2015 (1) TMI 1089 - AT - Central Excise

Denial of input service credit on erection and installation charges - Held that - The fact that these charges have been borne by the appellant is not in dispute. Further the machine is inoperative in the absence of erection and installation and therefore, these have been borne by the appellant. In the light of decision of the Hon'ble High Court in the case of Ultra Tech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT , wherein it was held that an assessee who is a manufacturer of excisable goods is entitled for input service credit of the services availed by him in the course of their business. Admittedly, in this case, the appellant has availed the services of erection and installation of machinery is part of the business. Therefore, the appellants are entitled for input service credit. Whether the appellant is entitled to take the benefit of exemption Notification 22/03 in the absence of re-warehousing certificate - Held that - admittedly, the appellant cleared the goods under CT-3 certificates and copy of the same was produced by him before the department at the time of clearance between 2007-08. Within 90 days, the appellant was required to file re-warehousing certificate which they failed to do so but no steps has been taken by the revenue to verify whether the re-warehousing certificate has been obtained or not to deny the benefit of the Notification 22/03. Further, the audit took place in 2010. At that time also, this fact came to the knowledge of the department. Thereafter, the show-cause notice was issued invoking the extended period of limitation on 02.03.2012, and there is no allegation of suppression of facts or wilful misstatement. Therefore, the extended period of limitation is not invocable. Accordingly demand under this head is barred by limitation. - Decided in favour of assessee.

Summary

Issues:
1. Denial of input service credit on erection and commissioning charges.
2. Denial of exemption under Notification no. 22/2003 due to lack of re-warehousing certificate.

Analysis:

Issue 1: Denial of input service credit on erection and commissioning charges:
The appellant, a machinery manufacturer, appealed against the denial of input service credit for charges related to the installation of machinery at customers' sites. Revenue contended that these charges were paid beyond the place of removal and not included in the assessable value. The appellant argued that the installation charges were part of their business activity and should be considered input services under Rule 2(l) of the CENVAT Credit Rules, 2004. The appellant cited the decision in CCE vs. Danke Products to support their claim. The Tribunal held that the appellant was entitled to the input service credit as the installation was necessary for the machinery to be operational, following the precedent set in Ultra Tech Cement Ltd. The Tribunal distinguished the case of Kilburn Engg. where the installation was arranged by the customer's contractor, which was not the situation in this case. Therefore, the appellant was allowed to take Cenvat credit for the input service charges.

Issue 2: Denial of exemption under Notification no. 22/2003:
The second issue pertained to the denial of exemption under Notification no. 22/2003 due to the appellant's failure to produce a re-warehousing certificate within 90 days of clearance to a 100% EOU. The appellant argued that they had cleared the goods with CT-3 certificates and had submitted the same to the department at the time of clearance. Despite the lapse in submitting the re-warehousing certificate, the revenue did not verify whether the certificate had been obtained. The Tribunal noted that the audit conducted in 2010 should have brought this issue to light, and the subsequent show-cause notice issued in 2012 was beyond the extended period of limitation without any allegations of suppression of facts or wilful misstatement. Therefore, the Tribunal ruled that the demand under this head was time-barred, and the appellant succeeded in their appeal, allowing them to benefit from the exemption under Notification no. 22/2003.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order in favor of the appellant on both issues.