2006 (10) TMI 446 - AT - Central Excise

Summary

Issues involved: Application for dispensing with pre-deposit of duty amount and penalty confirmed by Commissioner of Central Excise, Pune. Dispute regarding entitlement to credit of service tax paid on advertisement expenses.

Issue 1: Pre-deposit of duty amount and penalty

The appellants sought dispensation of the pre-deposit of duty amount and penalty totaling Rs. 75,15,733 and Rs. 10,000 respectively, as confirmed and imposed by the Commissioner of Central Excise, Pune.

Issue 2: Entitlement to credit of service tax on advertisement expenses

The dispute revolves around the appellants' entitlement to take credit of the service tax paid on advertisement expenses by advertising agencies. The Commissioner disallowed the credit, stating that the advertisement was for the final product, aerated waters, and not for the concentrate manufactured by the appellants.

The definition of "input service" under Explanation 2 to rule 2 of the Cenvat Credit Rules, 2004 was crucial in this case. It includes services used directly or indirectly by the manufacturer in relation to the manufacture of the final product. The wide connotation of "in relation to the manufacture of final product" has been upheld by various authorities. Notably, the definition explicitly includes advertisement or sale promotion, which is significant in this context.

The appellants' advertisement of aerated water, though not directly related to the concentrate, is crucial as the consumption of concentrates is linked to the sale of aerated water. The contradictory stances taken by the revenue department regarding the inclusion of advertisement charges in the value of the concentrate further complicated the matter. The reliance on a previous Supreme Court decision was deemed improper as the circumstances differed significantly from the present case.

After considering the arguments presented, the Tribunal found that the appellants had established a prima facie case in their favor, warranting the unconditional allowance of the stay petition. Given the recurring nature of the issue and the pending notices, the appeal was scheduled for final disposal on 13-11-2006.