2016 (11) TMI 1451 - AT - Service Tax

CENVAT credit - various input services - denial on the ground of nexus - Held that - The explanation given by the appellant about the periodicity of the availment of the service and nature of service availed, throws light that those are integrally connected with the manufacturing activity and indispensable - credit allowed. Revenue may conduct enquiry in respect of Service tax credit taken based on incomplete distribution invoice issued by their corporate offices to ascertain the genuineness of the services and if satisfied about the genuineness thereof, there should not be denial of Cenvat credit of the appropriate claim by the appellant - appeal allowed in part and part matter on remand.

Summary

Issues:
Service Tax credit denial for various services including auctioneering, mobile telephone, EDI maintenance, FOREX, and quality system audit. Dispute over the allowability of Cenvat credit on these services.

Analysis:
The appellant contended that the denied services were integral to their manufacturing activity, with some services availed daily and others periodically. The appellant highlighted the importance of these services to their operations, emphasizing their connection to manufacturing activities. The appellant specifically mentioned that services like mobile telephone, EDI maintenance, FOREX, and quality system audit were availed on a daily basis, while ISD services were periodic. The Revenue disputed the allowability of Cenvat credit on these services.

Regarding ISD services, the court noted that there should not be difficulty for the Revenue to verify the authenticity of the services provided and availed, suggesting that appropriate Cenvat credit should be granted if the services were genuine. The Revenue supported the adjudication process.

After hearing both sides and examining the records, the court found merit in the appellant's argument that the denied services were essential and integrally connected to their manufacturing activity. The court acknowledged the appellant's explanations regarding the nature and periodicity of the services availed, concluding that the appellant was entitled to Cenvat credit for the service tax paid on these services.

To address any doubts raised by the Revenue regarding the last service related to incomplete distribution invoices, the appellant offered to cooperate in an inquiry. The court appreciated this gesture and directed the Revenue to conduct an inquiry to verify the genuineness of the services. The court emphasized that if the Revenue was satisfied with the authenticity of the services, the appellant should not be denied Cenvat credit.

In the final decision, the court allowed the appeal concerning the first five services listed and remanded the decision on the last service for further inquiry. The court instructed the authority to conduct an inquiry, share the results with the appellant, and issue a reasoned order based on the findings.

This comprehensive analysis of the judgment highlights the key arguments, considerations, and decisions made by the tribunal in addressing the issues raised regarding the denial of Service Tax credit for various services.