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BRIEF FACTS OF THE CASE:-1.1 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. (hereinafter referred to as '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 said Act'). 1.2. During the course of scrutiny of the records for the period from April-2006 to September-2006, it was observed that the noticee had availed & utilized the CENVAT credit of duty of excise and service tax under Rule 3 of CENVAT Credit Rules, 2004 to the tune of Rs. 10,76,71,396/- as shown below:-

TABLE ‘A’STATEMENT OF CENVAT CREIDT/CREDIT OF SERVICE TAX

WRONGLY AVAILED FOR THE PERIOD (April '06 to September' 06)

Sr. No.

Name of capital goods, Inputs/ Input Services,

capital goods

Ex duty/ Service Tax

Edu. Cess Total

1. Steel 41035856 820725 41856581 2. Cement 10124086 202481 10326567 3. Air Conditioner 617031 12335 629366 4. CHA Services 142323 2751 145074 5. Rent-a-cab 483188 9634 492822 6. Mobile Phone 240826 4798 245624 7. Surveyor Services 168373 3357 171730 8. Other Inputs 3698898 74307 3773205 9. Other Inputs 16607136 615895 17223031 10 Other Inputs 1399033 27887 1426920 11. Other Inputs 1138415 22768 1161183 12. Other Inputs 786442 15727 802169 13. Other Inputs 2730631 54613 2785244 14 Other Input service 26304067 327813 26631880

TOTAL 105476305 2195091 107671396

It was observed that;

(I). The amount of Rs. 41035856/- and Ed. cess Rs. 820725/- totalling to Rs. 418565811/- was availed as CENVAT credit on Steel;

(II). the amount of Rs. 10124086/- and Ed. Cess Rs. 2024811- totalling to Rs. 10326567/- was availed as CENVAT credit on Cement used in the construction of new Jetties and other buildings used as "Capital Goods";

(III). the noticee had availed the CENV A T Credit of Rs. 617031/- and Education Cess Rs. 12335/- totalling to Rs. 629366/- during the period from Apr'06 to Sept'06 as per Rule 3 of CENVAT Credit Rules, 2004. It was observed that the said amount of Rs. 629366/- was availed as CENVAT credit on Air conditioners purchased and utilized (by their Electrical Department) used as "Capital Goods";

(IV). the noticee had availed and utilized credit of service tax of Rs. 142323/- and Education Cess Rs. 27511- totalling to Rs. 145074/- 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 for availing input services viz. Custom House Agent;

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(V). the noticee had availed and utilized credit of service tax of Rs. 483188/- and Education Cess Rs. 9634/- totalling to Rs. 492822/- 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 for availing input services viz. Rent-a-Cab;

(VI). the noticee had availed and utilized credit of service tax of Rs. 240826/- and Education Cess Rs. 4798/- totalling to Rs. 245624/- paid by them for availing input services viz. Mobile phone which was said to have been consumed for their business purpose paid by them for availing input services viz. Mobile Phone;

(VII). the noticee had availed and utilized credit of service tax of Rs. 168373/- and Education Cess Rs. 3357/- totaling to Rs. 171730/- paid by them for availing input services viz. Surveyor Services which was said to have been consumed for their business purpose paid by them for availing input services viz. Surveyor Services;

(VIII). the amount of Rs. 3698898/- and Education Cess Rs. 74307/- totalling to Rs. 3773205/- was availed as CENVAT credit on Cement used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/capital goods;

(IX). the amount of Rs. 16607136/- and Ed. Cess Rs. 615895/- totaling to Rs. 172230311- was availed as CENVAT credit on various inputs used' in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/capital goods;

(X). the amount of Rs. 1399033/- and Ed. Cess Rs. 27887/- totaling to Rs. 1426920/- was availed as CENVAT credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/capital goods;

(XI). the amount of Rs. 1138415/- and Ed. Cess Rs. 22768/- totaling to Rs. 1161183/- was availed as CENVAT credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/capital goods;

(XII). that the amount of Rs. 786442/- and Ed. Cess Rs. 15727/- totaling to Rs. 802169/- was availed as CENVAT credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/capital goods;

(XIII). the amount of Rs. 27306311- and Ed. Cess Rs. 54613/- totaling to Rs. 2785244/- was availed as CENVAT credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/capital goods;

(XIV). the noticee had availed and utilized credit of service tax of Rs. 26304067/- and Education Cess Rs. 327813/- totalling to Rs. 26631880/- paid by them for availing other input services such as 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 for availing input services.

1.3 It appeared that 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:

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(i) Steel & Cement used for construction of Jetty and other office buildings for providing output port service. The Cement and steel used in construction of new jetties and other building do not fall within the purview of “input”, "Capital Goods" and "Input services". (ii) Air Conditioners do not fall within the purview of inputs or Capital Goods as per Rule 2 of CENVA T Credit Rule, 2004 as the same are being utilized by their electrical department, which is nowhere related or had relationship whatsoever with the output service provided by the noticee. (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 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 Rule, 2004. (iv) 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. (v) Credit of Service Tax availed on 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. (vi) 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(1) of CENVAT Credit Rule, 2004. (vii) Paint, Plastic sheet, Grease, Cable, Fan, Engine Oil, Furnace Oil, Bitumen, Transformer, MS Pipe, Air Compressor, HDPE Pies, Electric items, Forklifts, Journal Purchases etc. which are not their valid "Input" or "Capital Gods" as per Rule 2(a) or 2(k) of CENVAT Credit Rules, 2004. Therefore, CENVAT credit is not admissible on these goods. (viii) Paint, Plastic sheet, Grease, Bitumen, MS Pipe, pipes, Electric items, bulldozers, excavator, valve dredger house, journal purchase are not their valid "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 CENVAT credit on various inputs/capital goods such as electric items/spares/cable/accessories, hose pipe, belt paints; plastic sheet, journal purchase etc. are not their valid "Input" or "Capital Gods" as per Rule 2(a) or 2(k) of the Cenvat Credit Rules, 2004. (x) The said Noticee has availed the Cenvat credit on various inputs 1 capital goods such as Electric Items 1 Spares 1 Cable 1 Accessories, Electric Pole, Dredger Hose, Transfer, Conveyor Belt, MS Pipes, Journal Purchases etc. which are not their valid "Input" or "Capital Goods" as per Rule 2(a) or 2(k) of the Cenvat Credit Rules, 2004. (xi) The said Noticee has availed the Cenvat credit on various inputs 1 capital goods such as Spare for Tugs 1 Crane, Grab Purchase, Pump, Motor, Journal Purchases etc. which are not their valid "Input" or "Capital Gods" as per Rule 2(a) or 2(k) of the Cenvat Credit Rules, 2004.(xii) The said Noticee has availed the Cenvat credit on various inputs 1 capital goods such as Spare for Tugs 1 Crane 1 SBM, Rail for T2, Wheat Cleaning Machine, Journal Purchases etc. which are not their valid "Input" or "Capital Goods" as per Rule 2(a) or 2(k) of Cenvat the Cenvat Credit Rules, 2004. (xiii) The said Noticee has availed the credit of Service Tax on various categories of services such as Profession Fees, Construction, Soil Testing, Bank Charges, Labour Charges, Installation etc. which are not their valid "Input Services" as per Rule 2(1) of the Cenvat Credit Rules, 2004.

1.4 Therefore, a Show Cause Notice No. V.ST/AR-G.dham/ Commr./134/2007 dated

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19.10.2007 was issued the noticee to show cause as to why wrongly availed credit Rs. 10,76,71,396/- (including Ed Cess) should not be disallowed and recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with section 68 & 73 of the Finance Act, 1994. Interest should not be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 with consequential penal action under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 and under Section 76 & 77 of the Finance Act, 1994. 1.5 On similar grounds the following two show cause notices were also issued to the noticee; which have been taken up together for adjudication.

a. SCN No. V.ST/AR-G.dham/Commr/140/2007, dated, 02/11/2007 issued from F. No.V.ST/15-130/Adj/2007 for the period October, 2006 to March, 2007.

b. SCN No. V.ST/AR-Gnd/15-120/Commr/2008, dated, 14/10/2008 issued from F. No.V.ST/15-161/Adj/08 for the period April, 2007 to September, 2007.

1.6 Brief facts of the SCN No. V.ST/AR-G.dham/Commr/140/2007, dated, 02/11/2007 is as under:1.6.1 During the course of scrutiny of the records for the period from October, 2006 to March, 2007, It was further observed that the noticee had availed & utilised Cenvat credit of Rs. 14,06,97,959/- ( 13,79,13,408/- Ed. Cess Rs. 27,60,736/- and S& HE Cess Rs. 23,815) during the period from October, 2006 to March, 2007 as per Rule 3 Cenvat Credit Rules, 2004. Details of the credit availed are as under:

TABLE ‘B’

(I) The amount of Rs. 51769819/- ( including E.Cess & S& HE Cess) was availed as Cenvat credit on Steel

(II) The amount of Rs. 9287353/- ( including E.Cess & S& HE Cess) was availed as Cenvat credit on Cement used in the construction of new Jetties and other buildings used as “ Capital Goods”.

(III) The amount of Rs. 336709/- ( including E.Cess & S& HE Cess) was availed as Cenvat credit on Air Conditioners purchased and utilised ( by their Electrical Department) used as “ Capital Goods”.

(IV) The amount of Rs. 641529/- ( including E.Cess & S& HE Cess) was availed and utilised as credit of service tax paid by them for availing input services viz Club Fees which was said to have been consumed for their business purpose.

(V) The amount of Rs. 5588631/- ( including E.Cess & S& HE Cess) was availed and utilised as credit of service tax paid by them for availing input services viz Custom House Agent which

STATEMENT OF CENVAT CREDIT/ CREDIT OF SERVICE WRONGLY AVAILED DURING THE PERIOD ( October, 2006 to March, 2007)

S.No.

Name of Capital Goods/ Inputs/ Input Services

Excise Duty/ Service Tax

Edu. Cess S& HSE Cess

Total:

1. Steel 50749349 1014986 5484 517698192. Cement 9104400 182087 866 9287353

3 Air-Conditioner

330045 6601 63 336709

4 Club Fees 628950 12579 641529

5 CHA Services 5479051 109580 55886316 Rent-a-Cab 1391220 27823 14190437 Mobile Phone 368607 7371 3759788 Surveyor

Services566336 11327 577663

9 Other Inputs 16504471 332571 10314 1684735610 Other Inputs 25676473 513529 2619000211 Other Inputs 3331459 66621 7088 340516812 Other Inputs 14848153 296963 1514511613 Other Inputs

Services 8934894 178698 9113592

TOTAL: 137913408 2760736 23815 140697959

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was said to have been consumed for their business purpose. (VI) The amount of Rs. 1419043/- ( including E.Cess & S& HE Cess) was availed and utilized as

credit of service tax paid by them for availing input services viz Rent- a-Cab which was said to have been consumed for their business purpose.

(VII) The amount of Rs. 375978/- ( including E.Cess & S& HE Cess) was availed and utilized as credit of service tax paid by them for availing input services viz Mobile Phone which was said to have been consumed for their business purpose.

(VIII) The amount of Rs. 577663/- ( including E.Cess & S& HE Cess) was availed and utilized as credit of service tax paid by them for availing input services viz Surveyor Services which was said to have been consumed for their business purpose.

(IX) The amount of Rs. 16847356/- ( including E.Cess & S& HE Cess) was availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

(X) The amount of Rs. 26190002/-( including E.Cess & S& HE Cess) was availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

(XI) The amount of Rs. 3405168 ( including E.Cess & S& HE Cess) was availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

(XII) The amount of Rs. 15145116/- ( including E.Cess & S& HE Cess) was availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

(XIII) The amount of Rs. 9113592/- ( including E.Cess & S& HE Cess) was availed and utilized as credit of service tax paid by them for availing other input services viz such as Profession Fees, Construction, Soil Testing, Bank Charges, Installation etc. which was said to have been consumed for their business purpose.

1.6.2 It appeared that 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 on the above goods and services is not admissible to them on the similar ground given in the show cause notice bearing No V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007.

1.6.3 Therefore, the show cause notice bearing No. V.ST/AR-G.dham/Commr./140/2007 dated 02.11.2007 was issued by the Commissioner, Customs & Central Excise, Rajkot as to why the wrongly availed credit demanding the wrongly availed Cenvat credit of Rs. 14,06,97,959/- ( 13,79,13,408/- Ed. Cess Rs. 27,60,736/- and S& HE Cess Rs. 23,815) during the period from October, 2006 to March, 2007 should not be disallowed and recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with section 68 & 73 of the Finance Act, 1994. Interest should not be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 with consequential penal action under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 and under Section 76 & 77 of the Finance Act, 1994.. 1.6.4 Brief facts of the third SCN No. V.ST/AR-Gnd/15-120/Commr/2008, dated, 14/10/2008 is as under: 1.6.5 During the course of scrutiny of the records, it was observed that the notice had availed & utilised the Cenvat Credit of Rs. 18,91,50,354/- ( Rs. 18,42,70,124/- Cenvat Credit, Rs. 39,57,103/- Edu. Cess and Rs. 9,23,126/- S& SHE Cess) during the period from April, 2007 to September, 2007 as per Rule 3 of Cenvat Credit Rules, 2004.

TABLE ‘C’STATEMENT OF CENVAT CREDIT/ CREDIT OF SERVICE WRONGLY AVAILED DURING THE PERIOD (

April, 2007 to Septmber, 2007)

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

Excise Duty/ Service Tax

Edu. Cess S& HSE Cess

Total:

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1 Steel 32112669 943042 70874 331265852 Cement 13767080 275322 115333 141577353 Air-Conditioner 457256 8912 2319 468487

4 CHA Services 440803 8811 1853 451467

5 Rent-a-Cab 506444 10267 2704 519415

6 Mobile Phone 275904 5530 1761 283195

7 Survey Services 721316 14352 5279 740947

8 Other Inputs Services Operation such as Profession Fees, Construction, Soil Testing, Bank Charges, Labour Charges, Installation etc.

57753433 1139747 408620 59301800

9 Other Inputs Services Project used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

28965620 571618 54171 29591409

10 Other Inputs- Operation used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

4115565 86131 42473 4244169

11 Other Inputs- Project in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

21574193 436090 176625 22186908

12 Other Inputs- Difference of Operation used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

9846779 197620 16664 10061063

13 Other Inputs- Difference of Project used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

3502082 70043   3572125

14 Other Inputs- Customs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

6651221 113551 17363 6782135

15 Other Inputs- Customs Difference used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods

3579760 76070 7087 3662917

  TOTAL: 184270124 3957103 923126 189150354

(I) The amount of Rs. 3,31,26,585/- ( i.e. Duty Rs. 3,21,12,699/- Education Cess Rs. 9,43,042/- and S& HE Cess Rs. 70,874/-) was availed as Cenvat credit on Steel.

(II) The amount of Rs. 14,15,77,35 ( Duty Rs. 1,37,67, 080/- Education Cess Rs. 2,75,322/- and S& HE Cess Rs. 1,15,333/-) was availed as Cenvat credit on Cement used in the construction of new jetties and buildings used as “Capital Goods”.

(III) The amount of Rs. 4,68,487 ( i.e. Duty Rs. 4,57,256/- Education Cess Rs. 8912/- and S&

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HE Cess Rs. 2319/- ) was availed as Cenvat credit on Air Conditioners purchased and utilised by their Electrical Department used as “Capital Goods”.

(IV) The amount of Rs. 4,51,467 was availed and utilised as credit of service tax ( i.e. Credit Rs. 4,40,803/- Education Cess Rs. 8811/- and S& HE Cess Rs. 2319/- ) which was paid by them for availing input services viz. Custom House Agent and which was said to have been consumed for their business purpose.

(V) The amount of Rs. 5,19,415/- was availed and utilised as credit of service tax ( Credit Rs. 5,06,444/- E.Cess Rs. 10,267/- and S& HE Cess Rs. 2704/-) which was paid by them for availing input services viz. Rent a Cab and which was said to have been consumed for their business purpose.

(VI) The amount of Rs. 2,83,195 was availed and utilised as credit of service tax (2,75,904/- Education Cess Rs. 5530/- and S& HE Cess Rs. 1761/-) which was paid by them for availing input services viz. Mobile Phone and which was said to have been consumed for their business purpose.

(VII) The amount of Rs. 7,40,947/- was availed and utilised as credit of service tax (Credit Rs. 7,21,316/- Education Cess Rs. 14,352/- and S& HE Cess Rs. 5279) which was paid by them for availing input services viz. Surveyor Services and which was said to have been consumed for their business purpose.

(VIII) The amount of Rs. 5,93,01,800/-was availed and utilised as credit of service tax ( Credit Rs. 5,77,53,433/- Education Cess Rs. 11,39,747/- and S& HE Cess Rs. 4,08,620/-) which was paid by them for availing input services viz. other input services such as Profession Fees, Construction, Soil Testing, Bank Charges, Labour Charges, Installation etc. and which was said to have been consumed for their business.

(IX) The amount of Rs. 2,95,91,409/-was availed and utilised as credit of service tax ( i.e. Credit Rs.2,89,65,620/-, Education Cess Rs. 5,71,618/- and S& SHE Cess Rs. 54,171/-) which was paid by them for availing input services viz. other input services such as Profession Fees, Construction, Soil Testing, Bank Charges, Labour Charges, Installation etc. and which was said to have been consumed for their business

(X) The amount of Rs. 42,44,168/-was availed and utilised as credit of service tax ( i.e. Credit Rs. 41,15,565/-, Education Cess Rs. 86,131/- and S& SHE Cess Rs. 42,473/-) which availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods.

(XI) The amount of Rs. 2,21,86,908/-was availed and utilised as credit of service tax ( i.e. Credit Rs. 2,15,74,193/-, Education Cess Rs. 4,36,090/- and S& SHE Cess Rs. 1,76,625/-) which availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods.

(XII) The amount of Rs. 1,00,61,063/-was availed and utilised as credit of service tax ( i.e. Credit Rs. 98,46,779/-, Education Cess Rs. 1,97,620/- and S& SHE Cess Rs. 16,664/-) which availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods.

(XIII) The amount of Rs. 35,72,124/-was availed and utilised as credit of service tax ( i.e. Credit Rs. 35,02,082/-, Education Cess Rs. 70,043/- and S& SHE Cess Rs. Nil/-) which availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods.

(XIV) The amount of Rs. 67,82,135/-was availed and utilised as credit of service tax ( i.e. Credit Rs. 66,51,221/-, Education Cess Rs. 1,13,551/- and S& SHE Cess Rs. 17,363/-) which availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods.

(XV) The amount of Rs. 36,62,917/-was availed and utilised as credit of service tax ( i.e. Credit Rs. 35,79,760/-, Education Cess Rs. 76,070/- and S& SHE Cess Rs. 7087/-/-) which availed as Cenvat Credit on various inputs used in the construction of new jetties/ infrastructures/ other buildings etc. used as other inputs/ capital goods.

1.6.6 It appeared that as per Rule 3 of the CENVAT Credit Rules, 2004, the credit of

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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 on the above goods and services is not admissible to them on the similar ground given in the show cause notice bearing V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007. 1.6.7 Therefore, the show cause notice bearing No. V.ST/AR.Gnd/15-120/Commr./2008 dated 14.10.2008 was issued by the Commissioner, Customs & Central Excise Rajkot as to why the wrongly availed Cenvat Credit of Rs. 18,91,50,354/- ( Rs. 18,42,70,124/- Cenvat Credit, Rs. 39,57,103/- Edu. Cess and Rs. 9,23,126/- S& SHE Cess) during the period from April, 2007 to September, 2007 should not be disallowed and recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with section 68 & 73 of the Finance Act, 1994. Interest should not be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 with consequential penal action under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 and under Section 76 & 77 of the Finance Act, 1994

DEFENCE:2.1 The noticee vide letter dated 31.12.2007 and 04.12.2008 have submitted their defence reply in respect of SCN No. V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007. They also submitted the defence reply for the SCN No. V.ST/AR-G.dham/Commr./140/2007 dated 02.11.2007 vide their letter dated 31/12/2007 and for SCN No. V.ST/AR.Gnd/15-120/Commr./2008 dated 14.10.2008 vide their letter dated 22/12/2008. The noticee in their defense replieshave inter alia stated as under: 2.2 The noticee are providing port services and holding Service Tax registration under "port services", "storage and Warehousing Services" or "Cargo Handling Services" as per Section 69 of Chapter V of the Finance Act, 1994 ("the Act"). 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 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 and railway wagons Transportation for final delivery to the customers

2.3 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. 2.4 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 smooth movement of goods into and out of 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. 2.5 The noticee first contended the issue of limitation and submitted that the Show Cause Notice covers period from April 2006 to September 2006 and it has been issued on 19.10.2007, which is clearly one year after the impugned period. In order to recover any amount for a period beyond one year, the SCN has to specifically invoke the longer period of limitation and state the grounds for invoking the longer period of limitation and therefore unsustainable. The noticee has relied upon decision of the Hon'ble Tribunal in the case of Rashtriya Audyogic Sansthan Vs. CCE, Kanpur [2001 (135) E.L.T. 353 (Tri. - Del.)] wherein demand notice issued by the department beyond the period without specifically invoking the longer period of limitation was held to be time barred. The notice also referred judgement of the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd. Vs. CCE, Pune III [2007 (211) E.L.T. 513 (S.C.)] wherein it has been held that the longer period of limitation must be specifically stated in the show cause notice, in absence whereof the Court would be entitled to raise an inference that the case was not one where the extended period of limitation could be invoked. Further, it

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is settled legal position by the judgement of the Hon'ble Supreme Court in the case of CCE Vs. HMM Ltd. [1995 (76) ELT 497 (SC)] wherein it has been held by the Apex Court that the show cause notice must contain an averment to that effect pointing out specifically as to which of the various commissions or omissions stated in the proviso to Section 11A(1) of Central Excise & Salt Act, 1944 had been committed by assessee. The longer period of limitation is not invokable unless show cause notice puts assessee to notice specifically as to which of the various commissions or omissions stated in the proviso to Section 11A(1) of Central Excises & Salt Act, 1944 had been committed. They further argued that in the present case, there is no averment in the SCN as to which of the acts the noticee has committed which would invoke Section 78 of the Act, the longer period of limitation has not been invoked. Therefore, Show Cause Notice is in excess of jurisdiction, unsustainable and deserves to be set aside on the above referred ground.

2.6 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 insofar 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 .

2.7 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.

2.8 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

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.

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.

2.9 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".

2.10 The noticee referred CBEC Circular No. F. No. B-11/1/2001-TRU dated 09.07.2001, wherein

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the scope of the activities in respect of Port Services is clarified. The relevant extracts of the said Circular are reproduced hereunder for ready reference:

“Port services generally consist of port and dock services (these are for services rendered in relation to vessels), cargo handling and storage services, railway haulage services, and container handling services (these are for services rendered in relation to goods). The Dock Labour Board of the Port provides service of labour for handling of goods. The port or the person authorised by the port rendering these services is the service provider.”

2.11 They further submitted that some of the specific charges for the services rendered in respect of port services are as follows.

(i) Port and dock charges consisting of berthing and mooring charges, port dues, pilotage and towage, water supply charges, salvage and diver charges, anchorage fee;

(ii) Cargo handling and storage charges consisting of wharfage for general cargo, warehousing charges, cranage charges, ore handling charges, wharfage on petroleum products, weighment charges for lorries, traffic appliance charges, weighment charges for goods;

(iii) Railway haulage charges for rail-borne goods, local haulage and storage; (iv) Container handling charges consisting of import, export and transshipment, wharfage on

containers, equipment charges for handling of containers, container storage charges; (v) Labour charges.

All these charges form part of taxable value of port services. Demurrage charges are recovered by port authority as a rental for storage of goods.... For any other charge not mentioned above, the Commissioner may decide the inclusion/exclusion in the value of taxable service on merits.

2.12 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".

2.13 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:

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

The expression “for the purpose of the business” is wider in scope than the expression “for the purpose of earning profits”. Its range is wide; it may not only day to day running of a business but also the rationalization of its administration and modernization of its machinery; it may include measure for the preservation of the business and for the protection of its assets and property from expropriation, coercive processor assertion of hostilities; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business.

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

Dealing with a case pertaining to property tax, the Hon'ble Supreme Court on the term "Used for the purpose of factory" held that: - "That the legislature left this undefined is a good indication that the intention was to have the question decided in any case where controversy arises over it, on a consideration of the facts the solution of the problem in the majority of cases.

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One is that where the building is used for a purpose which the factory law requires must be fulfilled in order that the factory may function, that will be use for the purpose of a factory. The other is that where the use of the building is such as is necessary for the efficiency of the machines or of the workmen engaged in the factory the building should be held to be used for the purpose of a factory".

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

The word "used for the purpose of business" obviously mean used for the purpose of enabling the owner to carry on the business and earn profits in the business.

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. CENVAT CREDIT ON CEMENT AND STEEL

2.14 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, 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.

2.15 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 fall under the definition of Inputs and eligible for Cenvat Credit.

2.16 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 an essential and integral part of a port, would clearly fall under the definition of 'Inputs' as defined under the Credit Rules. Therefore, cement and steel used by the noticee for the purpose of construction of the jetty qualify as 'inputs' and accordingly credit of the Excise duty paid on such inputs would be available to the Noticee and the Noticee has not wrongly claimed the credit.

CENVAT CREDIT ON AIRCONDITIONERS

2.17 The noticee submitted that Air Conditioner falls under Chapter Heading 8415 of the First Schedule to the Central Excise Tariff Act, 1985 and qualifies as "Capital goods" as defined under Rule 2(a) of the Credit Rules. As per Rule 2(a), equipments and appliance used in an office will not be eligible as Capital goods only in case of a manufacturer. Thus, equipments and appliances used in the office of a service provider are eligible as Capital goods if they are used for providing Output Service. Air Conditioners are used to maintain the temperature of electric/electronic/ mechanical equipments inside the port. If the temperature is not maintained then the equipments will get damaged and will affect the port operations. These electric and mechanical appliances/equipments are used for provision of various services in relation to goods or vessels like handling of goods, administration of import and export of goods. Air Conditioners used in the Port Premises are used for providing output services qualify as 'Capital Goods' and the credit of the excise duty paid has been taken correctly.

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CENVAT CREDIT ON CUSTOM HOUSE AGENT CHARGES & SURVEYORS FEES

2.18 The notice have 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. The noticee have submitted that they have 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, stevedores etc. 2.18.1 As regards CHA, the Noticee have submitted that they have 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 CHAs 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 have furnished the relevant extracts of the contract dated 01.07.2006 held between the noticee and CHA. 2.18.2 The noticee also furnished relevant extracts of the contract held between the noticee and Indian Potash Ltd. for Stevedoring, Clearing and Forwarding of Imported Fertilizers for the years 2005-06 and 2006-07

Item of Operation Rate (Rs./MT)

I (i

All inclusive rate for stevedoring, bagging and standardization, double machine stitching, cost of thread and stacking inclusive 30 days of free storage, Port / Customs overtime, customs documentation, security weighment and all other allied operations but exclusive of cost of transportation and cost of bags upto: (a) Loading of bagged cargo into trucks at Mundra Port 135 (b) Loading of bagged cargo into wagons at Mundra Port siding ... 180

Terms and Conditions

4.0 The Regional Office of the Company shall send to the Stevedoring cum Clearing & Forwarding Agent nomination papers/ fixture note of shipments, It will be the Stevedoring cum Clearing & Forwarding Agent's responsibility to arrange the preparation, signature and execution of all Port and Customs documents as may be necessary for the commencement of discharge from the vessel immediately on arrival and clearance of cargo outside the Port area in bulk or bagged form. The Stevedoring cum Clearing & Forwarding Agent shall identify the Company from all the consequences arising from incorrect or improper documentation with Port and Customs Authorities. ......

10.0 The Stevedoring cum Clearing & Forwarding Agent shall on behalf of the Company prepare promptly and within the prescribed time limit all claims with the Customs, Carriers, Vessels Agents and Shipping lines, Insurance, Port Trust etc .. with a copy to the Company's Regional office and pursue the same till they are settled. This obligation of the Stevedoring cum Clearing & Forwarding Agent shall continue till the claims are settled notwithstanding the expiry of time or termination of the Contract. ....

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18. In consideration of the Stevedoring cum Clearing & Forwarding Agent performing, rendering, executing, fulfilling, discharging obligations as per the Contract, Company shall pay to the Stevedoring cum Clearing & Forwarding Agent the charges as mutually agreed (it is not a part of definition of port service) from time to time on the following basis: ......18.04 The rates agreed are all inclusive and without any exception and include all labour costs, levies. port and customs overtime. detention charges, charges for hire and use of mechanical equipments and all other expenses.

2.18.3 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 qualify as an “input service”. 2.18.4 They further submitted that the surveyor render service of 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 is an integral part of the day to day business. As a port operator and as custodian of the cargo, the 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.2.18.5 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 are made by the noticee and subsequently the noticee recover 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.

CENVAT CREDIT ON RENT-A-CAB SERVICES 2.19 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. In this regard, the noticee furnished details of Clause 14.11 of Annexure II - Special Terms and Conditions and said clause 17 of Annexure III of the Agreement which sets out the General Terms and Conditions.

17. WORKING IN CUSTOMS AREA The work site is located within the Mundra Port, Navinal Island Complex which is a Customs Area and the provisions of the Indian Customs Act, 1962, the Indian Ports Act, 1908, Gujarat Maritime Board Act and Port Rules and Regulations shall be applicable and the contractor shall have to adhere to such Acts, Rules & Regulations as applicable. The contractor shall strictly adhere to port security and safety procedures i.e. entry strictly by entry tokens requirement of obtaining work permits, etc. as applicable.

2.19.1 It is submitted by the noticee that 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

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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. 2.19.2 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.

CENVAT CREDIT ON MOBILE PHONES

2.20 The SCN 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 esrtwhile 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.

2.20.1 They further submitted that Rule 3(6) of the Service tax Credit Rules 2002, is now superceded 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. The relevant extract of Rule 16(1) of the Credit Rules is as under:

Any notification, circular, instruction, standing order, trade notice or other order issued 'under the CENVAT Credit Rules, 2002 or the Service Tax Credit Rules, 2002, by the Central Government, the Central Board of Excise and Customs, the Chief Commissioner of Central Excise or the Commissioner of Central Excise, and in force at the commencement of these rules, shall, to the extent it is relevant and consistent with these rules, be deemed to be valid and issued under the corresponding provisions of these rules.

Thus, based on supplementary provision under Rule 16( 1), the said Circular is not relevant after the introduction of the Credit Rules and clearly inapplicable. 2.20.2 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.

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

2.21 They submitted that so far 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

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input service and accordingly, the Cenvat credit of Service tax would be available to the noticee. They further submitted that the said Order-in-appeal 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 CHA service, Surveyor’s fees and Rent-a-cab service deserve to be set aside on this ground alone.

CENVAT CREDIT ON VARIOUS INPUTS/CAPITAL GOODS SUCH AS PAINT, GREASE, CABLE, FAN, ENGINE OIL, BITUMEN, TRANSFORMER, MS PIPE, AIR COMPRESSOR, HDPE PIPES, ELECTRIC ITEMS, FORKLIFTS, JOURNAL PURCHASES ETC. 2.22 They 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 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. The noticee craved leave to make factual submissions at the time of personal hearing.

CENVAT CREDIT ON SERVICES SUCH AS PROFESSION FEES CONSTRUCTION, SOIL TESTING, BANK CHARGES, LABOUR CHARGES AND INSTALLATION ETC. 2.23 They submitted that the SCN does not set out the reasons for disallowing the credit on the aforesaid services. The aforesaid services are ultimately used for providing output service under clause (i) of Rule 2(1). These 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. Aforesaid services are used for the purpose of business and therefore qualify as an input service. They submitted that therefore credit of Service tax paid on the aforesaid services would be available to the noticee.

INTEREST 2.24 They submitted that since no tax is payable by the Noticee, interest under Section 75 also cannot be recovered from the Noticee.

PENALTY 2.25 They have submitted that it was their bonafide belief that they were 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)]

2.25.1 They further submitted that in any event, once penalty is imposed under Section 76 of the Act, no penalty can be imposed under Section 78 of the Act since failure to pay tax cannot once again be subjected to penalty under Section 78 of the Act which 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. They further submitted that under Section 78 of the Act, penalty is imposable only if the assessee has intended to evade payment of service tax by way of fraud, collusion, wilful statement or suppression of facts and 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. It is settled legal position that where

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subsequent notice is issued on an assessee when the authority had all the relevant knowledge at the time of issue of first show cause notice on same/similar set of facts then there is no suppression of facts by the noticee and consequently the longer period of limitation is not invokable.

2.25.2 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)] Collector of Central Excise V/s H.M.M Limited reported in 1995 (76) E.L.T 497 (S.C)

2.26 They also submitted their reply vide letter dated 4.12.2008 wherein they have reiterated the submissions made in their letter dated 31.12.2007 and further interalia submitted that Cement and Steel used for construction of jetty within the port which was carried out to enable them to expand their capacity to handle more ships and consequently increase their business and without such jetty, it is not possible for them to carry on their business activities. Therefore, the Cement and Steel used for construction of jetty qualify as “inputs” within the definition thereof as provided under Rule 2 (k) of Cenvat Credit Rules, 2004 and accordingly, credit of duty paid thereon is available to them. They further submitted that having regard to the definition of “input services” which inter alia includes services in relation to setting up and modernization of a factory or premises of the provider of output service, 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, credit of duty paid on inputs cannot be denied.

2.27 They further submitted that the issue of availability of Cenvat credit on cement and steel, amongst host of other items, was in dispute before the Hon’ble Tribunal in Appeal No. ST/160/07, filed by them against Order-in-Original No. 21-22/COMMR/2007 dated 26.7.2007. The Hon’ble Tribunal, vide its Order No. A/2122/WZB/AHD/08 dated 8.5.2008/30.9.2008 did not agree that cement and steel can be held to be eligible inputs used for providing output port service.

2.28 They further submitted that the said Order dated 8.5.2003/30.9.2008 also covered other items of demand relating to input credit in respect of central excise duty paid on Air-conditioners and service tax paid on mobile phones, CHA and surveyor charges, rent-a-cab and professional charges paid to consultants for construction, soil testing and labour etc. The Hon’ble Tribunal while dealing with each of the above items individually has allowed our appeal thereby upholding our submission on availability of the credit of duty/tax paid and in view of the aforesaid, the demand in respect of the aforesaid is required to be dropped and /or withdrawn.

2.29 They further submitted that apart from the aforesaid the captioned notice also covers items such as paint, plastic sheet, grease, cable fan etc. Of which they had availed Cenvat credit and seeks to deny the credit availed on the ground that the said items are not valid “input” or “capital goods” as per Rule2 (a) and 2(k) of Credit Rules. They stated that they are enclosing a statement containing details of each of the items of dispute, detailing therein the use to which the same is put. The said statement read with the definition of Rule Rule2 (a) and 2(k) of Credit Rules no room for doubt that each of the items detailed therein is either an “input” or “capital goods”. Further each of the item is directly used by them for provision of output services viz. Port service, Storage & Warehousing Service and Cargo Handling Service. These items are required for day to day running of their business of providing support services of the nature stated above and therefore qualify as “inputs” and accordingly, credit of duty paid on the said items would be available to them and they have rightly availed the credit.

2.30 They have further submitted that without prejudice to the submissions on merits made hereinabove they submitted that the notice in the present case is beyond normal period of limitation. The period of demand is April, 2006 to September, 2006, while the notice has been issued on 19.10.2007, which is clearly beyond the period of 1 year. The present case relates to a bonafide dispute regarding the admissibility of Cenvat credit or otherwise on various items. The issue clearly involves a case of interpretation of the provisions of the Credit Rules and cannot be termed to be a malafide act on their part. This is more so since the credit was availed in the statutory records with the knowledge of the

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concerned authorities. As such the issuance of the notice with the larger period of limitation in the present case is clearly uncalled for.

2.31 They have further submitted that though the notice has been issued beyond the normal period of limitation there are no allegations of fraud, mis-statement and or intention to evade payment of duty at all therein. It is also relevant to note that the notice, though issued beyond the normal period, does not even formally invoke the larger period of limitation. It is settled law that not only is it necessary to mention the above ingredients in the notice but it is equally sought to evade payment of duty/tax, In view of the aforesaid the captioned notice being grossly barred by time is required to be dropped/withdrawn on this count alone.

2.32 They have further submitted that insofar as the proposal for imposition of penalty under Rule 15 of the Credit Rules read with Section 78 of the Act and further penalties under Section 76 and 77 thereof is concerned, apart from our submissions contained in our earlier reply, they placed reliance on the Order of the Hon’ble Tribunal wherein paragraph 12 it has held that the issue involved is of bonafide dispute about the admissibility of credit or otherwise and involves the bonafide interpretation of the provisions of law. The Hon’ble Tribunal further held that credit was availed in the statutory records, under due intimation to the jurisdictional authorities. As such no malafide can be attributed to us so as invoke penal provisions. The present case also is on identical footing and, therefore, there can be no reason whatsoever to impose penalty on us on any count whatsoever.

PERSONAL HEARING :-

3.1 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 same. They also stated that if required they would produce/ give any clarification sought by the Department.

DISCUSSION & FINDINGS :-4.1 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. 4.2 First of all, I take up the issue of limitation raised by noticee in their written submission. They submitted that the period of demand is April, 2006 to September, 2006, while the notice has been issued on 19.10.2007, which is beyond the period of 1 year. In this regard, I find that the ST-3 return for the period April, 2006 to September, 2006 was filed on 24.10.2006 and the Show Cause Notice in question was received by the noticee on 20.10.2007, i.e. within one year of receipt of the ST-3 return. Therefore, the Show Cause Notice is not hit by limitation in view of the provisions of Section 73 of the Finance Act, 1994. 4.3 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 (e) Club House Fees (iv) Other inputs/capital goods (v) 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 b e 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

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(c) Mobile phone/telephone (d) Surveyor service (e) Club House Fees

(iv) Other inputs/capital goods (v) Other input services.

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

5.1 Cenvat Credit availed on Cement & Steel .5.1.1 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.

5.1.2 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 having 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. I have carefully gone through the definition of “input” and “capital goods” given under Cenvat Credit Rules, 2004. 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 notice, 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”. My above view is supported by the following decisions /judgments:- 5.1.2.1 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 in paras 30 to 36 , held as under :

“30. We have considered arguments from both sides, the cited decisions and the records of the case. We find that the afore cited amending Notification No. 22/09-C.E. (N.T.), dated 7-9-2009 was issued as a part of the Budget proposals of the Finance Minister. The said notification along with other Budget notifications, the Finance (No. 2) Bill, 2009 and the accompanying Memorandum explaining the provisions in the Finance (No. 2) Bill, 2009 (popularly known as the “Pink Book” because of its colour; which has remained the same over several decades) were laid on the Table of the Parliament. The said Pink Book contained the following Explanatory Memorandum at Page 28 :-“H. Amendment in Central Excise Rules and Cenvat Credit Rules.*   *   *   *   *   *   *   *   *   *(2) An explanation is being inserted in Rule 2 of Cenvat Credit Rules, 2004 so as to clarify that ‘inputs’ shall not include cement, angles, channels, CTD or TMT bars and other items used for construction of shed, building or structure for support of capital goods.*   *   *   *   *   *   *   *   *   *The above cited Explanatory Memorandum placed before the Parliament makes it amply clear that the purpose of the amendment was clarificatory and that it sought to clarify that the expression ‘input’ does not cover cement and steel items used for construction of shed, building or structure for support of capital goods.

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31. We also find that the “Budget Bulletin 2009” issued by the Directorate of Publicity and Public Relations of the Customs, Central Excise and Service Tax Department contained the following at Page 38 :-“3. Amendments in Cenvat Credit Rules, 2004 :-(i) An explanation has been inserted in Rule 2 of the Cenvat Credit Rules, 2004 so as to clarify that ‘inputs’ which are eligible for availing Cenvat credit shall not include cement, angles, channels, CTD or TMT bar and other items used for construction of shed, building or structure for support of capital goods. [Notification No. 16/2009-C.E. (N.T.) refers].”32. We further find that the Joint Secretary (TRU-I) had issued a letter dated 6-7-2009 bearing DO F. No. 334/13/2009-TRU to the Chief Commissioners and Commissioners which under the heading ‘Important Legislative Amendments’ stated as follows in Page 5 :-“1.8 Important Legislative Amendments :-*   *   *   *   *   *   *   *   *   *(ix) Rule (2) of Cenvat Credit Rules, 2004 has been amended to clarify that ‘input’ should not include cement, angles, channels, CTD/TMT bars etc. used for construction of shed, building or structure for support of capital goods.*   *   *   *   *   *   *   *   *   *Though this letter was addressed to the senior officers of the Central Excise Department, the same was made available to the public as seen from the publicly accessible website of the Department at www.cbec.nic.in33. The Excise Law Times while reporting the Budget changes in its 13-7-2009 issue (Vol. 238, Part - 2, page A34) also reproduces the Explanatory Note from the Pink Book placed before the Parliament as follows :-“(2) An explanation is being inserted in Rule 2 of Cenvat Credit Rules, 2004 so as to clarify that ‘inputs’ shall not include cement, angles, channels, CTD or TMT bars and other items used for construction of shed, building or structure for support of capital goods.”34. From the foregoing it is evident that the intention behind the 2009 amendment to Explanation 2 to Rule 2(k) was merely to clarify the coverage under the expression “input” used in the Cenvat Credit Rules, 2004. There was no indication whatsoever that the 2009 amendment was made to change the scope of the Rules or to introduce any new provision.35. We find that a similar issue had come up earlier for decision in the case of J.K. Synthetics Ltd. v. CCE, Jaipur - 1996 (88) E.L.T. 785, where the Tribunal considered whether the substituted explanation to Rule 57Q was clarificatory or not and came to the following finding :-“The above substituted Explanation to Rule 57Q is obviously clarificatory in nature as is evident from the Budget Speech of the Finance Minister while moving the Finance Bill, 1996 in pursuance of which the notification has been issued. The Finance Minister stated, therein, “The Modvat Scheme which provides for duty credit on inputs and capital goods has been liberalised considerably over the past few years. Still there are problems about the coverage of certain inputs and capital goods. I propose to clarify the scope of eligible capital goods by specifying the heading and sub-headings of the tariff relating to capital goods in the Modvat Rules”, (emphasis added). Being thus, a clarificatory amendment to Rule 57Q, the substituted Explanation, in our view, can be retrospectively applied as per well-settled principles of interpretation of notifications. In this context, the judgments of the Supreme Court in the case of K.P. Verghese - [1981 (131) ITR 597], Sold Trustee Loksikshan Trust {1976 TLR Page 1), CIT v. Mahindra & Mahindra reported in 1983 (4) SCC 392 are also relevant wherein the Supreme Court laid down that if an amendment was being brought forward by the Finance Minister, his speech justifying the amendment would be relevant as it would throw considerable light on the object and the purpose of the amendment and his speech would be a proper aid to a correct interpretation of the words in this amendment.”Applying the ratio of the aforecited decision to this case, the clarificatory” amendment made to Explanation 2 to Rule 2(k) in 2009 has to be held to be retrospectively applicable.36. In any case, going by the Explanatory Memorandum presented to the Parliament along with the amending notification and the contemporaneous exposition of the amendment made available to the departmental officers and the public clearly go to show that the impugned goods

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namely cement and steel items used for construction of shed, building or structure for support of capital goods were never intended to be included by the rule making authority under the expression ‘input’ eligible for Cenvat credit. Hence, the argument that the rule making authority had used the general rule making power under Section 37(1) of the Central Excise Act, 1944 to extend Cenvat credit in respect of the impugned items to carry out the general purpose of the Act must be dispelled. When it is clear from the Explanatory Memorandum etc. that the Government never intended to allow Cenvat credit on the impugned items, it cannot be argued that the Government had used its general powers under Section 37(1), in excess of the specific powers under Section 37(2)(xvia) to grant such credit for the earlier period prior to the amendment. We, therefore, have no hesitation in discarding such a proposition that powers under Section 37(1) was used to grant credit in respect of goods for which credit cannot be otherwise allowed under specific powers under Section 37(2)(xvia).”

5.1.2.2 The above decision was also upheld by the Hon’ble High Court of Orissa , reported at 2010 (257) E.L.T. 401 (Ori.) in the case of M/s JINDAL STAINLESS LTD.Versus UNION OF INDIA.5.1.2.3 The larger bench decision in the case of M/s Vandana Global Ltd (supra) , in Paras 40 to 49 and 51, dealt on the issued in great detail and came to the following conclusions:

40. Arguments have been advanced before us that credit of duty paid on the impugned goods namely cement and steel items which are used in laying foundation and/or making structures for support of capital goods should be allowed. Several alternative arguments have been advanced as follows :-(I) The foundation and structural support should be held to be capital goods adopting the natural meaning of the phrase ‘capital goods’ and cement and steel items used for such foundation and structural support should be treated as input for capital goods.(ii) The structural support should be treated as either part or as accessory of the machinery as without such support, the machinery cannot work and hence the impugned goods should be treated as inputs for such parts and accessories.(iii) The impugned goods i.e. cement and steel items should be alternatively considered as inputs for the final product as these are used in relation to the manufacture of the same.(iv) The fact that the impugned goods i.e. cement and steel items are used for laying of foundation or for making structural support which are non-dutiable being embedded to earth cannot be a reason for denying credit because there are a number of precedent decisions which allow credit even if intermediate goods are exempted,(v) Since the value of the cement and steel items used for laying the foundation and building the structural support contributes to the value of the final product, credit of the duty paid on the same should be allowed. We examine below these arguments.41. Keeping in view the scheme of the Act and the Cenvat Credit Rules, we are of the opinion that the phrases ‘capital assets’ and ‘capital goods’ cannot be held to be synonymous. The phrase capital goods has been defined in the Cenvat Credit Rules enumerating a number of goods. Obviously, the said definition of ‘capital goods’ has to be adopted while interpreting the rules for the purposes of granting and denying of credit. The phrase ‘capital assets’ has a wider meaning and it would certainly include capital goods and other assets’ such as immovable property in the form of building etc. Once this distinction is appreciated, it is easy to see that foundations and supporting structures embedded to earth may be categorized as capital assets but would not qualify to be capital goods in terms of the definition contained in the Cenvat Credit Rules. In fact, the definition states that ‘capital goods’ means “the following goods, namely” after which a list of goods has been provided. Mainly all goods falling in the machinery chapters of the Tariff have been specified in the list as also components, spares and accessories of such goods. As stated above earlier in paragraph 39, a few additional items have also been specially included in the list such as pollution control equipment, moulds and dies, refractories, tubes and pipes, and storage tank. We find that the foundation and supporting structures are neither machinery items, nor components, spares and accessories of machineries, nor have they been listed for special inclusion in the definition. Some arguments have been advanced that the supporting structures should be considered as parts and accessories of the machinery. Parts (which include components parts and spare parts and accessories have specific connotation in

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the context of the Customs and Excise Tariff Schedules in terms of which the supporting structures cannot be classified either as part or as accessory. A component part is required to complete a machinery and is, therefore, integral to its manufacture and function. A spare part is used to replace a worn out or damaged component part. An accessory either improves the efficiency/effectiveness of a machinery without changing its basic functions, or performs a secondary or subordinate function. For proper viewing, a television set may be required to be placed either on a table or on a TV stand/trolley or fixed on the wall. However, it cannot be anyone’s case that the table, the TV stand, the TV trolley or the wall should be considered as a part or accessory of the television set. Similarly, the foundation and the supporting structure for a machinery cannot be considered to be part or accessory of the machinery.42. Additionally, it has been argued on behalf of the Department that the capital goods have to be goods first and that the foundation and the supporting structures being embedded to earth are in the nature of immovable property and are not goods or excisable goods. Not only is the departmental contention well supported by a plethora of case laws, but even by the definition of ‘capital goods’ in the Cenvat Credit Rules which reads as “the following goods” supplemented with a list of goods that follows.43. Since the foundation and the supporting structures cannot be considered as capital goods, nor as parts or accessories of capital goods, nor the same have been specifically listed in the definition of capital goods’ (as tubes and pipes and storage tank etc. have been specifically listed), the question of treating cement and steel items as inputs for capital goods cannot arise. Hence Explanation 2 to Rule 2(k) cannot be held to cover cement and steel items used for laying foundation and for building structural support even during the period prior to the 2009 amendment.44. Another argument is that even the main definition of input under Rule 2(k) would include cement and steel items used for laying foundation and making supporting structures as the expression used thereunder is wide and includes everything “used in or in relation to the manufacture” of final products whether directly or indirectly. The argument is that cement and steel items so used are used in relation to the manufacture of final products. It has also been argued that at one time the definition of inputs excluded machines, machinery, plant, equipment, apparatus, tools, appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products and therefore, but for the exclusion, the expression inputs would have included machines etc. This argument appears to us to be clearly untenable. The exclusion provided earlier clearly appears to have been so provided by way of abundant caution to clarify that the inputs in any case would not include machinery and equipment. From such a clarificatory provision, it cannot be concluded that the expression ‘input’ would include cement and steel items used for laying foundation and making supporting structures. Moreover, if for a moment one has to agree with the contention that input included machinery etc. there would have been no need for providing a separate definition for capital goods and making a separate provision for allowing credit on capital goods. Such an argument cannot also be accepted as it would imply that capital goods would be included twice in the definition under Rule 2(a) with limited scope and with unlimited scope under Rule 2(k). Such a proposition appears to be totally absurd as the rule-makers cannot be seen to have provided two separate definitions to cover the same thing. There are also other rules in the Cenvat Credit Rules namely Rule 3, Rule 3(1), Rule 3(5), Rule 3 (5a), Rule 3 (5b), Rule 4(1), Rule 4(2), Rule 4(3), Rule 4(4), Rule, 5, Rule 6, Rule 9, Rule 15 which provide for different provisions for inputs and capital goods. It is very clear from these provisions that the rule making authority intended to deal with capital goods separately and inputs separately and the definition of input cannot be interpreted to include either the capital goods, or foundation and supporting structures for the same, as being argued by some of the Advocates.45. In this context we also endorse the decision of the Tribunal in the case of Vikram Cement (supra) which is as follows :-

“28. If one reads the decision of J.K. Cotton Spg. & Wvg. Mills Co. Ltd. case, it has been clearly held therein that the expression “in the manufacture of goods” should normally encompass the entire process carried on by the dealer of converting raw

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materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression “in the manufacture of goods”. This clearly disclose that the Apex Court in no uncertain term has ruled that of those goods which form part of the process carried out by the manufacturer for converting the raw material into finished goods would be the products used in the manufacture of the goods. In another words, if the product is not integrally connected with the process of the manufacture and which does not results in utilization of such product directly or indirectly into the manufacture of the finished product, then such a product cannot be said to be the input utilized for or in relation to manufacture of the final product. This is also evident from the definition of the term input as found in Rule 2(k). The definition clearly uses the word “used” and further clarity the same with the expression “in or in relation to” and further uses these expressions with reference to the term “manufacture of final products”. The definition disclosing the expression like “used”, “in or in relation to”, “the manufacture of final products” would inevitably disclose, that the same refer to only those products which are used in or integrally connected with the process of actual manufacture of the final product and only such product could be entitled to be classified as the input in or in relation to the manufacture of final products, and not otherwise. When the legislature in its wisdom has specifically defined a term, no Court or Tribunal under the guise of interpretation thereof is empowered to expand the meaning of such term. If the contention on behalf of the appellants is accepted, it would virtually amount to expand the meaning of the term “input” beyond the scope prescribed under the definition clause in Rule 2(k) of the Cenvat Credit Rules, 2004.29. It is also pertinent to note that the legislature in its wisdom has independently defined the expression capital goods under Rule 2(a) of the said rules. If the inputs were to include every product under the sun which is somehow related to the premises where the manufacturing process goes on, then there is no need to provide a definition of the term capital goods and, therefore, the acceptance of the contention on behalf of the appellants would render the definition of the term the capital goods to be redundant as well as the provisions relating to extending the benefit of Cenvat credit to the capital goods.”

46. The argument that the impugned goods, i.e., cement and steel items should be alternatively considered as inputs for the final product treating the same to have been used in relation to the manufacture of the final product cannot be accepted in view of the decision of the Hon’ble Supreme Court in the case of Maruti Suzuki (cited supra) which holds that input should have nexus with the final product in or in relation to the process of, manufacture. As has been rightly argued by the learned Jt. CDR, cement and the steel items used for laying foundation and for building supporting structures for the capital goods do not have any nexus with the process of manufacture.47. It has also been argued that the impugned goods which are used for laying foundation and building structural support should be granted credit ignoring the fact that at the intermediary stage non-excisable goods in the nature of immovable property attached to earth come into being. Reliance is placed on several decisions where credit has been allowed even though intermediate goods produced are exempt from payment of duty. In this connection we note that as the learned Jt. CDR has rightly submitted, the erstwhile Rules 57D and 57R of the Central Excise Rules, 1944 provided for non-denial of the credit if any intermediate product came into existence during the manufacture of final product. Hence, credit can be allowed if intermediate goods emerge during the process of manufacture of the finals product. The immovable capital assets in the form of foundations and structural supports embedded to earth cannot be considered as intermediate goods arising in the process of manufacture of the final product. The precedent decisions cited by the learned counsel do not advance the case of the appellants for obtaining credit of duty paid cement and steel items in question as the foundation and structural

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support built using such items cannot be considered as intermediate goods arising in the process of manufacture of the final product.48. The argument that the value of cement and steel items used for laying the foundation and building structural support contributes to the value of the final product and therefore, credit of the duty paid on the same should be allowed does not appear to be legally tenable under the Cenvat credit scheme. As pointed out in paragraph 37, the excise duty levied under the Act has only been named as Cenvat but the same is on goods produced or manufactured and is not in the nature of a value added tax. It was also noted in the said paragraph that the statute authorizes grant of credit of duty paid on the goods used in or in relation to the manufacture of excisable goods. The credit is not allowed with reference to value addition. We also find that in the case of Maruti Suzuki (supra), the Hon’ble Supreme Court has referred to the integral connection with the ultimate product, the dependence test and the functional utility test in the context of deciding what is an eligible input. It also held in the said case in paragraph 14 as follows :-“Packing material by itself would not suffice till it is proved that the item is used in the course of manufacture of final product. Mere fact that the item is a packing material whose value is included in the assessable value of the final product will not entitle the manufacturer to take credit.”As such, the argument advanced by the learned counsel Shri P.K. Sahu that the value of cement and steel items used for laying foundation and building supporting structural contributes to the value of final product and therefore the credit of duty paid on cement and steel items should be allowed cannot be accepted since these items are not used in the course of manufacture of the final product.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. 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.”

5.1.3 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

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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 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.”

5.1.4 In this regard, I also note that in their own (noticee’s case) 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.”

5.1.5. 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.

5.1.5.1 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

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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.5.1.6 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. 5.1.7 The details of the Cenvat Credit availed by the noticee on Steel, Cement are as under :

CENVAT CREDIT AVAILED DUIRNG THE PERIOD April, 2006 to September, 2006 AS PER THE SCN No. V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007 (Amt in Rs.)

S.No. PERIOD Description of Goods / Services

Ex. Duty/ Service Tax

Edu. Cess Total

1 April, 2006 to Sept. 2006

Steel 4,10,35,856 8,20,725 4,18,56,581

2 April, 2006 to Sept., 2006

Cement 1,01,24,086 2,02,481 1,03,26,567

TOTAL 5,11,59,942 10,23,206 5,21,83,148

CENVAT CREDIT AVAILED DURING THE PERIOD October,2006 to March, 2007 AS PER SCN No. V.ST/AR-G.dham/ Commr./140/2007 dated 02.11.2007 (Amt in Rs.)

S.No. PERIOD Description of Goods / Services

Ex. Duty/ Service Tax

Edu. Cess SHE Cess

Total

1 October,2006 to March, 2007

Steel 5,07,,49,349 10,14,986 5,484 5,17,69,819

2 October,2006 to March, 2007

Cement 91,04,400 1,82,087 866 92,87,353

TOTAL 5,98,53,749 11,97,073 6350 6,10,57,172

CENVAT CREDIT AVAILED DUIRNG THE PERIOD (April, 2007 to September, 2007) AS PER SCN No. V.ST/AR-Gnd/15-120/Commr/2008 dated 14.10.2008 (Amt in Rs.)

S.No. PERIOD Description of Goods / Services

Ex. Duty/ Service Tax

Edu. Cess SHE Cess

Total

1 April, 2007 to September, 2007

Steel 3,21,12,669 9,43,042 70,874 3,31,26,585

2 April, 2007 to September, 2007

Cement 1,37,67,080 275,322 1,15,333 1,41,57,735

TOTAL 4,58,79,749 12,18,364 1,86,207 4,72,84,320

5.1.8 In view of the discussion at para 5.1.6 supra, I hold that the Cenvat credit of Rs.5,21,83,148/-, 6,10,57,172/- and 4,72,84,320/- (i.e Rs. 16,05,24,640/-) availed by the notice on ‘Steel and Cement’ for the period from April, 2006 to September 2006, October 2006 to March 2007 and April 2007 to September 2007, respectively is not admissible to them and the same is required to be disallowed and recovered from them under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 read with Section 68 of the Finance Act, 1994.

5.2 Cenvat credit on Air Conditioners as Capital goods

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5.2.1 I find that the Cenvat credit of duty paid on Air Conditioners has been allowed by the Hon’ble Tribunal 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 :(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.

5.2.2 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, 2006 TO SEPTEMBER, 2006 AS PER THE SCN NO. V.ST/AR-G.DHAM/ COMMR./134/2007 DATED 19.10.2007.

(Amount in Rs.)S.

No.Name of Capital goods, Inputs/ Input Services Ex. Duty/

Service TaxEdu. Cess

Total

1 Air Conditioners 617031 12335 629366

CENVAT CREDIT AVAILED DURING THE PERIOD OCTOBER, 2006 TO MARCH, 2007 AS PER SCN NO. V.ST/AR-G.DHAM/ COMMR./140/2007 DATED 02.11.2007.

(Amount in Rs.)S.

No.Name of Capital goods, Inputs/ Input Services Ex. Duty/

Service TaxEdu. Cess

SHE Cess

Total

1 Air Conditioners 330045 6601 63 336709

CENVAT CREDIT AVAILED DURING THE PERIOD APRIL, 2007 TO SEPTEMBER, 2007 AS PER SCN NO. V.ST/AR-GND/15-120/COMMR/2008 DATED 14.10.2008

(Amount in Rs.)S.

No.Name of Capital goods, Inputs/ Input Services Ex. Duty/

Service TaxEdu. Cess

SHE Cess

Total

1 Air Conditioners 457256 8912 2319 468487

5.2.3 Thus, Cenvat credit amounting to Rs. 14,34,562/- availed on Air Conditioners is admissible to the notice.

5.3 Cenvat credit availed on service tax paid on “input services” like CHA Service, Rent-a-cab service, Surveyor service, Tele/Mobile phone, Club House Fees

5.3.1 In this regard, I find that 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. 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.)]

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(iii) Excel Crop Care Ltd. v. CCE [2007 (7) S.T.R. 451].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.”

5.3.2. 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

5.3.2.1 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 said service provider’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. 5.3.3 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 DURING THE PERIOD APRIL, 2006 TO SEPTEMBER, 2006 AS PER THE SCN NO. V.ST/AR-G.DHAM/ COMMR./134/2007 DATED 19.10.2007.

(Amount in Rs.)S. No. Name of Input Services Ex. Duty/ Service Tax Edu. Cess Total

1 CHA Services 142323 2751 1450742 Rent-a-Cab 483188 9634 4928223 Mobile Phone/ Telephone 240826 4798 2456244 Surveyor Services 168373 3357 171730

TOTAL: 1034710 20540 1055250

CENVAT CREDIT AVAILED DURING THE PERIOD OCTOBER, 2006 TO MARCH, 2007 AS PER SCN NO. V.ST/AR-G.DHAM/ COMMR./140/2007 DATED 02.11.2007.

(Amount in Rs.)S. No. Name of Input Services Ex. Duty/

Service TaxEdu. Cess

SHE Cess

Total

1 CHA Services 5479051 109580 55886312 Rent-a-Cab 1391220 27823 1419043

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3 Mobile Phone/ Telephone 368607 7371 3759784 Surveyor Services 566336 11327 577663

TOTAL: 7805214 156101 7961315

CENVAT CREDIT AVAILED DURING THE PERIOD April, 2007 to September, 2007 AS PER SCN NO. V.ST/AR-GND/15-120/COMMR/2008 DATED 14.10.2008 (Amount in Rs.)

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

Edu. Cess

SHE Cess

Total

1 CHA Services 440803 8811 1853 4514672 Rent-a-Cab 506444 10267 2704 5194153 Mobile Phone/ Telephone 275904 5530 1761 2831954 Surveyor Services 721316 14352 5279 740947

TOTAL: 1944467 38960 11597 1995024

5.3.4 In view of the above, Cenvat credit of service tax amounting to Rs. 10,55,250/-, Rs. 79,61,315/- and Rs. 19,95,024/- demanded vide SCN No. V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007, SCN No. V.ST/AR-G.dham/ Commr./140/2007 dated 02.11.2007 and SCN No. V.ST/AR-Gnd/15-120/Commr/2008 dated 14.10.2008 respectively on services pertaining to Mobile Phones, CHA, Surveyors, Rent-a-cab services is admissible to the noticee. 5.3.5 As regrds admissibility of Cenvat credit on Club House Fees, I find that the Hon’ble CESTAT had disallowed Cenvat credit on Club House Fees vide Order No. A/2122/WZB/AHD/08 dated 30/09/2008 in the own case of the noticee and hence, there is no reason for me to differ from the view of the Hon’ble Tribunal. As such I disallow Cenvat credit of Club House Fees amounting to Rs. 6,41,529/- taken by the noticee during the period October, 2006 to March, 2007 (SCN No. V.ST/AR-G.dham/Commr/140/2007, dated, 02/11/2007) and hold that the same is recoverable along with interest from the noticee under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 and Section 75 of the Finance Act, 1994.

5.4 Cenvat credit on Other inputs/capital goods5.4.1 The noticee has in its 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 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 area

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9 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

5.4.2 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.

5.4.3 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 on them, I proceed to discuss the issue regarding eligibility of the same by considering as if Cenvat credit was taken by the notice as “Inputs”. I find from the list mentioned at para 5.4.1 supra, that the inputs 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

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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. 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 itemsused 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

31

carve out certain exceptions must be applicable only to manufacturer in the conspicuous absence of any reference to service provider. Therefore we hold that 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.”

5.4.4 The noticee has relied on the following cases :Sr.No. Cases Decision

1 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 case are pertaining 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 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.

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5.4.5 The main issue is as to whether Cenvat credit can be allowed on inputs such as 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, it is necessary that they should invariably be consumed during the provision of output services. In the instant case, I find that the “inputs/capital goods” were not consumed during the provision of the output services provided 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.

5.4.6 The details of the Cenvat credit availed on “Other Inputs” are as under:CENVAT CREDIT AVAILED DURING THE PERIOD APRIL, 2006 TO SEPTEMBER, 2006 AS PER THE SCN NO. V.ST/AR-G.DHAM/ COMMR./134/2007 DATED 19.10.2007. (Amount in Rs.)S.No. Name of Capital goods, Inputs/

Input ServicesEx. Duty/ Service Tax Edu. Cess Total

01 Other Inputs 2,63,60,555 8,11,197 2,71,71,752

CENVAT CREDIT AVAILED DURING THE PERIOD OCTOBER, 2006 TO MARCH, 2007 AS PER SCN NO. V.ST/AR-G.DHAM/ COMMR./140/2007 DATED 02.11.2007. (Amount in Rs.)S.No. Name of Capital goods, Inputs/

Input ServicesEx. Duty/ Service Tax

Edu. Cess SHE Cess Total

01 Other Inputs 60360556 1209684 17402 61587642

CENVAT CREDIT AVAILED DURING THE PERIOD April, 2007 to September, 2007 AS PER SCN NO. V.ST/AR-GND/15-120/COMMR/2008 DATED 14.10.2008 (Amount in Rs.) S.No

.Name of Capital goods, Inputs/ Input Services

Ex. Duty/ Service Tax

Edu. Cess SHE Cess Total (Rs.)

01 Other Inputs 49269600 979505 260212 50509317

5.4.7 In view of the above discussion, I hold that the Cenvat credit of Rs.2,71,71,752/- , Rs. 6,15,87,642/- and Rs. 5,05,09,317/- availed by the noticee on ‘Inputs/Capital Goods’ for the period from April, 2006 to September 2006, October 2006 to March 2007 and April 2007 to September 2007 is not

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admissible to the noticee and required to be disallowed and recovered from them under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 read with Section 68 of the Finance Act, 1994, as demanded in the SCN No. V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007, SCN No. V.ST/AR-G.dham/ Commr./140/2007 dated 02.11.2007 and SCN No. V.ST/AR-Gnd/15-120/Commr/2008 dated 14.10.2008 respectively.

5.5 Cenvat credit on “Other input service”5.5.1 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 professional fees, 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”. 5.5.2 In this regard, I find that the notice 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.

5.5.3 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. 5.5.4 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.5.5.4.1 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

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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 30.09.2008.5.5.5 Regarding the professional fee/charges, I find that the noticee have paid fee/charges to various types of professionals. On going through the Commissioner(A) order No. 346/2007Commr(A)/Raj dated 30/11/2007, I find that he has not allowed Cenvat Credit on other input services such as testing fee and consulting architect service utilized at DAV School. I find that the Commissioner (Appeals) has held that the noticee have failed to substantiate the nexus with output service through documentary evidence. The Hon’ble CESTAT in the order [2009(13) STR 178 (Tri.-Ahmd) has allowed the Cenvat Credit on professionals by referring the Commissioner (Appeals) Order supra. Thus, stand taken by the Commissioner (Appeals) is completely different from what is mentioned in para 9 of Hon’ble CESTAT order regarding credit on professionals. For admissibility of Cenvat credit on professional fee the nexus between the service received by the noticee and the output service namely “Port Service” must be established. I find that there is no nexus between these services and the output service provided by the noticee. Further, as held by Hon’ble High Court of Gujarat vide order dated 05/05/2010 the question of principle of judicial comity and consistency does not arise as the Commissioner (Appeals) has not allowed credit on professionals. In view of the above, I hold that Cenvat Credit on professional fee/charges are not admissible to the noticee. 5.5.6 I find that the Cenvat credit availed by the notice on the ‘Other Input Services” including Bank Charges, are as under: CENVAT CREDIT AVAILED DURING THE PERIOD APRIL, 2006 TO SEPTEMBER, 2006 AS PER THE SCN NO. V.ST/AR-G.DHAM/ COMMR./134/2007 DATED 19.10.2007. (Amount in Rs.)S.No. Name of Input Services Ex. Duty/

Service TaxEdu. Cess Total

01 Other Inputs Services 2,63,04,067 3,27,813 2,66,31,880TOTAL: 2,63,04,067 3,27,813 2,66,31,880

CENVAT CREDIT AVAILED DURING THE PERIOD OCTOBER, 2006 TO MARCH, 2007 AS PER SCN NO. V.ST/AR-G.DHAM/ COMMR./140/2007 DATED 02.11.2007. (Amount in Rs.)S.No. Name of Capital goods, Inputs/

Input ServicesEx. Duty/ Service Tax

Edu. Cess SHE Cess

01 Other Inputs Services 8934894 178698 9113592

CENVAT CREDIT AVAILED DURING THE PERIOD APRIL, 2007 TO SEPTEMBER, 2007 AS PER SCN NO. V.ST/AR-GND/15-120/COMMR/2008 DATED 14.10.2008

(Amount in Rs.)S.No. Name of Capital goods, Inputs/

Input ServicesEx. Duty/ Service Tax

Edu. Cess SHE Cess Total

01 Other Inputs Services 86719053 1711365 462791 88893209

5.5.7 In view of the above discussions, the benefit of Cenvat credit on these ‘Other Input Services’ namely, professional fees, construction, soil testing, bank charges, labour charges, installation, etc. is not admissible to the notice. Accordingly, the Cenvat credit of Rs. 2,66,31,880/-, Rs. 91,13,592/- and Rs. 8,88,93,209/- availed by the noticee on ‘Other Input Services’ for the period from April, 2006 to September 2006, October 2006 to March 2007 and April 2007 to September 2007 as demanded in the SCN No. V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007, SCN No. V.ST/AR-G.dham/ Commr./140/2007 dated 02.11.2007 and SCN No. V.ST/AR-Gnd/15-120/Commr/2008 dated 14.10.2008 respectively is not admissible to the noticee and required to be disallowed and recovered from them under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 read with Section 68 of the Finance Act, 1994.

Impositon of Penalty 6 I find that the Hon’ble CESTAT in its order dated 08.05.2008/30.09.2008 in their own case has set aside the penalty proposed under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 78, 76

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and 77 of the Finance Act, 1994, which has also been maintained by the Hon’ble High Court of Gujarat and the Hon’ble Apex Court. As such, I refrain from imposing any penalty on the said noticee.7. In view of above discussions and findings, I pass the following order in respect of the SCN shown hereunder:

ORDER

(A) SCN No. V.ST/AR-G.dham/ Commr./134/2007 dated 19.10.2007 of Rs. 10,76,71,396/-.

(i) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 5,21,83,148 /- (Rupees Five Crore Twenty One Lakh Eighty Three Thousand One Hundred Forty Eight 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. 5,38,03,632/- (Rupees Five Crore Thirty Eight Lakh Three Thousand Six Hundred Thirty Two) on “Other Inputs” 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. 16,84,616/- ( Rupees Sixteen Lakh Eighty Four Thousand Six Hundred Sixteen ) 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.).

(B) SCN No. V.ST/AR-G. dham/Commr/140/2007 dated 02/11/2007 Rs. 14,06,97,959/-

(i) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 6,10,57,172/- (Rupees Six Crore Ten Lakh Fifty Seven Thousand One Hundred Seventy Two) 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. 7,13,42,763/- (Rupees Seven Crore Thirteen Lakh Forty Two Thousand Seven Hundred Sixty Three) on “ Club House Fees”, “Other Inputs” and “Other input services” under Rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 against M/s.

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Mundra Port & Special Economic Zone Ltd. ( Now M/s Adani Port & Special Economic Zone Ltd.).

(vi) 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.

(vii) I drop the demand of recovery of Cenvat credit of Rs. 82,98,024/- ( Rupees Eighty Two Lakh Ninety Eight Thousand Twenty Four ) 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.).

(C) SCN No. V.ST/AR-Gnd/15-120/Commr/2008 dated 14/10/2008 of Rs. 18,91,50,354/-

(i) I confirm the demand for recovery of wrongly availed Cenvat credit amounting to Rs. 4,72,84,320/- (Rupees Four Crore Seventy Two Lakh Eighty Four Thousand Three Hundred Twenty) 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. 13,94,02,524/- (Rupees Thirteen Crore Ninety Four Lakh Two Thousand Five Hundred Twenty Four) on “Other Inputs” 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.24,63,511 /- ( Rupees Twenty Four Lakh Sixty Three Thousand Five Hundred Eleven ) 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.)

(Tejasvini P. Kumar) Commissioner

Service Tax, Ahmedabad.F.No. V.ST/15-129/Adj/2007 Dt. 11/11 /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 Circle

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NavrangpuraAhmedabad

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.