Circular No 966/09/ 2012-CX dt 18 May 2012. on CENVAT Credit on Structural Components of Boiler

Clarification regarding classification of Structural Components of Boiler and Admissibility of CENVAT Credit on these Structural Components

A. Issue:

Clarification in respect of the Circular No 964/07/2012-CX issued vide F No 84/1/2011-CX.1 dated 2^nd April 2012 stating that

1.Structural components of Boiler which are essentially parts of the boiler are to be classified under heading 8402 and

2.CENVAT credit shall be admissible in respect of such structural components/ parts (of the Boiler), as they are not used for laying of foundation or making of structures for support of capital goods.

B. Clarification:

The circular dated 2^nd April 2012 was issued in the context of a dispute    as to

1. Whether certain structural components were to be treated as boiler parts or as goods for making structures to support the boilers.

2. Whether a particular structural component is a part of the Boiler or a component to make structure for supporting the Boiler is a question of facts and needs to be examined on a case to case basis, depending on the nature and use of the said structural component as per the existing legal provisions and judicial pronouncements on the subject.

C. Conclusion:

            As clearly stated in para 3 of Boards’ above circular dated 2.4.2012, it is once again reiterated that in terms of the Rule 2(k) of the CENVAT Credit Rules, 2004,

a. While CENVAT Credit is available in respect of parts of Boiler,

b. But the same is not admissible in respect of the structural components used for laying of foundation or making of structures for support of capital goods/ Boiler. 

The above clarification is in conformity with the views expressed in the judgments of the Hon’ble Supreme Court/ different benches of the CESTAT.

Circular No. 158/9/ 2012 – ST, Dated 8th May 2012

Clarification on Rate of Tax

1.             The rate of service tax has been restored to 12% w.e.f. 1^st April 2012.  Representations have been received requesting clarification on the rate of tax applicable wherein invoices were raised before 1^st April 2012 and the payments shall be after 1^st April 2012.

2.             Clarification has been requested in case of the 8 (taxable services referred to in sub-clauses (g),(p),(q),(s),(t),(u),(za) and (zzzzm) of clause (105) of section 65 of the Finance Act, 1994. ) specified services provided by individuals or proprietary firms or partnership firms, to which Rule 7 of Point of Taxation Rules 2011 was applicable and services on which tax is paid under reverse charge.

3.             The rate of service tax prevalent on the date when the point of taxation occurs is rate of service tax applicable on any taxable service. In case of the 8 specified services and services wherein tax is required to be paid on reverse charge by the service receiver the point of taxation is the date of payment. Circular No 154/5/2012 – ST dated 28^th March 2012 has also clarified the same

4.             . Thus in case of such 8 specified services provided by individuals or proprietary firms or partnership firms and in case of services wherein tax is required to be paid on reverse charge by the service receiver, if the payment is received or made, as the case maybe, on or after 1^st April 2012, the service tax needs to be paid @12%.

5.             The invoices issued before 1^st April 2012 may reflect the previous rate of tax (10% and cess). In case of need, supplementary invoices may be issued to reflect the new rate of tax (12% and cess) and recover the differential amount. In case of reverse charge the service receiver pays the tax and takes the credit on the basis of the tax payment challan.

6.              Cenvat credit can be availed on such supplementary invoices and tax payment challans, subject to other restrictions and conditions as provided in the Cenvat Credit Rules 2004.

M/s.Triveni Engg. & Industries Ltd. Vs Commissioner of Central Excise (dt 18.8.2011 CESTAT NEW DELHI)

Facts of the Case:

1              As per facts on record M/s. Triveni Engineering  & Industries   Ltd. are engaged in the manufacture of sugar and were availing   services   of   Goods transport agency by road.  They were duly registered with the service tax department and were discharging Service Tax liability as recipient of the said services in terms of provisions of Rule 2(1)(d)(v) of the Service Tax Rules, 1994, by which the liability  of payment of Service Tax in respect of GTA services stands shifted to the recipient of the said services.

2              While discharging their service tax liability on the GTA services, the appellant availed the benefit of Notification No. 34/2004 ST dated 3.12.2004. ( The said notification exempted the taxable service provided by a goods transport agency  to  customers in relation to the transport of the goods by road in a goods carriage,  from the whole of the Service Tax leviable thereon, where the gross amount charged on consignments transported  did not exceed Rs.1500/- and the gross amount charged on an individual consignment transported   did not exceed Rs.750/-.)

3              The appellant was also availing the benefit  under Notification No. 32/2004 ST dated 3.12.04 (where by abatement upto  75% of value of the taxable service is claimed, wherever they were discharging their duty liability.)

Contention of the Revenue

4              Revenue felt that the exemption under Notification No. 34/04 ST is not available to the assessee inasmuch as the same exempts the services provided by the goods transport agency.   Accordingly, the notice propose to confirm the demand of Service Tax of Rs. 1,32,176/- and education cess of Rs.2,644/- along with imposition of penalty. 

First Appeal

5              The said order was appealed against  by the appellant.   The Commissioner (Appeals) observed that the issue for determination was  whether the concession / exemption provided under Notification No. 32/2004-ST and 34/2004-ST both dated 3.12.2004 is available to the appellant or not.

a.  As regards the  Notification No. 34/2004-ST, it was observed by the appellate authority that as in terms of Rule 2(1)(d)(v)  of the Service Tax Rules, 1994, the liability of payment of Service Tax  in respect of certain services like GTA  services having been shifted to certain categories of  persons and the appellants having made payment of  Service Tax on receipt of such services, the notification ibid exempts the instant services from payment of Service Tax irrespective of the person made liable to pay the service tax.  

b. With regard to availment of exemption under both the notifications i.e. 32/04-ST & 34/04 ST ibid, the wordings in the opening para of each of the notification are the same.  Vide  para 4 of the Circular No.51/2007 ST dated 12.3.07, it has been clarified that these notifications (32/2004 ST & 1/2006 ST) exempt taxable services from so much of service tax as specified therein, irrespective of the person made liable to pay service tax.

c. As is seen from the above, the Commissioner (Appeals) held  in favour of the assessee on notification No. 34/2004 ST with the above findings of the Commissioner (Appeals), the matter would have ended and the appeal was required to be allowed.

Mistaken belief that Notification No. 32/2004 is also involved

6              However, it is seen that   in spite of  holding that the appellant was entitled to the benefit of notification No. 34/2004, the appellate authority, under a mistaken belief that Notification No. 32/2004 is also involved, denied the benefit of the same on the ground that the abatement  to the extent of 75% of the value of taxable service cannot be extended inasmuch as there is no declaration by the service provider to the  effect  that credit has not been availed.   As such, she held that benefit of Notification No. 32/2004 is not available.   However, in respect of penalty, she reduced the penalty from  Rs. 1,34,820/- to Rs.50,000/-.   And Appeal filed by the Assesse as well as by the Department

The decision

7              In view of the above discussion, the appeal filed by the appellant is allowed  and set aside the confirmation of demand and imposition of penalty on the assessee.

8.            As regards the revenues appeal, CESTAT found  that apart from contending that Commissioner (Appeals) has wrongly considered the notification No. 32/2004, there is no  other plea that the benefit of notification No. 34/04 ST  dated 3.12.04 is wrongly extended to the assessee.   Having held that the appellants is not required to pay any service tax  and that exemption in terms of  notification No. 34/04 is available to the assessee as it was the assessee who was discharging the duty liability as service recipient and the exemption, if any, would be available to the person who is  under legal  obligation to discharge the tax, we find that eligibility to Notification No. 32/2004-ST cannot  alter the liability of the assessee and therefore, the Appeal of Revenue is rejected.