2016 (7) TMI 1280 - AT - Service Tax

CENVAT credit - trade promotion service - insurance/public relation service - cargo handling service - mobile repair services - denial on account of nexus - Held that - The Cenvat Credit Rules prevalent at the material time provided activity relating to business for the purpose of consideration as input service. Since the expenses incurred on the disputed services were in relation to the business activities of the appellant, Cenvat credit on the disputed services cannot be denied on the ground that there is no nexus between the input and the output services. With regard to the trade promotion service, taking of Cenvat credit is not in conformity with Rule 9 of the CCR, 2004, credit rightly denied. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Denial of Cenvat credit on various taxable services.
2. Nexus between input service and output service.
3. Validity of taking Cenvat credit for trade promotion service.

Analysis:
1. The appeal challenged the denial of Cenvat credit on Service Tax paid for insurance/public relation service, cargo handling, mobile repair services, and trade promotion service. The Commissioner of Customs and Central Excise, (Appeals-I), Jaipur, denied the credit citing lack of nexus with the output service provided by the appellant and non-compliance with Rule 9 of the Cenvat Credit Rules, 2004 for the trade promotion service.

2. The Commissioner (Appeals) acknowledged that the expenses on the disputed services were business-related. However, he upheld the denial of Cenvat credit due to the perceived lack of nexus between the input and output services. The Tribunal disagreed, noting that the expenses were related to the business activities of the appellant, as confirmed by the Commissioner (Appeals). The Tribunal held that Cenvat credit cannot be denied solely based on the absence of a nexus between input and output services. However, regarding the trade promotion service, the Tribunal found that taking Cenvat credit was not in compliance with Rule 9 of the Cenvat Credit Rules, 2004.

3. The Tribunal allowed the appeal, except for the Cenvat credit of &8377; 32,389/- related to the trade promotion service, which was deemed non-compliant with the Cenvat statute. The judgment clarified the importance of establishing a nexus between input and output services for claiming Cenvat credit and highlighted the necessity of adherence to the relevant rules for credit eligibility.

Conclusion:
The judgment by the Appellate Tribunal CESTAT NEW DELHI addressed the denial of Cenvat credit on various taxable services, emphasizing the need for a nexus between input and output services for credit eligibility. While allowing the appeal in most parts, the Tribunal upheld the denial of Cenvat credit for trade promotion service due to non-compliance with the Cenvat Credit Rules, 2004. The decision underscored the significance of adhering to statutory provisions for claiming Cenvat credit and ensuring a clear connection between input and output services.