2012 (12) TMI 30 - AT - Central Excise

Cenvat credit on input services - disallowance as the services have no nexus with excisable goods manufactured - Held that - The matter of invoices in the names of Valco Aluminium Extrusion and Vishnu Associates Ltd. the assessee submits that Valco Aluminium Extrusion is the brand name of their product and Valco Industries Ltd. is the registered name of the company. So some of the service providers used their brand name to refer to the company and that is the reason why such name appears on the invoices in some cases. They also point out that their unit at Chandigarh was earlier known as Vishnu Associates Ltd. before their name was changed to Valco Industries Ltd . A few service provides had issued bills in their earlier name. There is no other company by name. Vishnu Industries Ltd. and the services in question was received by them and utilized. So considering provisions of the proviso to Rule 9(2) of Cevant Credit Rules, 2004 there is no justification in denying the credit. Security services for the factory at Chandigarh - Held that - No reason to deny Cenvat credit on this however, the submission of fact made by the Counsel in this regard needs verification. In respect of mobile phones also, the credit is to be extended based on precedent decisions though such credit should be apportioned as would relate to dutiable products following the principles laid down under Rule 6 of Cenvat Credit Rules. Service tax relating to insurance service for the vehicles in the name of the Directors - Held that - It is necessary to verify the factual submissions regarding the fact that vehicles were figuring as assets in the balance sheet of the company and its expenditure was being met by the company. Also it is necessary to apportion the Cenvat credit on this item between the value of dutiable goods and value of exempted products manufactured by the appellants following the principles laid down under Rule 6 of Cenvat Credit Rules 2006.

Summary

Issues:
Dispute over Cenvat credit for various input services received by the appellant from January 2008 to December 2008.

Analysis:

1. The appellant, a manufacturer of excisable goods, availed Cenvat Credit Scheme benefits for input services.

2. The dispute revolved around Cenvat credit taken by the appellant for five types of input services, including security services, services billed by specific providers, insurance of vehicles, membership fees for clubs, and services related to a specific unit.

3. The Revenue argued that the services were received at the headquarters and then transferred to the factory at Chandigarh, which manufactures dutiable products, while the Baddi factory produces exempted goods. The appellant did not register as an "input service distributor" as required.

4. The Counsel for the appellant contended that the security services were solely for the Chandigarh factory, and transferring credit to the factory did not necessitate distributor registration.

5. Regarding services billed under different names, the Counsel explained the historical name changes and brand associations, justifying the credit claim under Rule 9(2) of the Cenvat Credit Rules.

6. For insurance of vehicles registered in directors' names, the appellant argued that the vehicles were company assets, and the expenditure was company-funded, justifying the credit claim.

7. The Counsel cited tribunal decisions supporting Cenvat credit for mobile phone services as input services for manufacturing.

8. No arguments were presented for membership fees and specific unit-related services.

9. The Revenue opposed the credit for mobile phones and vehicle insurance, citing lack of nexus with manufacturing activities and partial use for exempted goods.

10. The Tribunal noted that input services' nexus with manufacturing need not be direct, and non-registration as an input service distributor did not warrant credit denial. Compliance with Rule 6 was necessary due to the Baddi factory's exempted status.

11. The Tribunal found the explanations satisfactory for services billed under different names, justifying the credit claim.

12. Cenvat credit was allowed for security services and mobile phones, subject to verification and apportionment for dutiable products.

13. Credit for vehicle insurance was permitted based on company ownership and usage by directors, pending verification and apportionment following Rule 6.

14. Credit for unaddressed items was disallowed, and the adjudicating authority was directed to quantify eligible credit based on the Tribunal's decisions.

15. The appellant was given another opportunity to provide relevant records for verification, ensuring proper quantification of eligible credit by the adjudicating authority.