2014 (7) TMI 230 - AT - Central Excise

CENVAT Credit - Eligibility - Various input services - Held that - Eligibility of telephone services - mobile as well as land line - Following decision of CCE vs. Excel Crop Care Ltd. reported in 2008 (7) TMI 160 - HIGH COURT GUJARAT - decided in favour of assessee. As regards the Cenvat credit in respect of courier services used for dispatch of documents, this issue also stands decided in favour of the appellant by the judgment of Hon ble Gujarat High Court in the case of Commissioner vs. Apar Industries Ltd. (2013 (2) TMI 276 - GUJARAT HIGH COURT) and also by the judgments of the Tribunal in the cases of Kodak India Pvt. Ltd. vs. CCE, Indore reported in 2012 (11) TMI 70 - CESTAT, NEW DELHI . decided in favour of assessee. As regards the eligibility of Cenvat credit of the insurance services used for insurance of the plant and machinery against damage due to accident etc., we are of prima facie view that this service is an integral part of the business of manufacturing of final product, as no prudent manufacturer would start manufacturing operations without ensuring his plant and machinery and other costly assets and hence the ratio of the judgment of Hon ble Bombay High Court in the case of Commissioner vs. Ultratech Cement Ltd. (2010 (10) TMI 13 - BOMBAY HIGH COURT ) would apply. The Commissioner s reasoning that amendment made to Rule 2 (l) w.e.f. 01/4/11 by which the expression activities relating to business had been deleted, is retrospective amendment, is totally wrong as an amendment which restricts the definition of input services and thereby restricting the availability of Cenvat credit to an assessee cannot be given retrospective amendment when there is no such intention expressed in the amending provision. We find that the Tribunal in the case of Federal Mogul Goetze (India) Ltd. vs. CCE, Chandigarh - II (2013 (12) TMI 787 - CESTAT NEW DELHI) had also expressed the view that insurance of plant and machinery against risks and hazards is eligible for Cenvat credit and is covered by the definition of input service. decided in favour of assessee.

Summary

Issues:
- Eligibility of Cenvat credit for courier services, telephone services, and insurance of plant and machinery.

Analysis:
The appellant, a manufacturer of cement and clinker, availed Cenvat credit for services like courier, telephone, and insurance during the period from November 2004 to March 2008. Dispute arose when the department issued show cause notices for recovery of the Cenvat credit amount along with interest and penalties, stating that these services did not have a nexus with the manufacturing process. The Commissioner upheld the demands, citing that the services were not related to the manufacture of the final product and that an amendment to the Cenvat Credit Rules applied retrospectively. The appellant challenged this decision through appeals and stay applications.

The appellant argued that services like courier for document dispatch, insurance of plant and machinery, and telephone services were essential for the business of manufacturing, citing relevant judgments. They contended that the retrospective application of the rule amendment was incorrect, as it lacked clear legislative intent. The appellant presented cases where courts and tribunals had ruled in favor of similar services being eligible for Cenvat credit, emphasizing the importance of these services in the manufacturing process.

The Department Representative opposed the stay applications, reiterating the Commissioner's findings that the disputed services lacked a connection to the manufacturing process, thus making them ineligible for Cenvat credit. However, the Tribunal analyzed the arguments from both sides and examined the precedents cited by the appellant.

The Tribunal found in favor of the appellant on all counts. It held that telephone services used for company work, courier services for document dispatch, and insurance services for plant and machinery were integral to the manufacturing business. The Tribunal referenced judgments from various High Courts and Tribunals supporting the eligibility of these services for Cenvat credit. It rejected the retrospective application of the rule amendment and concluded that the appellant had a strong prima facie case in their favor. Consequently, the requirement for pre-deposit of the Cenvat credit demand, interest, and penalty was waived, and the recovery of the same was stayed until the appeals were disposed of. The stay applications were allowed, providing relief to the appellant.