance. The Noticee thereafter appoints CHAs for the purpose of clearance of the goods for its customers. They have submitted that CHA Service is one of the services required to be used by them for effectively carrying out their activities. It is necessary to run their day to day business. They have further submitted that in the absence of CHA, the noticee cannot provide the service of clearing of goods for import and export . Therefore, CHA service is required by them for providing output service and qualifies as an “input service”.

7.18.5 They further submitted that the surveyor render service of survey/draft survey of the vessel before and after loading /unloading of the cargo as well as in respect of cargo stored in the storage tanks within the port premises. In this regard, they further submitted that without the services of the surveyor, the noticee would not be able to render its output service as in the absence of survey of the vessel and storage tanks, it would be impossible to measure the quantities loaded and unloaded. This would lead to complete chaos and confusion as well as loss of business/profit for them as their tariff is based on volume and quantity of the goods loaded/unloaded. They also submitted that the surveyor's fees are an integral part of the day to day business. As a port operator and as custodian of the cargo, the

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noticee is accountable for the cargo, and in case of any disputes or claims, contractual or statutory, it is imperative for the noticee to maintain a complete record of the cargo received/handled by it. This is also required for billing clients and hence the survey integrally connected to the Noticee’s business of providing support service.

7.18.6 They have also submitted that the CHA and Surveyors raised their invoices on the noticee for the services rendered by them. The payment of such invoices is made by the noticee and subsequently the noticee recovers the same from its customer on the lump sum basis including service tax on the lump sum amount. The service tax collected by the noticee is paid to the department.

7.18.7 They further submitted that in their own case, the noticee have succeeded before the Hon’ble Tribunal, insofar as the question of availment of Cenvat Credit on service tax paid for the services of CHAs and Surveyor is concerned [M/s MP& SEZ Ltd v/s CCE Rajkot].

7.19 CENVAT CREDIT ON RENT-A-CAB SERVICES

7.19.1 Regarding Rent-a-cab service the noticee submitted that the contract between them and the Rent-a-cab operator clearly states that the vehicles would be plying within the Customs area and the Rent-a-cab operator must accordingly observe the rules and regulations of 'operating within the Customs area.

7.19.2 They have also submitted the relevant clauses delegating the contract and also the extract of the special terms and conditions from the contract. Further they submitted that those Rent-a-cab services are used by the noticee mostly within the Port premises and the extended infrastructure backup area. Further, they submitted that the premises of the noticee are spread across an area of 300 acres which comprises of berthing area, road, storage, administrative building of the noticee, custom offices, canteen etc. It is further submitted that all spaces which houses the above said facilities are spread over length and breadth of the premises of the noticee. They submitted that in order to ensure seamless and timely movement of men and material required for the import and export of goods, the noticee uses rent-a-cab services for commuting within the port area. They further submitted that in the absence of the Rent-a-cab services, the business would virtually come to a standstill as it would result in inordinate delays in the movement of goods for import/ export of goods. Further, foreign trade requires compliance with various formalities including documentation, approvals from the Government etc. A large number of such Government offices are located outside the premises of the noticee. Such offices are located upto 75 kms from the premises of the noticee.

7.19.3 They have submitted that in view of the above, Rent-a-cab services are necessary to run the day-to-day business and are used by the noticee for providing output service and accordingly the Cenvat credit of service tax paid on such service would be available to the noticee. They have cited the decision of Hon’ble Tribunal in the case of CCE, Nasik v/s Cable Corporation of India Ltd. [2008(12) STR 598 (Tri.-Mumbai)] in their favour. They have also stated that in the noticee’s own case in M/s Mundra Port & SEZ Ltd. vs CCE, Rajkot, the said order of the Hon’ble Tribunal has not been appealed by the Department and has

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therefore attained finality.

7.20 CENVAT CREDIT ON MOBILE PHONES

7.20.1 They submitted that SCNs has purported to rely on CBEC Circular No. 59/8/2003 dated 26.06.2003, wherein it has been clarified that credit in respect of Service tax paid on mobile phones would not be available. In this regard, the noticee submitted that said Circular was issued at the time when the' Service Tax Credit Rules, 2002 were in force which specifically provided for availability of Credit on telephones installed at the site. The relevant extract of the erstwhile Rule is as under:

Rule 3(6) Service tax credit on the service provided in relation to telephone connection shall be allowed only in respect of such telephone connections which are installed in the premises from where output service is provided.

7.20.2 They further submitted that Rule 3(6) of the Service tax Credit Rules 2002, is now superseded by the Credit Rules (to be ascertained). The newly introduced Credit Rules do not contain any such provisions to restrict the Credit only to telephones installed at offices. The Credit Rules provides for credit of Service tax paid on all Input Services. They also submitted that Mobile service is used for purpose of day to day business activities. Without communication it is not possible to conduct any business, thus mobile phone used for business purpose will form part of Input Services under the Credit Rules. In addition to above, they submitted that Rule 16(1) of the Credit Rules specifically provides that Circulars issued prior to introduction of the Credit Rules would be applicable, only if it is relevant under the new Credit Rules. They argued that based on supplementary provision under Rule 16(1), the said Circular is not relevant after the introduction of the Credit Rules and clearly inapplicable. They relied on the following decision in their support :-

(i) Hon'ble Tribunal in the case of Indian Rayon Ltd. Vs. CCE, Bhavnagar [2006 (4) S.T.R. 79 (Tri. - Mumbai)] has held that credit of service tax paid on mobile phones would be available as there is no bar under the Credit Rules for availing the same.

(ii) Hon'ble Tribunal in the case of Excel Crop Care Ltd. Vs. CCE, Ahmedabad [2007 (7) STR 451 (Tri. - Ahmd.)] and Rajasthan Textile Mills Vs. CCE, Jaipur [2007 (7) STR 400 (Tri. - Del.)] has held that Cenvat credit on mobile phones would be available to the assessee. They have also stated that in the noticee’s own case in M/s Mundra Port & SEZ Ltd. vs CCE, Rajkot.

7.20.3 The noticee have stated that services inter-alia include Consulting Engineer Services, Maintenance and Repair Services, Security Services, Construction Services, Banking Services etc. The services mentioned hereinabove are all business related services and therefore ought not to be included in the impugned notice. Therefore, the notice has correctly availed of Cenvat Credit.

7.21 CENVAT CREDIT ON VARIOUS INPUTS/CAPITAL GOODS

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SUCH AS PAINT, GREASE, CABLE, FAN, ENGINE OIL, BITUMEN, TRANSFORMER, MS PIPE, AIR COMPRESSOR, HDPE PIPES, ELECTRIC ITEMS, FORKLIFTS, JOURNAL PURCHASES ETC.

7.21.1 The noticee submitted that the SCNs do not set out the reasons for disallowing the credit on the aforesaid items and is therefore bad in law and deserves to be set aside. The aforesaid goods are ultimately used for providing output service viz. Port Service, Storage and Warehousing Service and Cargo Handling Service by the Noticee and therefore qualify as inputs. Accordingly, credit of duty paid on the aforesaid goods would be available to the noticee and the noticee has rightly availed the credit.

7.21.2 The noticee submitted that the aforesaid goods and their use as inputs are described in detail as under:

a. The notices use paint for maintenance of the tug, excavator, crane, tank farm, liquid pipeline as erosion coatings on the said equipments. Similarly, grease is used in order to maintain the equipments used for handling of cargo. Engine oil is also used in order for the said equipments to function.

b. The plastic sheets are used as inputs for covering bulk cargo lying in the open area/ go down eg. Wheat, fertiliser, sugar etc. and for covering open wagons of bulk fertilizer.

c. Furnace oil is used by the noticee in Hotmix & Bitumen burner which is used at the port. Bitumen is used in the noticee’s open godown facility (cargo storage in open godown) and internal Road in port area.

d. Cables are purchased and used for bagging machine, power transmission and electrical tower in the open area. The transformer is used in mining equipments.

e. Rope Wire is used by the notice in Cranes for lifting of Grab. Grab is used for bulk coal and scrap cargo loading and unloading. Electric items are used at the tank farm, backup yard, godown etc.

f. Filter is used in the Engines and also in the transformers. These engines and transformers are further used for providing electrical backup for uninterrupted power supply to various operating machines.

g. The UPS is used for supply of electricity constantly at weighbridges, port offices etc.

h. Ms Pipes are used in tug berth, container terminal and pipes are used for the open stack yard at the port.

i. Generators, pump are used in dredging activities at the port.

j. Trucks are used for movement of project materials from one place to another place. Excavators are used for loading and unloading of sugars and fertilisers. Cranes are used in Port operations i.e. bulk cargo loading and unloading.

k. Cylinders are used in cranes. Cranes are used for handling of dry bulk cargo like fertilizers, coal and steel.

l. Software is used for program logic control in the conveyor belt system. This system is used for handling for the handling of dry bulk cargo like fertilizer.

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m. Tune up Kit is used by the noticee in compressors used for pumping of liquid cargo like petroleum products, chemicals and edible oils. Timers are placed in the lighting tower, boiler and in compressor.

n. Gasket and Filter are used in the engines and also in the transformers. These engines and transformer are further used for providing electrical backup for uninterrupted power supply to various operating machines.

o. Battery chargers are used in the process of charging battery used in cranes and separate units. Radiators are used in the Engines of cranes. Cranes are used for handling of dry bulk cargo like fertilisers, coal and steel.

7.22 CENVAT CREDIT ON OTHER INPUT SERVICES- PORT SERVICES:

7.22.1 The noticee have stated that the SCNs do not set out the reasons for disallowing the credit on the other Input Services-Port Services so received and therefore, proposal for denial of Cenvat credit is bad in law, erroneous, without any authority in jurisdiction.

7.22.2 The noticee further submitted that they undertake 3 major types of activity namely (i) handling of dry cargo, (ii) handling of Liquid cargo and (iii) Container terminal operations. For carrying out the said activities, it has entered into back –to-back contracts with sub-contractor to undertake various port services. The various services covered under the ‘other Input services-Port services are:

1. Cargo handling service

2. Port service

3. Clearing & Forwarding Agent’s service

4. Dredging service

5. Manpower recruitment and supply agency’s service

6. Piloted service

7. Storage and warehousing service

8. Supply of tangible goods service

7.22.3 The noticee further submitted that the department has alleged for recovery of so called wrong availment of Cenvat credit under ‘Other Input Services-Port services’, pursuant to the information provided by the noticee. They submitted that it is obligatory on the part of the department to give reasons before amking proposal of denial of Cenvat credit. The noticee also submitted that they pay on an average a service tax of Rs. 7.37 Crore per month on the output service. The further submitted in light of their above submission, the noticee be allowed to avail Cenvat credit to the extent of Other Input Services-Port Service’.

7.22.4 Regarding Cenvat credit on services such as Cargo handling, Clearing & Forwarding, Business Auxiliary service, Errection , Commissioning or Installation service, Manpower Recruitment & Supply, Technical Testing & Analysis service, Construction Service etc, the noticee submitted that the SCNs do

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not set out the reasons for seeking to disallow the credit on the aforesaid services and are therefore bad in law and deserve to be set aside.

7.22.5 The noticee further submitted that the aforesaid services are ultimately used for providing output service under clause (i) of Rule 2(1). They are required for the day to day running of the business of the noticee of providing support service. Apart there from, the third part of the definition of "Input service" specifically provides for activities relating to business and thereafter specifies certain activities. Since the term used is “activities relating to business such as....” it implies that it is an illustrative list and all activities that are legitimately used for business would qualify as input service. The noticee further submitted that the aforesaid services are used for the purpose of business and therefore qualify as an input service. Accordingly, credit of Service tax paid on the aforesaid services would be available to the noticee.

7.22.6 The noticee further submitted that Cargo Handling and Clearing & Forwarding Services stand on a footing identical to the services of Customs House Agents and Surveyors rendered to the port in order for the port to function in a smooth manner. Contracts similar to those entered into for the service of Customs House Agent have been entered into for the above services also. That the aforesaid services are used for providing output service and therefore the noticee is entitled to credit in respect of the same. The said contract entered into for Clearing & Forwarding and Cargo Handling makes it very clear that the services are received solely for the use of the port. The payments for the said services are made by the noticee to the service provider directly. They further submitted that the availment of Cenvat Credit on service tax paid on Clearing & Forwarding Services has been allowed by the Tribunal in Metro Shoes Pvt. Ltd. Versus Commissioner of Central Excise, Mumbai-I [2008 (10) S.T.R. 382 (Tri. Mumbai)].

7.22.7 The noticee further submitted that the services like handling of coal are also rendered to the port as the port would be completely unable to function if these services were not so rendered. The service so rendered, is therefore, related to the output service. These services are paid for by the notice and there is Privity of Contract between the notice and the handlers. Therefore, the service tax paid by the notice is available to them as Credit. They have also submitted a copy of a sample contract between the notice and the Coal Handler in their defence reply.

7.22.8 The noticee further submitted that they also use the services of various agencies for the jobs of soil investigation in the port area in order that machinery can be installed at the port so that the notice can perform the functions required of a port. In the case of soil testing, the contractors provide the machines and carry out the surveys required by the noticee in order to ensure that the jetty may be built in a specific location. The contractor is then compensated by the notice as per the contract. They have also submitted a copy of one such contract.

7.22.9 The noticee submitted that they also receive the services of contractors who maintain the machinery installed at the port. The smooth functioning of the machinery is integral to the functioning of the port. They take credit of the service tax paid for the services of the said technicians received at the port. They have also submitted a sample copy of one such contract.

7.22.10 The noticee further submitted that any equipment hired by them are for use in the port and form part of the final output service provided by them.

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Credit claimed on business auxiliary service of equipment hiring is therefore available to the noticee. They also submitted a copy of one such contract.

7.22.11 The noticee also craves leave to produce further documents showing the true nature of all services listed hereinabove on which the Department seeks to deny credit that has been correctly taken by the noticee.

7.22.12 The noticee submitted that the afore said services are used for the purpose of business and therefore qualify as an input service. Accordingly, credit of service tax paid on the aforesaid services would be available to the noticee and noticee has rightly availed the credit.

7.23 OTHER INPUT SERVICE-UNDER RULE 6(5) CREDIT AS PERCENVAT CREDIT RULES, 2004

7.23.1 The noticee submitted that the SCNs not made any single allegation against the noticee for denial of Cenvat credit on services falling under the category of Rule 6(5) of Cenvat Credit Rules, 2004 so received and therefore, proposal for denial of Cenvat credit is bad in law, erroneous and without any authority in jurisdiction. They further submitted that Rule 6(5) of the Credit Rules does not require any bifurcation while maintaining the books of account between taxable and exempted services in order to avail the credit and it is obligatory on the part of the department to give reason before making proposal for denial of Cenvat Credit. They argued that denial of credit a single reason is not given therefore, the noticee be allowed to avail Cenvat credit to the extent of ‘Other Input services-Rule 6(5).

7.24 ISSUE NO LONGER RES INTEGRA - STANDS DECIDED IN NOTICEE'S OWN CASE

7.24.1 The noticee submitted that in so far as the Cenvat credit in respect of CHA Fees, Surveyors Fees and Rent-a- cab Services are concerned, the issue stands decided in the favour of the noticee vide Order-in- Appeal No. 346/2007 dated 30.11.2007 passed by the Commissioner of Central Excise (Appeals), Rajkot wherein the Hon'ble Commissioner (Appeals) held that the aforesaid three services qualify as an input service and accordingly, the Cenvat credit of Service tax would be available to the noticee.

7.24.2 The noticee further submitted that insofar as the Cenvat credit in respect of Mobile phones, CHA Fees, Surveyors Fees and Rent-a- cab Services are concerned, the issued stands decided in favour of Noticee vide Order No. A/2122/WZB/AHD/08 dated 08.05.2008/ 30.09.2008 reported in 2009(13)STR 178, passed by the Hon’ble Tribunal wherein after considering the factual and legal submissions made by the noticee, the Hon’ble Tribunal held that the aforesaid services qualify as input services and accordingly, the Cenvat credit of Service Tax would be available to the noticee. The above referred order of Tribunal was challenged by the department to the extent of allowing Cenvat credit on input services before the Hon’ble Gujarat High Court. The Hon’ble Gujarat High Court by order dated 05/05/2010 in Tax Appeal No. 737 of 2009 was pleased to dismiss the appeal. The noticee also submitted copy of the same. The noticee further submitted that the said order of the Hon’ble Tribunal is an order which is inter se between the parties involved and consequently is binding on both the sides. Consequently, the demand in respect of Cenvat credit on Mobile phones, CHA

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fees, Surveyor fees and Rent-a-cab Services deserve to be set aside on this ground.

7.25. INTEREST

Since no tax is payable by the Noticee, interest under Section 75 also cannot be recovered from the Noticee.

7.26 PENALTY

7.26.1 The noticee submitted that the present issue has arisen due to a disputed interpretation of the law and not due to mala fide intention to evade tax and therefore no penalty can be imposed in the present case.

7.26.2 They also submitted that they are eligible to take credit of excise duty and service tax paid on inputs/ capital goods and input services and that the issue involved in the present case relates to interpretation of statutory provisions and in the absence of any contemptuous conduct or deliberate defiance on the part of the noticee, no penalty under section 76 or section 77 of section 78 is called for or warranted in the facts and circumstances of the case. The noticee has relied upon following decision of Hon'ble Tribunal wherein it has held that no penalty ought to be imposed where the service tax is not paid or registration not obtained or returns not filed on account of bona fide belief:

a) Star Neon Singh Vs. Commissioner [2002 (141) ELT 770 (Tri- Del.)] b) Flyingman Air Courier Pvt. Ltd. Vs. CCE, Jaipur [2004(170) ELT 417

(Tri-Del.)] c) ETA Engineering Ltd. Vs. Commissioner [2004(174) ELT 19 (Tri- LB)]

7.26.3 The noticee further submitted that penalty under Rule 15(1) and Rule 15(3) cannot be imposed where the matter is of an interpretation nature.They submitted that it has been held by the Hon’ble Tribunal in Wiptech Peripherals Pvt. Ltd. vs Commissioner of Central Excise, Rajkot [2008 (12) S.T.R. 716 (Tri. –Ahmed) that there is no justification to impose a penalty where the matter was of an interpretational nature.

7.26.4 It has been similarly held by the Tribunal in Sanghi Industries Ltd. vs Commissioner of Central Excise, Rajkot, [2008 (12)S.T.R. 495(Tri. Ahmd)]; Metro Shoes Pvt. Ltd. Versus Commissioner of Central Excise, Mumbai-I and A.G. Shibu Versus Commissioner of Cus. C.Ex. & S.T. Cochin, [2008 (10) S.T.R. 317 (Tri. Bang.)] and the ratio of all the above decisions is applicable and binding insofar as the aspect of imposition of penalty is concerned.

7.26.5 In any event, once penalty is imposed under Section 76 of the Act, no penalty can be imposed under Section 78 of the Act, Section 78 of the Act is specifically in respect of penalty for intention to evade payment of service tax or suppression or concealment of the value of taxable services or for furnishing inaccurate value of services. In the present case, there is no suppression of facts by the noticee inasmuch as the noticee was served with a Show Cause Notice dated 13.4.2007 on identical issues in respect of a prior period. The noticee relied upon following decisions:

Nizam Sugar Factory Vs. CCE, AP [2006 (197) E.L.T. 465 (S.C.)] ECE Industries Ltd. Vs. CCE, Delhi [2004 (164) E.L.T. 236 (S.C.)] Devans Modem Breweries Ltd. Vs. CCE, Chandigarh [2006 (202) E.L.T.

744 (SC)]

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7.26.6 The noticee further submitted that in view of the settled legal position as set out above that no suppression of facts by the noticee and consequently Rule 15(3) is not invocable. Since Rule 15(3) is not invocable in the present case, there is no question of imposition of any penalty on the noticee.

7.27 They further submitted that they have filed an appeal before the Hon’ble Gujarat High Court vide Appeal No. 3876 dated 05.12.2008 against the Order No. A/2122/WZB/AHD/08 dated 8th May 2008/ 30th September, 2008 passed by the CESTAT, Ahmedabad to the extent the Tribunal has disallowed Cenvat Credit of Excise duty paid on Cement and Steel used in construction of the jetty and the port terminal for utilization towards payment of service tax by the noticee under the taxable service of Port Services. Since the matter is already pending before the High Court, they pray that that adjudication of present SCN be kept in abeyance, till the issues in dispute are finally decided.

PERSONAL HEARING :-8. The noticee was granted a personal hearing on 30.08.2013, which was attended by Shri Hardik P Modh, Advocate alongwith Shri Nirav H Patel, Shri Piyush B Gandhi, Shri Bharat R Dixit and Shri Haresh Bhava. They reiterated the submissions made in their written reply. Further they gave a compilation of case laws in their favour and requested to decide the case based on the above. They also stated that if required they would produce/ give any clarification sought by the Department.

DISCUSSION & FINDINGS

9. I have carefully gone through the Show Cause Notices, the submissions made by the noticee in their written replies as well as at the time of personal hearing and considered all the facts on record.

9.1 On going through the SCNs, I find that the noticee has been providing services under the category of “Port Services’ and has for the same availed Cenvat credit on (i) Steel and cement as “inputs”, (ii) Air-conditioner as capital goods (iii) input services such as (a) CHA Services, (b) Rent-a-cab (c) Mobile phone/telephone (d) Surveyor service (iv) Other Inputs- Bitumen (v) Other Input- Excise Duty (vi) Other Inputs-Capital Goods (vii) Other Input Services-Port Services (viii) Other Input Services – Rule 6(5) credit as per CCR, 2004 (ix) Other Inputs- Capital Goods-On holding during F.Y. 2009-10 (x) Other Input Services. The subject SCNs propose to deny the Cenvat Credit availed, on above, on the grounds that they do not fall under the category of inputs, input services and capital goods for the provision of output services namely ‘Port Services’. Thus, the basic issue to be decided in the present case is whether the Cenvat credit is admissible on (i) Steel and cement as “inputs”, (ii) Air-conditioner as capital goods (iii) input services such as

(a) CHA Services, (b) Rent-a-cab (c) Mobile phone/telephone (d) Surveyor service (e) Club House Fees

(iv) Other Inputs- Bitumen

(v) Other Inputs- Excise Duty

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(vi) Other Inputs-Capital Goods

(vii) Other Input Services-Port Services

(viii) Other Input Services – Rule 6(5) credit as per CCR, 2004

(ix) Other Input Services.

10. I accordingly proceed to discuss each and every issue as follows

10.1 Cenvat Credit availed on Cement & Steel .10.1.1 The noticee has submitted that :

- Cement and Steel were used for construction of jetty within the port which was done to enable them to expand their capacity and handle more ships, thereby increasing their business. Therefore, Cement and Steel qualified as “inputs” within the definition as provided under Rule 2(k) of Cenvat Credit Rules, 2004 and accordingly, Cenvat credit of duty paid thereon was available to them.

- the credit of duty paid on inputs cannot be denied so long as the nexus between the inputs and the provision of output service is established.

10.1.2 In this regard, I find from the definition of “input” and “input service” as defined under Cenvat Credit Rules, 2004 that both the definitions are separate and have different clauses. The clauses of “input service” cannot be borrowed in the matter of “input” for justification of admissibility of Cenvat credit on the goods which are not input as per its definition. Therefore, the admissibility of Cenvat credit on input is decided by the definition of “input” only. In the present case, cement and steel were used for construction of jetty as alleged in the SCN which is also confirmed by the noticee in their written submission. The construction of jetty in port area is categorised under the service viz. “Construction Service – Commercial and Industrial service” and the construction of port is exempted by virtue of Notification No. 16/2005-ST dated 07.06.2005 as substituted by Notification No. 25/2007-ST dated 22.05.2007 and the said service is not provided by the noticee as their output service. Further, I find that the said goods were not used for providing the output service viz. “Port Service” service by the said noticee. Therefore, I hold that the said goods i.e. cement and steel cannot be treated as “input” for the said noticee, being a service provider. Further, the same cannot be considered as “capital goods” as the cement and steel is not covered under the definition of “capital goods” under Rule 2(a) of the Cenvat Credit Rules, 2004. My above view is supported by the following decisions /judgments:-

10.1.3 Larger bench decision in the case of M/s VANDANA GLOBAL LTD. Versus COMMISSIONER OF C. EX., RAIPUR reported in 2010 (253) E.L.T. 440 (Tri. - LB). The Hon’ble Tribunal dealt on the issued in great detail and came to the following conclusions in para 49 and 51:

“49. In the light of the foregoing findings, we answer the questions referred to the Larger Bench as follows :-(a) The term “capital goods” has been defined in the Cenvat Credit Rules, which in turn have been framed under the rule making powers conferred under Section 37(2) of the Act. The said Section refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods.

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Hence, ‘capital goods’ defined in the Cenvat Credit Rules in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of the decisions of the Hon’ble Supreme Court on the issue, which is no longer res integra.(b) Goods like cement and steel items used for laying ‘foundation’ and for building ‘supporting structures’ cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the Cenvat Credit Rules for the impugned period.****51. In view of our opinion as above, we also hold that the view taken by the Division Bench in the case of Bhushan Steel and Strips Ltd. (supra) is not the correct view in law.”

10.1.4 Further, the Central Board of Excise and Customs vide Circular issued from F.No.267/11/2010-CX8 dated the 8th July, 2010, has provided clarification on the issue of availment of Cenvat credit on cement, angles, channels, CTD or TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods as under : 

“Subject: Availability of Cenvat credit on inputs used in the manufacture of capital goods-reg.         I am directed to invite your attention to the landmark judgement of the CESTAT Larger Bench in the case of Vandana Global Ltd. V/s CCE, Raipur [2010-TIOL-624-CESTAT-DEL-LB] delivered on 30.04.10, on admissibility of credit on capital goods and inputs and to state that the Tribunal has ruled that ‘capital goods’ defined in the CENVAT Credit Rules, in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of settled decisions of Supreme Court on the issue. The Tribunal has further ruled that goods like cement and steel items used for laying ‘foundation’ and for building ‘supporting structures’ cannot be treated as either inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the CENVAT Credit Rules. It has also been stated by Tribunal that amendment to Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004 inserted vide Notification No. 16/2009-CE (NT) dated 07.07.09, is clarificatory in nature and has retrospective effect.2.    Attention is also drawn to the Tribunal’s judgement in the case of Vikram Cement V/s CCE, Indore [2009(242)ELT545(Tri-Del)], where the Tribunal held that credit on welding electrodes used for repair and maintenance, is not available as input. It may also be noted that in the case of Vikram Cements V/s CCE, Indore [2005(187)ELT145(SC)], it has been conclusively held by the Apex Court that the definition of capital goods is not inclusive and only the items covered under the definition and used in the factory of the manufacturer can be treated as capital goods.3.     It thus follows from the above judgements that credit on capital goods is available only on items, which are excisable goods covered under the definition of ‘capital goods’ under CENVAT Credit Rules, 2004 and used in the factory of the manufacturer. As regards ‘inputs’, they have to be covered

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under the definition of ‘input’ under the CENVAT Credit Rules, 2004 and used in or integrally connected with the process of actual manufacture of the final product for admissibility of Cenvat credit. The credit on inputs used in the manufacture of capital goods, which are further used in the factory of the manufacturer is also available, except for items like cement, angles, channels, CTD or TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. Further, credit shall also not be admissible on inputs used for repair and maintenance of capital goods.”

10.1.5 In this regard, I also note that in their own (noticee’s) case vide CESTAT order dated 30/09/2008 reported in 2009 (13) STR 178 (Tri-Ahmd.), the Honourable CESTAT disallowed Cenvat credit on cement and steel used for construction jetty and port. The findings of CESTAT are contained in para 7 which is reproduced below:-

“7. Having observed as above, we proceed to find out the true meaning and interpretation of the expression “used for providing a output service”. A plain and simple English meaning of the above would be the goods which are required for providing a output service. Admittedly jetty is required for providing the port service in the same manner as any office building etc. is required for providing any other output service. The question is as to whether cement and steel, which are the disputed goods in the present case, are required for providing port service or can be said to be used for providing port service. The cement and steel have undoubtedly been used in the construction of jetty and port building by the contractor, which service is itself liable to service tax, though the same is exempted under the Notification. As such, it can be safely concluded that the cement and steel stand used for providing the output service of construction of building and not used in providing the port service, such an interpretation would lead to unwarranted results and the definition cannot be so stretched so as to include the use of cement and steel as used for providing the output service of port services. If such a wide meaning is given to the above expression then the cement and steel used for construction of any building which houses the office etc. would become eligible inputs for the purposes of providing output services. As such, we do not agree with the ld. Advocate that such cement and steel can be held to be eligible inputs used for providing the output port service. Accordingly, confirm the demand on this count.”

10.1.6 Further, I find that the noticee have cited the following cases where Cement & Steel was held to be eligible for Cenvat Credit as inputs.

a. M/s CCE Vs. Sai Sahmita Storages (P) Ltd reported at 2011(270) ELT 33(AP);

b. M/s Bhushan Steel & Strips Ltd Vs. CCE reported at 2008(223)ELT 517 (T);

c. M/s Shree Rajasthan Syntex Ltd Vs. CCE reported at 2013(292)ELT 234;

d. M/s Mastech Technologies P Ltd Vs. CCE reported at 2013(293) ELT 311(T);

e. CCE Vs. M/s SLR Steel Ltd reported at 2012 (280) ELT 176 (Kar) and

f. M/s Star Paper Mills Ltd. Vs. CCE reported at 1997 (107)ELT 241.

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10.1.7 In this regard, I find that the ratio of the judgements referred to the cases by the noticee cannot be applied in the present case. In all the above cases, the credit has been allowed on cement and steel as they fall within the definition of “inputs” for providing output services. In the present case, the cement & steel has been used for construction of Port, and construction of port is exempted and therefore as per Rule 6(1) of Cenvat Credit Rules, 2004, the Cenvat credit on exempted output services is not available.

Further in another cited case i.e. of M/s Novopan India Ltd. Vs CCE (supra), the Apex Court deals with the issue of classification of melamine board and does not deal with the issue of admissibility of Cenvat credit on particular commodity as input or capital goods, hence, I find that the said noticee has erred on this judgment of the Honorable Supreme Court. In this regard, I also rely on the judgment of Hon’ble High Court of Rajasthan in the case of Union of India v/s Hindustan Zinc Ltd. [2009(16) STR 234 (Raj)] wherein in para 12 of the judgment it is held that “cement which is building/construction material and which is used in the mines as construction, repairing or maintaining the mines in a proper condition, is not eligible input for availment of Cenvat credit and no Cenvat credit is available on the same.” In view of the above, the “Cement & Steel” used in construction of the Port, does not fall either within the definition of “input” or “capital goods” as discussed in the foregoing para before or after issuance of Notification No. 16/2009-CE(NT), dated 07.07.2009 , and Cenvat credit is not admissible on them.

10.1.8 In view of the above, I find that Cement and steel used in the construction of the Mundra Port are neither Capital Goods nor Input, and therefore Cenvat credit on the excise duty paid by them on cement and steel is not admissible and therefore required to be recovered from them.

10.1.9 The details of the Cenvat Credit availed by the noticee on Steel, Cement are as under :

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2008 to March, 2009 AS PER THE SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010 (Amt in Rs.)

S.No. PERIOD Description of Goods / Services

Ex. Duty/ Service Tax

Edu. Cess SHE Cess

Total

1 October, 2008 to March, 2009

Steel 1,02,87,720 2,05,776 1,02,856 1,05,96,352

2 October, 2008 to March, 2009

Cement 16,65,949 33,319 16,659 17,15,927

TOTAL 1,19,53,669 2,39,095 1,19,515 1,23,12,279

CENVAT CREDIT AVAILED DURING THE PERIOD April, 2009 to September, 2009 AS PER SCN No. V.ST/4-80/O & A/10-11 dated 15.10.2010 (Amt in Rs.)

S.No. PERIOD Description of Goods / Services

Ex. Duty/ Service Tax

Edu. Cess SHE Cess

Total

1 April, 2009 to September, 2009

Steel 1,35,52,976 2,71,050 1,35,359 1,39,59,384

2 April, 2009 to Cement 10,61,864 21,237 10,619 10,93,720

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September, 2009TOTAL 1,46,14,840 2,92,287 1,45,978 1,50,53,105

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2009 to March, 2010 AS PER SCN No. V. STC/4-147/O & A/10-11 dated, 12.04.2011 (Amt in Rs.)S.No. PERIOD Description

of Goods / Services

Ex. Duty/ Service Tax

Edu. Cess SHE Cess

Total

1 October, 2009 to March, 2010

Steel 8,04,364 16,067 8,077 8,28,507

2 October, 2009 to March, 2010

Cement 1,53,140 2,984 1,492 1,57,617

TOTAL 9,57,504 19,051 9,569 9,86,124

CENVAT CREDIT AVAILED DUIRNG THE PERIOD April, 2010 to September, 2010 AS PER SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 (Amt in Rs.)S.No. PERIOD Description

of Goods / Services

Ex. Duty/ Service Tax

Edu. Cess SHE Cess

Total

1 April, 2010 to September, 2010

Steel 15,97,284 33,304 16,640 16,47,227

2 April, 2010 to September, 2010

Cement 92,220 1,844 922 94,987

TOTAL 16,89,504 35,148 17,562 17,42,214

10.1.10 In view of the discussion at paras 10.1 to 10.1.10 supra, I hold that the Cenvat credit of Rs. 1,23,12,279/- , Rs. 1,50,53,105/-, Rs. 9,86,124/- and Rs. 17,42,214/- (i.e. Rs. 3,00,93,722/-) availed by the noticee on ‘Steel and Cement’ for the period from October, 2008 to March, 2009, April, 2009 to September 2009, October 2009 to March 2010 and April 2010 to September 2010, respectively is not admissible to them and the same is required to be disallowed and recovered from them along with interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73, Section 68 and Section 75 of the Finance Act, 1994 as demanded in the SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010, SCN No. V.ST/4-80/O & A/10-11 dated 15.10.2010, SCN No. V. STC/4-147/O & A/10-11 dated 12.04.2011 and SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 respectively.

10.2. Cenvat credit on Air Conditioners as Capital goods

10.2.1 I find that the Cenvat credit of duty paid on Air Conditioners has been allowed by the Hon’ble Tribunal in their own case vide order No. A/2122/WZB/AHD/2008 dated, 30.09.2008 considering them as Capital goods falling under Chapter 85 of the Central Excise Tariff Act, 1985. Para 11.1 and 11.2 of the CESTAT Order discussed the issue as under :

11.1 A part of the demand relates to the credit of duty paid on the air-conditioners. The appellant has contended that such air-conditioners are capital goods falling under Chapter 85 of the Central Excise Tariff Act, 1985 and as such in terms of the definition of capital goods, credit has to be allowed. Reliance stands placed on the following decisions :

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(i) CCE, Hyd-I v. BPL Engg. Ltd. [2006 (206) E.L.T. 461 (Tri.-Bang.)](ii) CCE, Trichy v. Thiru Arooram Sugars Ltd. [2008 (221) E.L.T. 264

(Tri.-Chennai)(iii) Jawahar Mills Ltd. v. CCE, Coimbatore [1999 (108) E.L.T. 47 (Tri.-

LB)]11.2 In view of the above, we hold that the credit of duty paid on the Air-conditioners would be available to the appellants.

10.2.2 Thus, following the ratio of the order of the Hon’ble CESTAT, I find that the Cenvat credit on Air Conditioners is admissible to the noticee.

CENVAT CREDIT AVAILED DURING THE PERIOD April, 2009 to September, 2009 AS PER SCN No. V.ST/4-80/O & A/10-11 dated 15.10.2010 (Amt in Rs.)

S. No.

Name of Capital goods, Inputs/ Input Services

Ex. Duty/ Service Tax

Edu. Cess

SHE Cess

Total

1 Air Conditioners 58053 1160 580 59793

CENVAT CREDIT AVAILED DUIRNG THE PERIOD April, 2010 to September, 2010 AS PER SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 (Amt in Rs.)S. No. Name of Capital goods, Inputs/ Input

ServicesEx. Duty/

Service TaxEdu. Cess

SHE Cess

Total

1 Air Conditioners 10275 205 103 10583

10.2.3 Thus, Cenvat credit amounting to Rs. 59,793/- and Rs. 10,583/- (i.e. Rs. 70,376/-) availed on Air Conditioners during the period of April 2009 to September 2009 and April 2010 to September 2010 respectively as shown above is admissible to the noticee.

10.3 Cenvat credit availed on service tax paid on “Input Services” like CHA Service, Rent-a-cab service, Surveyor service, Tele/Mobile phone.

10.3.1 I find thatin the noticee’s own case, the Hon’ble High Court of Gujarat has in its order dated 5.5.2010 in respect of Commr. of C.Ex and Customs Vs MP&SEZ Ltd., as reported in 2011(21)STR 361 (Guj.), upheld the CESTAT Order No. A/2122/WZB/AHD/2008 dated 30.09.2008. Further, the order of Hon’ble High Court has also been upheld by the Apex court. Accordingly, I, reproduce Paras 8, 9 and 10 of CESTAT Order No. A/2122/WZB/AHD/2008 dated 30.09.2008 as under :

“ 8. A part of the demand relates to the input credit in respect of service tax paid on the mobile phones, CHA and surveyor charges, rent a cab, club house fees and professional charges paid to consultants for construction, soil testing and labour etc. We find that the issue in respect of availability of credit of service tax paid on mobile phones stand decided by the Tribunal in the following decisions :(i) CST, New Delhi v. Stic Travels Pvt. Ltd. [2007 (8) S.T.R. 495 (Tri. Del.)]

(ii) Indian Rayon & Inds. Ltd. v. Comm. [2006 (4) S.T.R. 79 (Tri.)](iii) Excel Crop Care Ltd. v. CCE [2007 (7) S.T.R. 451].

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9. Similarly we find that the services of CHA and surveyors availed by the appellant are used for the purposes of providing output services and are integrally connected with the port services and the other warehousing and storage services. Similarly hiring of cars for use by the port officers and as such availability of the credit of service tax paid on them under rent a cab services can be held to be availed for the purposes of providing output services. The same are covered by the definition of input services as contained in Rule 2(l) of Central Excise Rules (sic) [Cenvat Credit Rules, 2004] inasmuch as the same are used by a provider of taxable service for providing a output service. We also note that the Commissioner (Appeals), Rajkot vide order-in-appeal No. 346/2007/Commr(A) /RAJ dt. 30-11-2007 has allowed credit of the service tax paid by the appellants on mobile phone, rent a cab, CHA and Surveyor charges and professionals. The said order has not been challenged by the Revenue and as such has attained finality. We accordingly hold that the credit in respect of the same is available to the appellant.10. However, we do not agree with the appellant that the service tax paid on the club house fees, which are meant for recreation of the workers is available as credit to the appellant inasmuch as the same cannot be held to be in anyway used for providing output services. The same is accordingly confirmed.”

10.3.2 It is evident from the above order that Hon’ble CESTAT has categorically held that the following services were used for providing output services and were integrally connected with the Port Services and other warehousing and storage services:

a. CHA and Surveyors. b. Hiring of the cars for use by the Port officers ( Rent –a-Cab)c. Use of Mobile phones

10.3.3 Further, the Hon’ble High Court of Gujarat in its order dated 05.05.2010, has also upheld the order of the Tribunal by observing that since the Commissioner (Appeals), Rajkot Order-in-appeal No. 346/2007/Commr(A)/RAJ dt. 30-11-2007 has not been challenged by revenue, the same has attained finality and that in absence of any material change justifying the revenue to take a different view of the matter, the question could not have been reopened and a different and contradictory stand could not have been taken. In this regard it is on record that Commissioner (Appeals), Rajkot vide order-in-appeal No. 346/2007/Commr(A) /RAJ dt. 30-11-2007 {in the noticee’s own case} had also allowed the availability of Cenvat credit of the service tax paid by the said service provider on mobile phone, and CHA services by holding them to be “input services” for providing output services within the Customs area and the Port area.

10.3.4 In view of the above, I find that Cenvat credit of service tax paid on Mobile Phones, CHA, Surveyors, Rent-a-cab services is admissible to the noticee. The Cenvat credit availed on Mobile Phones, CHA, Surveyors, Rent-a-cab services by the noticee is as follows:

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2008 to March, 2009 AS PER THE SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010 (Amt in Rs.)S. No. Name of Input Services Ex. Duty/

Service TaxEdu. Cess

SHE Cess Total

1 CHA Services 37908 758 379 39045

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2 Rent-a-Cab 1211033 24221 12110 12473643 Mobile Phone/ Telephone 374250 7485 3743 3854784 Surveyor Services 1863126 37263 18631 1919020

TOTAL: 3486317 69727 34863 3590907

CENVAT CREDIT AVAILED DURING THE PERIOD April, 2009 to September, 2009 AS PER SCN No. V.ST/4-80/O & A/10-11, dated 15.10.2010 (Amt in Rs.)

S. No. Name of Input Services Ex. Duty/ Service Tax

Edu. Cess

SHE Cess Total

1 CHA Services 23020 460 230 237102 Rent-a-Cab 270183 5404 2702 2782893 Mobile Phone/ Telephone 754097 15082 7541 7767204 Surveyor Services 681238 13625 6812 701675

TOTAL: 1728538 34571 17285 1780394

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2009 to March, 2010 AS PER SCN No. V. STC/4-147/O & A/10-11 dated, 12.04.2011 (Amt in Rs.)

S. No. Name of Input Services Ex. Duty/ Service Tax

Edu. Cess

SHE Cess Total

1 CHA Services 58907 1178 589 606742 Rent-a-Cab 479455 9589 4795 4938393 Mobile Phone/ Telephone 324950 6499 3249 3346984 Surveyor Services 1361518 27230 13615 1402364

TOTAL: 2224830 44496 22248 2291575

CENVAT CREDIT AVAILED DUIRNG THE PERIOD April, 2010 to September, 2010 AS PER SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 (Amt in Rs.)

S. No. Name of Input Services Ex. Duty/ Service Tax

Edu. Cess

SHE Cess Total

1 CHA Services 235828 4717 2358 2429032 Rent-a-Cab 189795 3796 1898 1954893 Mobile Phone/ Telephone 311003 6220 3110 3203334 Surveyor Services 1358210 27165 13582 1398957

TOTAL: 2094836 41897 20948 2157682

10.3.5 In view of the above, Cenvat credit of service tax amounting to Rs. 35,90,907/-, Rs. 17,80,394/-, Rs. 22,91,575/- and Rs. 21,57,682/- demanded vide SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010, SCN No. V.ST/4-80/O & A/10-11 dated 15.10.2010, SCN No. V. STC/4-147/O & A/10-11 dated, 12.04.2011, SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 respectively on services pertaining to Mobile Phones, CHA, Surveyors, Rent-a-cab services is admissible to the noticee.

10.4 Cenvat credit on Other Inputs-Excise Duty- Bitumen, Other Inputs- Excise Duty, Other Inputs-Capital Goods (including Capital Goods on hold) etc.

10.4.1 The noticee have in their defence reply submitted that the SCN does not set out the reasons for disallowing the credit on the aforesaid items and is therefore bad in law and deserves to be set aside. They further submitted that aforesaid goods are ultimately used for providing output service viz. Port Service, Storage and Warehousing Service and Cargo Handling Service by the Noticee and

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therefore qualify as inputs. Accordingly, credit of duty paid on the aforesaid goods would be available to them and the same has been rightly availed by them. During the personal hearing held on 30.8.2013, they have submitted a list of Inputs and their uses. The details thereof is reproduced hereunder :-Sr. No Input Items Uses

1 Paint For maintenance of Tug, Excavator, Crane, Tank Farm, Liquid Pipeline-used for erosion coating

2 Plastic Sheet Used for covering bulk cargo lying in open area/godown i.e Wheat, Fertilizer, Sugar etc and covering open wagon of bulk fertilizer.

3 Grease Used in Crane, Excavators, Loaders, Hydra and equipments used for handling of cargo

4 Cable Used for bagging machine, power transmission, electrical tower in open area.

5 Fan Used in Port Offices in Port area and Blower Fan for Boiler.6 Engine Oil Used in Crane, Excavators, Loaders, Hydra and equipments

used for handling of cargo7 Furnace Oil Used in Hotmix & Bitumen burner8 Bitumen Used for open godown facility (cargo storage in open

godown) and internal Road in Port area9 Transformer Transformer used in Tank Farms, Container Terminal

electrical supply10 MS Pipe Used in Tank Farm, Container terminal11 Air Compressor Used as machinery in liquid cargo processing plant12 HDPE Pipes Used for covering electrical cables at jetty area13 Electric items Used at Tank farm, Backup yard- CT-2, Godowns14 Forklifts Loading, unloading of steel plates, structural steel cargo15 Bull dozers Loading and unloading of sugar and fertilizer.16 Excavators Loading and unloading of sugar and fertilizer.17 Valves Used in Liquid Pipelines for liquid cargo operation18 Dredger House Used in Dredger pipeline for dredging activity19 Conveyer Belt Conveyer Belt used in conveyer system for fertilizer and coal

cargo, loading and unloading from vessel20 Electrical pole Lighting in open area of Port21 Spares for tugs Tugs used for port operation i.e berthing and de-berthing of

vessel at jetty22 Spares for cranes Cranes used for Port operations i.e bulk cargo loading and

unloading23 Grab Grab used for bulk scrap cargo loading and unloading24 Pump Motor Used in mobile bagging machine (bagging of wheat cargo)25 Spares for SBM Used in VLCC vessels operation at Singal Buoy Mooring –

IOCL site26 Rail for T2 Rail for Crane movements on terminal for cargo handling27 Wheat Cleaning

machineUsed for cleaning of wheat before loading into the vessels i.e part of port services

10.4.2 The noticee have submitted in their written submission dated 30/08/2013 that the aforesaid items qualify as “inputs” and were used for providing Port Services and cited the cases of M/s Ambuja Cement Eastern Limited VS. CCE reported at 2010(256)ELT 690 (HC); UOI Vs. Hindustan Zinc Ltd. reported at 2007(214) ELT 510(Raj); Birla Corporation Ltd. Vs. CCE reported at 2012(276) ELT 376 (T) and Panipat Co-op Sugar Mills ltd. Vs. CCE reported at 2013(293) ELT 66, in support of their defence. In respect of their capital goods in question the noticee have not given the specific evidence which

46

proves that the same is used as capital goods for providing output service namely “Port Service”.

10.4.3 In this regard, it is important to determine the nature and use of the “inputs/capital goods” to arrive to the solution as to whether the Cenvat credit could be available to them. I find from the list mentioned at para 10.4.1 supra, that the inputs/capital goods are being used for maintenance, repairs of the machines installed in the Port area and for other general uses in the Port area. Now, the Construction of the port is an exempted service in terms of Notification No. 16/2005-ST dated 07.06.2005 as substituted by Notification No. 25/2007-ST dated 22.05.2007. Thus, as the construction of the Port is immovable property and exempted service falling under “Commercial or industrial construction service” as referred to in sub-clause (zzq) of clause (105) of section 65 of the Finance Act, any inputs/machines used in or in relation to running/maintaining of the Port , cannot be said to be inputs used for providing Port Services. This fact is fortified by the landmark judgement of M/s BHARTI AIRTEL LTD. Versus COMMISSIONER OF CENTRAL EXCISE, PUNE reported at 2013 (29) STR 0401 (Tri-Mum.). The Hon’ble Tribunal in the said case examined the issue of whether the immovable, non-marketable and non-excisable structure viz. tower can be considered as “goods” for providing output service and whether its components can be held to be inputs. In Paras 38 to 40, the Hon’ble Tribunal examined the issue in detail, and concluded as under :

“38. If  the towers and parts thereof are not capital goods falling under Rule 2(a)(A) of the CENVAT Credit Rules, 2004, it is argued, they are liable to be recognized as ‘inputs’ under Rule 2(k). We have examined this alternative plea also. The appellant and their counsel are now claiming under clause (ii) of the definition of ‘input’, which reads thus : “all goods, except light diesel oil, high speed diesel oil, motor spirit commonly known as petrol, and ‘motor vehicles, used for providing any output service”. The argument is that there is no place for Chapters, Headings and sub-headings of the CETA Schedule in the definition of “input” and therefore the tower should be held to be input used for providing output service. Relying on Explanation 2, the learned counsel has argued that, in case the tower is held to be capital goods, the components used for its fabrication and erection would stand covered by the definition of input. Contextually, it has also been argued that the amendment which was brought to the explanation by Notification No. 16/2009-C.E. (N.T.), dated 7-7-2009 did not have retrospective effect to defeat the appellant’s contention that the various items used for making the tower for support to antennas are covered by the definition of ‘input’. The learned JCDR has, on his part, placed heavy reliance on the Tribunal’s Larger Bench decision in Vandana Global case wherein the said amendment was held to have retrospective effect. We have carefully considered all these submissions. Looking at the definition of ‘input’ referred to by both sides, we note that all “goods” (except motor vehicles and certain petroleum products) used for providing any output service are within the ambit of the definition of “input”. If any item has to be brought within the ambit of this definition, it has to be, firstly, “goods” and, secondly, “used for providing any output service”. The first requirement in this case is not met by the towers which are admittedly immovable structures and ipso facto non-marketable and non-excisable. In our view, the following points made by C.B.E. & C. in Circular No.

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58/1/2002-CX., dated 15-1-2002 are relevant to this context :(iii) Where change of identity takes place in the course of construction or

erection of a structure which is an immovable property, then there would be no manufacture of “goods” involved and no levy of excise duty.

(v) If items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods.

(vii) When the final product is considered as immovable and hence not excisable goods, the same product in CKD or unassembled form will also not be dutiable as a whole by applying Rule 2(a) of the Rules of Interpretation of the Central Excise Tariff… …

The appellant’s counsel submitted that towers in CKD condition falling under sub-heading 7308 20 of the CETA Schedule were procured and brought to the sites and assembled and erected there for installation of antennas aloft. That, upon such assembly and erection, they became immovable structures is an admitted fact. On these facts, there is no question of holding the towers to be “goods” and, for that matter, to be “inputs” under Rule 2(k).39. Explanation 2, prior to its amendment, says that “input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer”. Obviously, it is applicable only to a manufacturer of final product who manufactures capital goods out of duty-paid materials and uses such capital goods captively for the manufacture of final product in the factory. The explanation is intended to enable him to treat the said duty-paid materials as ‘inputs’ for the purpose of CENVAT Credit. It is not applicable to providers of taxable services. Further, to our mind, the amending Notification No. 16/2009-C.E. (N.T.) intended to exclude certain specified materials (cement, angles, channels, CTD bars, TMT bars etc.) which would otherwise have been covered by Explanation 2 as it stood prior to the amendment. In this view of the matter, the amendment is also not applicable to a provider of output service. We can analyse as follows the exclusion clause added to Explanation 2 by Notification No. 16/2009 :-

but shall not include cement, angles, channels, CTD bar or TMT bar and other items

used for ---construction of factory shed, (a)(b) building or laying of foundation or making of structures for

support of capital goods.Both sides seem to have understood the last segment (“building or laying of foundation or making of structures for support of capital goods”) of the amended explanation as applicable to both manufacturer of goods and provider of taxable services. In our view, had it been the intention of the legislative authority to include a provider of taxable services also in explanation 2, it would have been clearly reflected in the text of the explanation. As the inclusion clause of the explanation is expressly applicable only to manufacturer, the exclusion clause which only seeks to carve out certain exceptions must be applicable only to manufacturer in the conspicuous absence of any reference to service provider. Therefore we hold that

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Explanation 2 is applicable only to manufacturers of excisable goods and not to providers of taxable services, both prior to 7-7-2009 and after that date. In other words. Explanation 2 has no impact on the issue at hand. In the result, the iron & steel materials used for fabricating and erecting the towers cannot be held to be ‘inputs’ on the basis of anything contained in Explanation 2.40.The learned counsel for the  appellant has relied on a line of decisions in support of his plea for holding towers to be ‘inputs’ used for providing mobile telephone service. In the case of Godfrey Phillips India Ltd., the word ‘input’ used in Notification No. 201/79-C.E., dated 4-6-1979 was examined by the Bombay High Court and was held to have a wider meaning than the word ‘ingredient’. In the case of Hindustan Sanitaryware and Industries, the question considered by the Supreme Court was whether moulds of plaster of paris which were used for manufacture of sanitaryware could be treated as ‘inputs’ within the meaning of this term used in exemption Notification No. 217/86-C.E., dated 2-4-1986 as amended by Notification No. 82/87-C.E. In these and similar cases cited by the learned counsel, the commodities considered were all goods which were found to have been used, one way or another, in or in relation to the manufacture of the final products. The cited decisions are not applicable to the present case where the issue under consideration is whether the immovable, non-marketable and non-excisable structure viz. tower can be considered as “goods” used for providing output service and whether its components can be held to be inputs on the basis of Explanation 2 (vide supra). We have answered these questions against the appellant for definite reasons. Our reasons pertaining to the appellant’s case are not relevant to the cases cited by the learned counsel, nor are the grounds on which those cases were decided relevant to the appellant’s case.”

10.4.4 The noticee has relied on the following cases :

Sr.No. Cases Decision1 M/s Ambuja Cement

Eastern Limited VS. CCE as reported in2010(256) ELT 690 (HC)

the welding electrodes used for repair/maintenance of the capital goods, which are, in turn, used in the manufacture of final products i.e. clinker and cement falling under Chapter-25 of the Central Excise Tariff Act, 1985 would be “inputs”

2 UOI Vs. Hindustan Zinc Ltd. as reported in 2007 (214) ELT 510 (RAJ)

Such goods which are necessary for running of plant and up-keeping of the machinery directly involved in the manufacturing and products were eligible to avail Modvat credit.

3 Birla Corporation Ltd. Vs. CCE as reported in 2002 (276) ELT 376 (TRI.)

Welding electrodes, used for repair of plant and machinery were held to be eligible for Cenvat credit and in Panipat Co-op Sugar Mills ltd., Credit for Steel Items such as channels, angles H.R. sheets, etc., used for repair of old and worn out machinery were held to be eligible for credit

On plain reading of these case laws, it is clear that the facts of the present case are different to those cited by the noticee. The above cited cases are pertaining

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to issue of eligibility of inputs to a manufacturer, whereas, in the present case, the noticee is not a manufacturer but a service provider. The definition of “inputs” must be read differently in respect of a manufacturer and a service provider. For a manufacturer, Cenvat credit may be allowed when “inputs” are used in the manufacture directly or indirectly, whereas for a service provider, Cenvat credit may be allowed only when “inputs” are used directly for providing output service. The noticee is a provider of service viz. “Port Service” and the subject items namely Paint, plastic sheet, grease, cable, fan, engine oil, furnance oil, bitumen, transformer, MS Pipe, Air Compressor, HDPE Pipe, Electric items, Forklifts, Bull dozers, Excavators, Valve, Dredger House, Conveyor Belt, Electrical pole, spares for tugs, spares for cranes, grab, pump motor, spares for SBM, Rail for T2, Wheat cleaning etc. are used for repairs and maintenance of port and not used directly for providing their output service. Hence, the same cannot be considered as inputs for them and consequently the Cenvat credit is also not admissible to them.

10.4.5 The main issue is as to whether Cenvat credit can be allowed on inputs/capital goods such as bitumen, machines, parts of machine or the inputs used for the maintenance or repair of the machines installed in the port area. I find that in the service provider’s own case reported in 2009 (13) S.T.R. 178 (Tri. - Ahmd.) which was maintained by Hon’ble High Court of Gujarat as reported at 2011 (21) S.T.R. 361 (Guj.), the Hon’ble judges on the question as to what constitutes or does not constitute an output service for the said service provider, dwelt as under :

“7…….. we proceed to find out the true meaning and interpretation of the expression “used for providing a output service”. A plain and simple English meaning of the above would be the goods which are required for providing a output service. Admittedly jetty is required for providing the port service in the same manner as any office building etc. is required for providing any other output service. The question is as to whether cement and steel, which are the disputed goods in the present case, are required for providing port service or can be said to be used for providing port service. The cement and steel have undoubtedly been used in the construction of jetty and port building by the contractor, which service is itself liable to service tax, though the same is exempted under the Notification. As such, it can be safely concluded that the cement and steel stand used for providing the output service of construction of building and not used in providing the port service, such an interpretation would lead to unwarranted results and the definition cannot be so stretched so as to include the use of cement and steel as used for providing the output service of port services. If such a wide meaning is given to the above expression then the cement and steel used for construction of any building which houses the office etc. would become eligible inputs for the purposes of providing output services. As such, we do not agree with the ld. Advocate that such cement and steel can be held to be eligible inputs used for providing the output port service. Accordingly, confirm the demand on this count”

It is thus evident that for goods to be qualified as inputs or capital Goods, it is necessary that they should invariably be used during the provision of output services. In the instant case, I find that the noticee has not provided any evidences showing the usage of such capital goods in the provision of output services namely ‘Port Service’. In absence of such evidences and the evedences on record I find that such “ inputs/capital goods” were not used during the provision of the output services provided

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by the noticee i.e. “Port Services” and hence they do not qualify as “Inputs” or “Capital goods” for output services provided by the noticee.

10.4.6 The details of the Cenvat credit availed on “Other Inputs/Other Capital Goods” are as under:

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2008 to March, 2009 AS PER THE SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010 (Amt in Rs.)

S.No. Name of Capital goods, Inputs/ Input Services

Ex. Duty/ Service Tax

Edu. Cess

SHE Cess

Total

01 Other Inputs-Excise Duty 10276680 204897 102118 1058369502 Other Inputs-Capital goods 23677542 473541 236765 24387848

TOTAL 33954222 678438 338883 34971543

CENVAT CREDIT AVAILED DURING THE PERIOD April, 2009 to September, 2009 AS PER SCN No. V.ST/4-80/O & A/10-11 dated, 15.10.2010 (Amt in Rs.)

S.No. Name of Capital goods, Inputs/ Input Services

Ex. Duty/ Service Tax

Edu. Cess

SHE Cess

Total

01 Other Inputs- Excise Duty 12567269 247873 123766 1293890802 Other Inputs-Capital Goods 44411966 888330 443876 45744172

TOTAL 56979235 1136203 567642 58683080

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2009 to March, 2010 AS PER SCN No. V. STC/4-147/O & A/10-11 dated, 12.04.2011 (Amt in Rs.)

S.No. Name of Capital goods, Inputs/ Input Services

Ex. Duty/ Service Tax

Edu. Cess

SHE Cess

Total

01 Other Inputs-Excise Duty 5933195 119247 59390 611183202 Other Inputs-Capital Goods 952609 19052 9514 981175

TOTAL 6885804 138299 68904 7093007

CENVAT CREDIT AVAILED DUIRNG THE PERIOD April, 2010 to September, 2010 AS PER SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 (Amt in Rs.)

S.No. Name of Capital goods, Inputs/ Input Services

Ex. Duty/ Service Tax

Edu. Cess

SHE Cess

Total (Rs.)

01 Other Inputs-Bitumen 42553 851 425 4382902 Other Inputs-Excise Duty 5678891 113635 56791 584931603 Other Inputs-Capital Goods 450898 9014 4500 46441204 Other Inputs-Capital Goods

On hold during F.Y. 2009-103217498 64313 32003 3313814

TOTAL 9389840 187813 93719 9671371

10.4.7 In view of the above discussion, I hold that the Cenvat credit of Rs. 3,49,71,543/- , Rs. 5,86,83,080/-, Rs. 70,93,007/- and Rs. 96,71,371/- availed by the noticee on ‘Inputs” and “Capital Goods” for the period from October 2008 to March 2009, April 2009 to September 2009, October 2009 to March 2010 and April 2010 to September 2010 is not admissible to the noticee and required to be disallowed

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and recovered from them along with interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section , read with Section 68, read with Section 75 of the Finance Act, 1994, as demanded in the SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010, SCN No. V.ST/4-80/O & A/10-11 dated 15.10.2010, SCN No. V. STC/4-147/O & A/10-11 dated, 12.04.2011 and SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 respectively.

10.5 Cenvat credit on “Other Input Services”, “Other Input Services-Port Services” and “Other Input Services-Rule 6(5) credit as per CCR, 2004”

10.5.1 It is alleged in the Show Cause Notice that the noticee have availed Cenvat credit of service tax on various categories of services such as Man Power Recruit and Supply, Transport of Goods by Road Dredging Service, Port Service, Cargo Handling Service, Site formation Services, Technical Testing & Analysis Service, construction, soil testing, bank charges, labour charges, installation etc. which are not their valid input service as per Rule 2 (l) of Cenvat Credit Rules, 2004. In their defence dated 31.12.2007, the noticee contended that :

- the aforesaid services are ultimately used for providing output service under above Rule.

- These are required for the day to day running of business of the noticee for providing support service.

- the third part of the definition of “input service” specifically provide for an activity relating to business and thereafter specify certain activities.

- aforesaid services are used for purpose of business and therefore qualify as “inputs service”.

10.5.2 In this regard, I find that the noticee has not submitted any evidence which proves that these services are used for their business and providing output service viz. “Port Service”. As per Rule 9 (6) of Cenvat Credit Rules, 2004, the burden of proof regarding admissibility of Cenvat credit lies upon the service provider of output service taking Cenvat credit which the noticee has failed to do . Thus, in absence of evidences regarding the manner in which these ‘other input services’ namely, professional fees, construction, soil testing, bank charges, labour charges, installation etc. were been used, I have to go by the evidences available on record. I find that the cases namely M/s Coca Cola India P Ltd Vs. CCE reported at 2009 (242) ELT 168 (Bom) and CCE Vs Cadila Healthcare Ltd reported at 2013(30) STR 3 (Guj), quoted by the noticee cannot be made applicable to this issue as the actual consumption of the services have not been brought on record by the noticee.

10.5.3 Further, in the case of M/s Aditya Birla Nuvo as reported at 2009 (14) STR 304 (Tri-Ahd), the Tribunal had allowed the Cenvat credit on service tax paid on Issuance of NOC by bank, annual custody fees and maintenance of fax machine at the house of company’s executive. However, in the present case, the said service provider has not submitted any details of nature of Bank Charges, and in absence of which the nexus of such Bank Charges to their output service cannot be established. Hence, the ratio of the decision of M/s Aditya Birla Nuvo (supra) cannot be applied to the instant case.

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10.5.4 Further, on going through the ABB judgement[2009(15) STR 23 (Tri.-LB), I find that Hon’ble CESTAT has at para 2 & 3 of the Order referred to Cenvat Credit Rules, 2004 and the condition where the Cenvat credit cannot be disallowed if the assessee satisfies any one of the following :-

(a) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products,

(b) Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal,

(c) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,

(d) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,

(e) Services used in relation to activities relating to business and outward transportation upto the place of removal.

Further, at para 24 of the said order, Hon’ble CESTAT has further held that the definition of “input service’ has to be interpreted in light of the requirements of business and it cannot be read restrictively so as to confine only upto factory or upto depot of manufacture.

10.5.4.1 A conjoint reading of the above, reveals that except for (d) and (e) all the other relate to manufacture. As regards (d) and (e) the conditions are relating to post manufacturing activity whereas in the instant case the assessee had availed Cenvat credit on services which had no relation to the “Port Service”. I find that the services in question are not integrally connected with the Port Service and other Warehousing Services. This view has already been laid down in CESTAT Order dated 30.09.2008.

10.5.5 I find that the Cenvat credit availed by the notice on the ‘Other Input Services” including Bank Charges, are as under:

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2008 to March, 2009 AS PER THE SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010 (Amt in Rs.)

S.No. Name of Input Services Service Tax Edu. Cess

SHE Cess

Total

01 Other Input Services 131004631 2620094 1309671 134934396

CENVAT CREDIT AVAILED DURING THE PERIOD April, 2009 to September, 2009 AS PER SCN No. V.ST/4-80/O & A/10-11 dated, 15.10.2010 (Amt in Rs.)

S.No. Name of Input Services Service Tax Edu. Cess

SHE Cess

Total

01 Other Input Services 127889860 2557798 1278418 131726075

CENVAT CREDIT AVAILED DUIRNG THE PERIOD October, 2009 to March, 2010 AS PER SCN No. V. STC/4-147/O & A/10-11 dated, 12.04.2011 (Amt in Rs.)

S.No. Name of Input Services Service Tax Edu. Cess

SHE Cess

Total

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01 Other Input Services-Port Services

68690654 1377533 616622 70684809

02 Other Input Services-Rule 6(5) credit as per CCR, 2004

30778940 615579 302426 31696946

03 Other Input Services 10148144 202963 101499 10452606TOTAL 109617738 2196075 1020547 112834361

CENVAT CREDIT AVAILED DUIRNG THE PERIOD April, 2010 to September, 2010 AS PER SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 (Amt in Rs.)

S.No. Name of Input Services Service Tax

Edu. Cess

SHE Cess

Total (Rs.)

01 Other Input Services-Port Services

89467377 1789345 894673 92151355

02 Other Input Services-Rule 6(5) credit as per CCR, 2004

17450873 348967 174485 17974325

03 Other Input Services 22339232 446783 223398 23009413TOTAL 129257482 2585095 129556 133135093

10.5.6 In view of the above discussion, I hold that the Cenvat credit of Rs. 13,49,34,396/- , Rs. 13,17,26,075/-, Rs. 11,28,34,361/- and Rs. 13,31,35,093/- availed by the noticee on ‘Other Input Services-Port Services”, Other Input Services-Rule 6(5) credit as per CCR, 2004” and “Other Input Services” for the period from October 2008 to March 2009, April 2009 to September 2009, October 2009 to March 2010 and April 2010 to September 2010 is not admissible to the noticee and required to be disallowed and recovered from them along with interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section , read with Section 68, read with Section 75 of the Finance Act, 1994, as demanded in the SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22/04/2010, SCN No. V.ST/4-80/O & A/10-11 dated 15.10.2010, SCN No. V. STC/4-147/O & A/10-11 dated, 12.04.2011 and SCN No. V. STC/4-56/O & A/11-12 dated, 08.09.2011 respectively.

Imposition of Penalty

11. Hon’ble CESTAT Ahmedabad has in its Order No. A/2122/WZB/AHD/2008 dated 30.09.2008 set aside the penalty proposed under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 78, 76 and 77 of the Finance Act, 1994, on the grounds that the matter involved interpretation of law. The Hon’ble CESTAT has discussed the issue of penalty in the para 12 of the above order which is as under:

12. ……….. As regards penalty of identical amount, we find that the issue involved is of bona fide dispute about admissibility of credit or otherwise and involves the bona fide interpretation of the provisions of the law. Otherwise also, the credit was availed in statutory records, under due intimation to the jurisdictional authorities. As such, no mala fide is attributable to the appellants so as to invoke penal provisions. As such, we do not find any justification for imposition of penalty upon the appellant. The same is accordingly set aside.

The said order was also maintained by the Hon’ble High Court of Gujarat and the Hon’ble Apex Court.

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11.1 However, once Hon’ble CESTAT decided the entire issue, the question of interpretation of law for subsequent period did not arise. Accordingly, the noticee should have as per the decision of Hon’ble CESTAT taken CENVAT credit only on those inputs, input services and capital goods on which CENVAT credit was allowed by the Hon’ble CESTAT. However, I find that inspite of the clear cut order passed by Hon’ble CESTAT on 30/09/2008, the noticee continued to take credit on inputs, input services and capital goods which were not consumed or utilised for the provision of output services namely “Port Services”. Thus, they had wrongly availed Cenvat credit on such inputs, input services and capital goods during the period Oct’08 to Sept’10 and have thereby made themselves liable to penalty under Rule 15(1) of the CENVAT Credit Rules’2004. However, I find that penalty under Section 76 of the Finance Act, 1994 as proposed in the SCN. No. V.ST/AR.Gndham/Commr./95/2010 dated 22/04/2010 is not imposable on the noticee as the issue in the SCN is regarding wrong availment of Cenvat Credit. Further, following the ratio of Hon’ble CESTAT order supra, I also find that penalty under Rule 15(3) of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 is not imposable on the noticee as there is no suppression or malafide intention etc. in the present case.

11.2 Further, the noticee have in their defence submitted that the present issue has arisen due to a disputed interpretation of the law and therefore no penalty can be imposed in the present case and have in support to their contention relied on the following decisions.

a. Wiptech Peripherals Pvt. Ltd v/s CCE, Rajkot [2008(12)STR 716 (Tri.-Ahmd].

b. Sanghi Industries Ltd. v/s CCE, Rajkot [2008(12)STR 495 (Tri.-Ahd)]c. A.G.Shibu v/s Commissioner of Cus, C.Ex. &ST, Cochin[2008(10) STR 317

(Tri.-Bang)]d. Nizam Sugar Factory v/s CCE, AP [20069197)ELT 465(SC0].e. ECE Industries Ltd. v/s CCE, Delhi [2004(164) ELT 236(SC)].f. Devans Modern Breweries Ltd v/s CCE, Chandigarh [2006(202) ELT

744(SC)].

11.3 In this regard, as already discussed by me in para supra, the matter of interpretation was already addressed by the Hon’ble CESTAT in its judgement dated 30.9.2008 and hence the same cannot be taken as a ground or excuse. I accordingly do not consider the same. As regard the judgements quoted by the noticee, I find that they do not have any relevance to the present case and hence the ratio of the judgements cannot be made applicable to the instant case. Therefore, I hold that the noticee is liable for penalty under Rule 15(1) of the Cenvat Credit Rules, 2004.

12. In view of above discussions and findings, I pass the following order in respect of the four SCNs shown hereunder:

ORDER

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(A) SCN No. V.ST/AR-Gndham/ Commr./95/2010 dated 22.04.2010 of Rs. 18,58,09,125/-.

(i) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 1,23,12,279/- (Rupees One Crore Twenty Three Lakh Twelve Thousand Two Hundred Seventy Nine only) on Cement & Steel, under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. ( Now M/s Adani Port & Special Economic Zone Ltd.).

(ii) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. ( Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable from time to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(iii) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 16,99,05,939/- (Rupees Sixteen Crore Ninety Nine Lakh Five Thousand Nine Hundred Thirty Nine) on “Other Inputs”, “Other Input-Capital Goods” and “Other Input Services” under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(iv) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable from time to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(v) I drop the demand of recovery of Cenvat credit of Rs. 35,90,907/- ( Rupees Thirty Five Lakh Ninety Thousand Nine Hundred Seven ) on Input Services viz., CHA Services, Rent-a-cab, Mobile Phone, Surveyor Services, and capital goods Air-conditioner raised against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(vi) I impose a penalty of Rs. 18,22,18,218/- (Eighteen Crore Twenty Two Lakh Eighteen Thousand Two Hundred Eighteen) on M/s. Mundra Port & Special Economic Zone Ltd. ( Now M/s Adani Port & Special Economic Zone Ltd.) under Rule 15(1) of the Cenvat Credit Rules, 2004.

(B) SCN No V.STC/4-80/O&A/10-11 dated 15/02/2010 of Rs. 20,73,02,447/-(i) I confirm the demand for recovery of wrongly availed Cenvat credit

amounting to Rs. 1,50,53,105/- (Rupees One Crore Fifty Lakh Fifty Three Thousand One Hundred Five) on Cement & Steel, under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(ii) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable from time

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to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(iii) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 19,04,09,155/- (Rupees Nineteen Crore Four Lakh Nine Thousand One Hundred Fifty Five) on , “Other Inputs”, “Other Input- Capital Goods” and “Other Input Services” under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(iv) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable from time to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(v) I drop the demand of recovery of Cenvat credit of Rs. 18,40,187/- ( Rupees Eighteen Lakh Forty Thousand One Hundred Eighty Seven ) on Input Services viz., CHA Services, Rent-a-cab, Mobile Phone, Surveyor Services, and capital goods Air-conditioner raised against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(vi) I impose a penalty of Rs. 20,54,62,260/- (Twenty Crore Fifty Four Lakh Sixty Two Thousand Two Hundred Sixty) on M/s. Mundra Port & Special Economic Zone Ltd. ( Now M/s Adani Port & Special Economic Zone Ltd.) under Rule 15(1) of the Cenvat Credit Rules, 2004

(C) SCN No. V.STC/4-147/O&A/10-11 dated 12/04/2011 of Rs.12,32,05,067/-(i) I confirm the demand for recovery of wrongly availed Cenvat credit

amounting to Rs. 9,86,124/- (Rupees Nine Lakh Eighty Six Thousand One Hundred Twenty Four) on Cement & Steel, under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(ii) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable from time to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(iii) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 11,99,27,368/- (Rupees Eleven Crore Ninety Nine Lakh Twenty Seven Thousand Three Hundred Sixty Eight) on “Other Inputs”, “Other Input-Capital Goods”, “Other Input Services-Port Services”, Other Input Services-Rule 6(5) credit as per CCR, 2004” and “Other input services” under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.)

(iv) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable

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from time to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(v) I drop the demand of recovery of Cenvat credit of Rs. 22,91,575/- ( Rupees Twenty Two Lakh Ninety One Thousand Five Hundred Seventy Five) on Input Services viz., CHA Services, Rent-a-cab, Mobile Phone, Surveyor Services, and capital goods Air-conditioner raised against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(vi) I impose a penalty of Rs. 12,09,13,492/- (Twelve Crore Nine Lakh Thirteen Thousand Four Hundred Ninety Two) on M/s. Mundra Port & Special Economic Zone Ltd. ( Now M/s Adani Port & Special Economic Zone Ltd.) under Rule 15(1) of the Cenvat Credit Rules, 2004

(D) S CN No. V.STC/4-56/O&A/11-12 dated 08/09/2011 of Rs.14,67,16,943/-

(i) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 17,42,214/- (Rupees Seventeen Lakh Forty Two Thousand Two Hundred Fourteen) on Cement & Steel, under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.)

(ii) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable from time to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(iii) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 14,28,06,464/- (Rupees Fourteen Crore Twenty Eight Lakh Six Thousand Four Hundred Sixty Four) on “Other Inputs-Bitumen”, “Other Inputs”, “Other Input-Capital Goods”, “Other Input Capital Goods-On Hold during F.Y. 2009-10” “Other Input Services-Port Services”, Other Input Services-Rule 6(5) credit as per CCR, 2004” and “Other input services” under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(iv) I order for recovery of interest on the above said wrongly availed Cenvat credit from M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) at the rates applicable from time to time in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994.

(v) I drop the demand of recovery of Cenvat credit of Rs. 21,68,265/-( Rupees Twenty One Lakh Sixty Eight Thousand Two Hundred Sixty Five) on Input Services viz., CHA Services, Rent-a-cab, Mobile Phone, Surveyor Services, and capital goods Air-conditioner raised against M/s. Mundra Port & Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.).

(vii) I impose a penalty of Rs. 14,45,48,678/- (Fourteen Crore Forty Five Lakh Forty Eight Thousand Six Hundred Seventy Eight) on M/s. Mundra Port

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& Special Economic Zone Ltd. (Now M/s Adani Port & Special Economic Zone Ltd.) under Rule 15(1) of the Cenvat Credit Rules, 2004

(Tejasvini P. Kumar) Commissioner

Service Tax, Ahmedabad.

F.No. V.ST/15-83/Adj/10 Dt. 19/11 /2013.By Regd. Post A.D./Hand DeliveryTo,M/s. Mundra Port & Special Economic Zone Ltd. (Formerly known as Gujarat Adani Port Ltd.)Now M/s Adani Port & Special Economic Zone Ltd.Adani House, Near Mithakhali CircleNavrangpuraAhmedabad

Copy to:(i) The Chief Commissioner of Central Excise & Service Tax, Ahmedabad Zone,

Ahmedabad.(ii) The Assistant Commissioner, Service Tax, Division II, Ahmedabad.(iii) The Superintendent, Service Tax, Range VIII, Division-II, Ahmedabad.(iv)Guard File.