2014 (7) TMI 1082 - AT - Service Tax

CENVAT Credit - cargo handling services, advertising agency service/sale of space or time for advertisement, business auxiliary service/business support service, management maintenance or repairs service for maintenance and repair of plant and machinery, general insurance services, manpower recruitment and supply agency services, technical testing and analysis service and scientific or technical consultancy services and in respect of C & F Agent s service - Held that - Services like advertisement or sales promotion, repair and maintenance, quality control, recruitment are specifically covered within the inclusive portion of the definition of input service. However, while the C & F agency service would be covered by the main definition clause - services used by the manufacturer in or in relation to clearance of the final product from the place of removal for the period upto 31-3-2008, during the period w.e.f. 1-4-2008, the C & F agency service for clearance of the goods from the place of removal would not be covered by the definition of input service , when by amendment to Rule 2(l), the scope of clearance related services for the purpose of Cenvat credit has been restricted to the services availed upto the place of removal , we are of prima facie view that the C & F services availed from the place of removal would neither be covered by the main definition part of the definition of input service nor by the inclusive part of the definition. As regards the cargo handling service, it has been explained by the appellant that this service, is required for handling the cement manufactured by them at the factory s railway siding and at various depots and the same is an important input for them. In our view, this service would be covered by the expression - activities relating to business in the inclusive portion of the definition. Similarly, general insurance service for insurance of plant and machinery is also an activity integrally connected with the manufacturing business. Appellant would be eligible for Cenvat credit in respect of cargo handling services, advertising agency service/sale of space or time for advertisement, business auxiliary service/business support service, management maintenance or repairs service for maintenance and repair of plant and machinery, general insurance services, manpower recruitment and supply agency services, technical testing and analysis service and scientific or technical consultancy services and in respect of C & F Agent s service upto 31-3-2008. - Conditional stay granted.

Summary

Issues:
Recovery of allegedly wrongly taken Cenvat credit amounting to Rs. 2,41,85,937/-; denial of Cenvat credit on grounds of services not being related to manufacture or covered by the definition of 'input service'.

Analysis:
The appellant, a manufacturer of Cement and Clinker, availed Cenvat credit under Cenvat Credit Rules, 2004, for Central Excise duty paid on inputs and services. The Commissioner issued a show cause notice for recovery of Rs. 2,41,85,937/- of Cenvat credit, alleging wrongful credit taken for services not related to manufacture or covered under 'input service' definition. The Commissioner confirmed the demand and imposed a penalty under Rule 15 of the Cenvat Credit Rules, 2004.

The appellant contended that the disputed Cenvat credit was for services like Cargo Handling, Advertising Agency, Business Auxiliary, Clearing and Forwarding, etc., covered under the 'input service' definition. They argued that these services were essential for their business activities and should be eligible for credit. The appellant challenged the Commissioner's order through an appeal and stay application.

During the hearing, the appellant's representatives detailed how the services in question were directly or indirectly related to their manufacturing process or business activities. They emphasized that the Commissioner's order did not adequately consider the eligibility of the services for Cenvat credit, leading to an unsustainable decision. The appellant sought a waiver for pre-deposit based on a strong prima facie case.

The Departmental Representative opposed the waiver request, supporting the Commissioner's findings and highlighting the appellant's lack of explanation regarding the services in question. The Tribunal carefully considered both sides' arguments and reviewed the records.

The Tribunal analyzed the services for which Cenvat credit was claimed, noting that certain services like Cargo Handling and General Insurance were integral to the manufacturing process. They observed discrepancies in the Commissioner's order regarding the eligibility of services for credit. The Tribunal found a prima facie case for allowing credit on specific services but deferred a decision on services post-1-4-2008 for final hearing.

Considering the case merits and revenue interests, the Tribunal directed the appellant to deposit Rs. 40,00,000 within eight weeks. Upon compliance, the pre-deposit requirement for the remaining amount would be waived, and recovery stayed pending appeal disposal. The Tribunal pronounced this decision on 25-7-2011.