2012 (7) TMI 1032 - HC - Service Tax

Summary

Issues Involved:
1. Interpretation of Rule 5 of Cenvat Credit Rules and definition of "input service".
2. Inclusion of various expenses as services "used in manufacture".
3. Ignoring Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006.

Summary:

Issue 1: Interpretation of Rule 5 of Cenvat Credit Rules and definition of "input service"

The Court examined whether the Tribunal erred in interpreting Rule 5 of Cenvat Credit Rules along with sub-rule 2(l) concerning the definition of "input service" by treating various maintenance services as service "used in manufacture". The Court noted that the respondent, M/s. Pharmanza Herbal Pvt. Ltd., engaged in the manufacture of Herbal Extract and Ayurvedic formulation, filed a refund claim u/s 11B of the Central Excise Act, 1944 for Rs. 7,392/-. The Assistant Commissioner sanctioned the refund, which was upheld by the Commissioner (Appeals). The Department's appeal to the Tribunal was rejected.

Issue 2: Inclusion of various expenses as services "used in manufacture"

The Court considered whether the Tribunal erred by including advertisement expenses, insurance premium for employees (PA Policy), labor processing charges, repair of computers, legal and professional expenses, mobile expenses, consultation engineering services, and maintenance and repair service as services "used in manufacture" of the final product for export. The Court did not delve into the merits of these inclusions due to the monetary limits set by the Department's circulars.

Issue 3: Ignoring Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006

The Court addressed whether the Tribunal ignored Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006, which stipulates that the refund of Cenvat credit is allowed only in respect of input service used in the manufacture of the final product, which is cleared for export. The Court noted that the appeal involved a refund claim of Rs. 7,392/- and referenced the Department's circulars dated 20-10-2010 and 17-8-2011, which set monetary limits for filing appeals.

Conclusion:

The Court highlighted that the amount involved in the appeal was Rs. 7,392/-, which fell below the monetary limits specified in the Department's circulars. The Court emphasized that the Department is bound by its own circulars and should not have preferred the appeal. Consequently, the appeal was dismissed, keeping the questions open to be decided in an appropriate case.