2019 (7) TMI 1651 - AT - Central Excise

Refund of unutilized CENVAT credit - input services used for Export of goods - period April, 2014 to June, 2014 - rejection of refund on the sole ground that from the documentary trail it could not be established that amount was paid for renting of immovable property - HELD THAT - The substantive part in respect of eligibility of credit in respect of input service has remained the same, being used by the manufacturer, whether directly or indirectly, in relation to the manufacture of final product. It is the inclusive part wherein amendment has been made effective from 1stApril, 2011 vide Notification no. 3/2011-CE (NT) dated 01.03.2011 and accordingly several exclusions have been brought in the definition of Input services, which did not exist, in the prior period. Moreover, the term services used in relation to setting up of the factory has been removed from the definition, being replaced by specific exclusions. Thus, based on such amendments, the department has argued that credit in respect of input services which were used for setting up of the factory shall not be allowed. Such narrow interpretation, without even considering changes made in the definition of input services shall lead to wrong conclusion. The refund claim filed by the Appellant is for the period April, 2014 to June, 2014. Various kind of input services viz. Business Auxiliary Service, Business Support Service, Clearing and forwarding service, erection commissioning and maintenance service, information technology service, renting of immovable property service, technical testing services has been taken by them during the set up stage of the manufacturing unit - These services do not form part of such exclusion clause, hence they are clearly available as credit. Moreover, adjudicating authority has admitted in the impugned order that the input services on which credit has been availed were essential for running of business and a pre condition for manufacturing final product. This also goes long way in establishing the fact that these services were eligible. Appeal dismissed - decided against Revenue.

Summary

Issues:
Refund claim under Rule 5 of Cenvat Credit Rules, 2004 for unutilized credit. Rejection of refund claim based on services used for setting up the factory. Interpretation of the definition of input services pre and post 1st April, 2011.

Analysis:
The case involved a refund application under Rule 5 of the Cenvat Credit Rules, 2004 for unutilized Cenvat credit. The appellant claimed a refund for various input services amounting to &8377; 7,27,52,794/- for the period April, 2014 to June, 2014. The department allowed a partial refund and rejected the balance. The dispute centered around whether the input services used for setting up the factory were eligible for credit. The department contended that such services did not qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004.

The appellant argued that the input services were essential for running the business and were indirectly and directly related to the manufacturing process. They contended that these services were for the set-up of business processes and not for the construction of the factory. The department's order-in-original acknowledged that the services were essential for running the business and pre-conditions for manufacturing the final product.

The tribunal observed that the rejection of the refund claim on the ground of input services used for setting up the factory was beyond jurisdiction and legally untenable. The tribunal delved into the definition of input services pre and post 1st April, 2011. The amendments effective from 1st April, 2011, specifically excluded services related to works contract or construction used in building or civil structures. The intention was to restrict input tax credits on services used during factory set-up.

The tribunal found that the services availed by the appellant, such as Business Auxiliary Service, Business Support Service, Clearing and forwarding service, etc., did not fall under the exclusion clause and were eligible for credit. The adjudicating authority had also acknowledged the essential nature of these services for running the business and manufacturing the final product. Consequently, the appeal filed by the department was rejected, and the appellant's appeal was allowed.

In conclusion, the tribunal disposed of both appeals, emphasizing the eligibility of the input services for credit and rejecting the department's narrow interpretation of the rules.