2014 (11) TMI 963 - AT - Central Excise

Cenvat Credit of Service Tax - Availment of credit in respect of various services - Penalty under Rule 15 - Held that - Insisting on quality control methods, is normal business practice in many products, but that does not mean that in all such cases the activity of business performed and used in the manufacture of products of the customers can be so interpreted to allow Cenvat Credit to appellant. - Similarly in the case of mango pulp testing service there is hardly any integral connection between manufacture of Concentrate and the testing of mango pulp supplied by a third party directly to the bottling plant. - Prima facie credit of service tax does not appear to be admissible in case of QMS Audit, inventory audit at bottlers end, mango pulp testing at suppliers end and verification of assets at retailers. Credit of service tax towards maintenance, charges for coffee vending machines would be admissible because the machines are owned by the appellants and used for dispensing the tea/coffee for retailers. As it has nexus to their business activity. The credit of service tax paid by an event management company for organizing events such as functions to honour employees at Bombay whereas the manufacturing activity is at Pune cannot be seen to any nexus connected with the business of the appellant. Reliance is placed of the judgment in the case of Manikgarh Cement (2010 (10) TMI 10 - BOMBAY HIGH COURT) wherein Hon ble High Court held that rendering taxable services at the residential colony for the benefit of employees is not integrally linked to the business of the assessee. The next service on which credit was denied is the security service at the Kondhwa godown. We note that the godown is outside the factory and no evidence was shown to prove that the godown was the place of removal. Input service under Rule 2(l) include service used in storage up to the place of removal. No evidence was produced as to show what was stored in the godown and whether it had any relation to the manufacturing activity of the appellant. The Cenvat credit is inadmissible. Cenvat credit is admissible for services used in the premises or precincts thereof for landscaping - Prima facie credit of service tax does not appear to be admissible in case of QMS Audit, inventory audit at bottlers end, mango pulp testing at suppliers end and verification of assets at retailers - Partial stay granted.

Issues Involved:
- Admissibility of Cenvat Credit on various services provided to bottlers
- Interpretation of "input service" in relation to the appellant's business activities
- Justification for availing Cenvat Credit on specific services
- Relevance of previous legal judgments in determining admissibility of Cenvat Credit
- Assessment of interest liability on Cenvat Credit utilization
- Consideration of waiver of pre-deposit of duty, interest, and penalty

Admissibility of Cenvat Credit on Various Services Provided to Bottlers:
The appellants filed stay applications against the impugned orders that held Cenvat Credit of Service Tax inadmissible on various services availed during the period from July 2005 to March 2011. These services included QMS audit, testing of mango pulp, verification of sales generating assets, physical verification of inventories, maintenance of coffee vending machines, event production, security services, landscaping work, and catering. The main contention was that these services were essential for maintaining product quality at the bottlers' end, directly impacting the appellant's business as poor quality beverages would reduce demand for Concentrate. However, the impugned order denied the admissibility of Cenvat Credit on these services, stating a lack of nexus between the services rendered and the appellant's business activities.

Interpretation of "Input Service" in Relation to the Appellant's Business Activities:
The definition of "input service" under Rule 2(l) of the Cenvat Credit Rules was crucial in determining the admissibility of Cenvat Credit. The tribunal analyzed whether the services availed by the appellants were used directly or indirectly in or in relation to the manufacture of their final products. It was emphasized that the services provided at the bottlers' premises did not meet the criteria of being used in the manufacture of the appellant's final products. The tribunal highlighted that the appellant and bottlers operated on a principal-to-principal basis, with separate business entities and Central Excise Registrations, leading to the denial of Cenvat Credit on activities performed at the bottlers' factories.

Justification for Availing Cenvat Credit on Specific Services:
The appellants provided detailed justifications for availing Cenvat Credit on specific services such as maintenance of coffee vending machines, event production, landscaping work, and security services. They argued that these services were necessary for their business activities and had a direct nexus to their operations. However, the tribunal scrutinized each service individually, considering factors like ownership of assets, location of services, and relevance to the manufacturing process. Ultimately, the admissibility of Cenvat Credit was determined based on the specific circumstances and applicability to the appellant's business.

Relevance of Previous Legal Judgments in Determining Admissibility of Cenvat Credit:
Both the appellants and the Commissioner relied on previous legal judgments to support their arguments regarding the admissibility of Cenvat Credit on the services in question. The tribunal examined these judgments, such as the case of VST Industries Ltd. Vs. CCE, Hyderabad, and Commissioner Vs. M/s Manikgarh Cement, to assess the applicability of Cenvat Credit rules in the current scenario. The tribunal's decision was influenced by the interpretations and precedents set by these legal judgments in similar cases.

Assessment of Interest Liability on Cenvat Credit Utilization:
The issue of interest liability on Cenvat Credit utilization was raised by the appellants, citing relevant legal precedents to support their argument that interest should not be demanded if the credit was not utilized. The tribunal considered these arguments along with the appellants' credit balance status to determine the justification for demanding interest. The decision regarding interest liability was crucial in assessing the financial implications for the appellants in relation to the Cenvat Credit availed.

Consideration of Waiver of Pre-Deposit of Duty, Interest, and Penalty:
In the final deliberation, the tribunal assessed the appellant's request for a waiver of pre-deposit of duty, interest, and penalty. After considering the merits of the case and the balance of convenience, the tribunal directed the appellants to make a pre-deposit of a specific amount within a stipulated timeframe. The decision regarding the pre-deposit and subsequent waiver of remaining dues was a significant outcome in the overall judgment.

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