2016 (3) TMI 994 - AT - Central Excise

Dismissal of refund claim - refund of service tax paid on the said input services used for manufacture and export of final products - denial of cenvat credit - Held that - The definition of input service as contained in rule 2(l) very much covers all the input services on which Cenvat Credit is claimed and all the services are directly or indirectly related to business. It is a fact that the appellant are 100% EOU. They received the input service from various services providers and those services providers raised invoices on the appellant for service charges along with service tax leviable thereon. The appellants have claimed refund of service tax paid on the strength of said invoices and these facts are undisputed. In view of this admitted position, the appellants are entitled to refund of service tax paid on the said input services used for manufacture and export of final products. It has been the policy of the government since inception that the export should be tax free. In other words, the object of the government is to export the goods and services and not the taxes. If the refund of service tax paid on input services is not allowed to the appellant then the said taxes would have to be built in the cost of the final products and thus it would lead to export of taxes which are against the policy of the government. - Decided in favour of assessee

Summary

Issues Involved:
1. Eligibility for Cenvat Credit on various input services.
2. Interpretation of Rule 2(l) of CENVAT Credit Rules, 2004.
3. Authority of the Commissioner (Appeals) to question the vires of Rule 2(l).

Detailed Analysis:

1. Eligibility for Cenvat Credit on Various Input Services:
The primary issue in this case revolves around the eligibility of the appellant to claim Cenvat Credit on various input services such as Chartered Accountant services, insurance premium, and CHA services, which were denied on the grounds that these services do not qualify as input services under Rule 2(l) of CENVAT Credit Rules, 2004.

Chartered Accountant Services:
The appellant argued that the Chartered Accountant services were essential for their business expansion, specifically for acquiring a manufacturing unit in Jaipur. This service was deemed necessary for the business operations and thus should qualify as an input service. The appellant cited precedents such as CCE Vs Hindustan Coca Cola Beverages Ltd. 2011 (23) STR 268 (T) and CCE Vs Andhra Pradesh Paper Mills Ltd. 2011 (22) STR 126 (T) to support their claim.

Insurance Premium:
The appellant contended that the insurance premium covered the staff of Unit I, Unit II, and the Jaipur unit, forming part of the same legal entity. The credit was initially allowed only for Unit I, but the appellant argued that as an Input Service Distributor (ISD), Unit I could distribute the credit to other units. The appellant referenced CCE Vs Ecof Industries Pvt. Ltd. 2011 (271) ELT 58 (Kar.) to substantiate their position.

CHA Services:
The appellant engaged CHA for import shipment clearance, which included services from other providers. The CHA charged service tax only on their services, not on the services provided by others. The Commissioner (Appeals) had denied this credit, stating that CHA functioned merely as a coordination agency. The appellant argued that the services were indeed used in relation to their export product and thus qualified as input services. They cited cases like Amar International Vs CST 2015 (37) STR 810 (T), Devesh Agriexim Pvt Ltd Vs CST 2014 (36) STR 1116 (T), and Chandra Engineers Vs CCE 2013 (30) STR 699 (T) to support their claim.

2. Interpretation of Rule 2(l) of CENVAT Credit Rules, 2004:
The Commissioner (Appeals) had held that the services in question did not fall within the definition of input services under Rule 2(l) of CENVAT Credit Rules, 2004. The appellant argued that the definition of input services includes any service used directly or indirectly in the manufacture of final products and clearance of final products up to the place of removal. The appellant's counsel cited the Coca Cola India P. Ltd. 2009 (15) STR 657 case, where the Bombay High Court held that any activity essential for the smooth functioning of the business qualifies as an input service.

3. Authority of the Commissioner (Appeals) to Question the Vires of Rule 2(l):
The appellant contended that the Commissioner (Appeals) overstepped his authority by questioning the vires of Rule 2(l) of CENVAT Credit Rules, 2004. The Commissioner (Appeals) had held that the Central Government did not have the power to include activities relating to business within the scope of input services. The appellant argued that the Commissioner is not empowered to decide on the vires of the rules, a power reserved for the High Court or Supreme Court. The appellant maintained that the rule-making power under Section 37 of the Central Excise Act, 1944, was within the Central Government's jurisdiction.

Conclusion:
The Tribunal found that the services in question were indeed used in relation to the manufacture and export of final products, and thus qualified as input services under Rule 2(l) of CENVAT Credit Rules, 2004. The Tribunal emphasized the government's policy that exports should be tax-free, and denying the refund would lead to the export of taxes, contrary to this policy. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

Order:
The appeals were allowed, and the impugned order was set aside, granting the appellant the refund of service tax paid on the input services used for the manufacture and export of final products.