2015 (7) TMI 544 - AT - Central Excise

CENVAT Credit - input service - Renting of immovable property - rental premises was not included in the registered premises - Penalty u/s 11AC - Premises which was not part of their manufacturing premises and had been included in their Central Excise Registration only on 31/3/2009 therefore it is contended in the show cause notice that said premises could not be considered as part of their factory premises to be used in the manufacture of their goods and therefore service cannot be considered as input service - Held that - As far as use of the premises is concerned it is not in dispute that same is used in connection with activity of the factory such as storage of goods. For the same use Revenue has allowed credit, subsequent to the date of inclusion of such premises in the registered premises of the factory therefore as far as use prior to the inclusion in the registered premises or thereafter it is same therefore it cannot be said that merely premises is not included in the registration premises the same is not used for activity related to manufacture. The whole emphasize for disallowing credit was given by the lower authorities on the ground that since the said rental premises was not included in the registered premises therefore credit is not admissible - use before or after, when it is meant for factory activity, credit is admissible whether the premises was included in the registered premises or otherwise. It is kept in mind that service is not tangible unlike inputs or capital goods. Scope of service is not limited within the four corner of factory, even if same services are received by the appellant at any place directly or indirectly related to manufacture of activity or related to business activity of the assessee irrespective whether it is provided within the factory or out side the factory, credit is admissible. Therefore in my considered view so long as rental premises in the present case is used for manufacturing activity of factory unit, credit is admissible, therefore the impugned order is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Admissibility of Cenvat Credit for service tax paid on rent of premises not initially included in factory registration.
2. Interpretation of Cenvat Credit Rules regarding inclusion of premises for availing credit.
3. Dispute over the use of premises in relation to manufacturing activity for credit eligibility.

Issue 1: Admissibility of Cenvat Credit:
The case involved a dispute over the admissibility of Cenvat Credit for service tax paid on rent of a premises (Gala No. A-07) that was not initially included in the factory's registration. The appellant contended that the premises were used for factory-related activities and therefore, credit should be allowed. The Revenue denied the credit for the period before the inclusion of the premises in the registration, arguing that it was not used in relation to manufacturing activities.

Issue 2: Interpretation of Cenvat Credit Rules:
The appellant argued that the Cenvat Credit Rules do not mandate that the rented premises must be included in the registered premises of the factory for availing credit. They emphasized that as long as the premises were used in connection with the manufacture of the final product or business activities related to the factory, credit should be permitted. The Revenue, on the other hand, maintained that until the premises were included in the registration, credit could not be granted.

Issue 3: Use of Premises for Manufacturing Activity:
The Tribunal analyzed the use of the premises and found that it was indeed utilized for activities related to the factory, such as goods storage. It was noted that the Revenue had allowed credit post the inclusion of the premises in the registered premises. The Tribunal emphasized that the key factor for credit disallowance was the non-inclusion of the rental premises in the registration. However, the Tribunal held that if the premises were used for manufacturing activities, credit should be allowed irrespective of registration status. The Tribunal clarified that services related to manufacturing activity are not confined to the factory premises alone. Therefore, as long as the rental premises were used for factory activities, credit was deemed admissible, leading to the setting aside of the impugned order and allowing the appeal.

This detailed judgment by the Appellate Tribunal CESTAT MUMBAI clarified the interpretation of Cenvat Credit Rules concerning the inclusion of premises for availing credit and highlighted the importance of the actual use of premises in relation to manufacturing activities for determining credit eligibility.