2014 (11) TMI 119 - AT - Central Excise

CENVAT Credit - Whether the appellant is eligible to avail the CENVAT Credit of Service Tax paid on Technical Testing & Analysis services, Technical Inspection & Certification services and Intellectual Property Right services received by the appellant for drug formulation - Held that - the services of technical inspection and certification are provided by the service provider in respect of the P.P. medicaments manufactured and to be manufactured by the appellant. It is on record that the appellants have themselves stated that some of the services are for the products which are to be manufactured in future - there being no dispute as to the receipt of the services provided in respect of technical inspection and certification services, that also in respect of the finished goods which are manufactured and to be manufactured, the services in our considered view will fall within the expression activities of business . It is a common knowledge that before introducing any final product especially P & P Medicaments, detailed analysis; research and technical study requires to be undertaken as to the efficacy, side effect and tolerance of the medication. The service provider conducts all these experiments and certify as to the acceptability of the said medicaments. - appellant is eligible to avail CENVAT Credit of the Service Tax paid on technical inspection and certification charges as also the technical testing services - Decided in favour of assessee.

Summary

Issues:
Whether the appellant is eligible to avail the CENVAT Credit of Service Tax paid on Technical Testing & Analysis services, Technical Inspection & Certification services, and Intellectual Property Right services for drug formulation.

Analysis:
The appeal questioned the eligibility of the appellant to claim CENVAT Credit for specific services received. The lower authorities initially denied the credit, leading to an appeal. The High Court remitted the matter back to the Tribunal for reconsideration regarding the CENVAT Credit availed for technical testing certification services. The key contention was whether the services were directly related to the manufacturing activity of the appellant.

The appellant argued that the services were essential for their business activities related to drug formulation. They cited a judgment by the High Court of Gujarat in a similar case, emphasizing that the services were in furtherance of their business and thus eligible for CENVAT Credit. On the other hand, the Revenue contended that the services' direct connection to the final product manufacture was unclear, as acknowledged by the appellant themselves.

After considering both parties' submissions and the factual record, the Tribunal focused on the primary issue of the appellant's eligibility for CENVAT Credit on technical inspection and certification services. It was noted that the services were provided for the medicaments manufactured and to be manufactured by the appellant. The Tribunal highlighted that detailed analysis and technical studies are crucial before introducing final products, especially in the pharmaceutical sector.

The Tribunal referred to a specific judgment by the High Court of Gujarat regarding technical inspection and certification services, which clarified the eligibility criteria for CENVAT Credit in similar contexts. The judgment emphasized the necessity of such services for maintaining standards and compliance with statutory requirements in manufacturing activities. The Tribunal concluded that the appellant was indeed eligible to avail CENVAT Credit for the mentioned services, aligning with the High Court's ruling.

In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, granting them the right to claim CENVAT Credit for the relevant services.