2014 (8) TMI 654 - AT - Central Excise

Denial of CENVAT Credit - input services on advertisement charges - product manufactured by the other unit - Held that - Credit cannot be denied merely because the service tax on advertisement charges was paid by the Unit-I for the advertisement of product of Unit-II, while both are under the umbrella of the same company. At any event, Unit- I could be registered as input service distributor under the Rules 2004. The Tribunal held that credit should not be denied for such procedural infraction when substantial part of the rule is complied. The another aspect of this case is that Unit-I, appellant herein, is eligible to avail the credit on service tax paid on advertisement charges. The reason for denial of the credit is that the contents of the advertisement is in respect of product of other unit. It is contended by the appellant that the advertisement charges incurred by the appellant had been added to the cost. The Hon ble Bombay High Court in the case of M/s. Coca cola India Pvt. Ltd. 2009 (8) TMI 50 - BOMBAY HIGH COURT allowed the credit of service tax paid on advertisement. In that case, the appellant manufactured non-alcoholic beverage bases known as concentrates . The concentrate was sold by the appellant to bottling companies who, in turn, sold aerated beverages from the concentrates to distributors who, in turn, sold to retailers for the ultimate sale to the consumer. The advertisement and sales promotion activities including market research was undertaken by the appellant. Revenue denied the credit on the ground that the advertisement did not relate to concentrates manufactured by the appellant. - it is apparent that input service credit on advertisement charges are related to the business of the assessee. Taking into account of the facts and circumstances of the present case, in so far as both the units are under the same manufacturer and the input service credit is related to the advertisement charges, relating to business of the same assessee, there is no reason to deny the input service credit to the appellants - Decided in favour of assessee.

Summary

Issues involved:
Common issue involving denial of cenvat credit on input services for advertisement charges by Unit-I used for products of Unit-II.

Detailed Analysis:

Issue 1: Denial of cenvat credit on input services for advertisement charges
The case involved M/s. Greaves Cotton Ltd., with two units - Petrol Engine Unit (Unit-I) and Diesel Engine Unit (Unit-II). Unit-I faced denial of cenvat credit on advertisement charges used for Unit-II products. The appellant argued that both units belonged to the same manufacturer, thus credit should not be denied. They cited various Tribunal and High Court decisions supporting their stance.

Issue 2: Interpretation of "input services" under Cenvat Credit Rules
The definition of "input services" under Rule 2(l) of Cenvat Credit Rules was crucial. The appellant contended that the advertisement charges were duly recorded in their books and related to Unit-II. The adjudicating authority accepted that Unit-II could avail the credit, leading to the argument that Unit-I should not be denied the credit as both units were under the same manufacturer.

Issue 3: Nexus between input services and business activity
The Revenue argued that the advertisement for Unit-II was not integrally related to Unit-I's manufacturing activity, thus credit should not be available. They cited High Court decisions emphasizing the nexus between services and the business of the assessee. However, the Tribunal's interpretation of Rule 7 and relevant case laws supported the appellant's position that credit distribution was permissible within the same company.

Issue 4: Revenue-neutrality and procedural irregularity
The case highlighted the concept of revenue-neutrality and procedural irregularity in credit utilization. The Tribunal's observations in similar cases emphasized that procedural lapses should be viewed sympathetically if no revenue loss occurred. The absence of legal requirements for credit allocation based on services received further supported the appellant's claim.

Conclusion:
The Tribunal analyzed the case in light of relevant legal provisions and precedents. It concluded that denial of credit solely based on the advertisement charges' use for Unit-II products was unjustified. The inclusive definition of "input service" and the nexus between services and business activities favored the appellant. Consequently, the impugned orders were set aside, and all appeals were allowed with consequential relief, emphasizing the importance of considering the business relationship within the same manufacturer for credit eligibility.