2016 (6) TMI 771 - HC - Central Excise

Cenvat Credit - input services - Management Consultancy Services - nexus with manufacturing activity - Extended period of limitation - Held that - It is hardly required to be stated that the manufacturing activity would be an ultimate result but it begins with the establishment of the unit by purchasing machinery raw material and also the availability of finance. In the absence of fund procured may be of its own source or through financial institution it may not be possible to reach to the ultimate result of manufacturing activity. It cannot be said that the Management Consultancy Services so obtained has no nexus to the manufacturing activity. The Tribunal has rightly found that the input tax credit was available and we do not find that the view taken by the Tribunal could be said as erroneous. - Credit allowed - Decided against the revenue.

Summary

Issues:
- Input tax credit for Management Consultancy Services
- Limitation period for raising demand

Analysis:
1. Input tax credit for Management Consultancy Services:
The appellant contended that the Tribunal should not have allowed the input tax credit for Management Consultancy Services. However, the Court found this contention to be unsubstantiated. The Court reasoned that Management Consultancy Services obtained for infusing finance in different units of the company can be considered connected with the manufacturing activity. The Court emphasized that the manufacturing activity begins with the establishment of the unit, which includes procuring machinery, raw materials, and finance. Without adequate funding, reaching the ultimate result of manufacturing activity would not be feasible. Therefore, the Court upheld the Tribunal's decision that the input tax credit was valid, as the Management Consultancy Services had a nexus to the manufacturing activity.

2. Limitation period for raising demand:
The second contention raised by the appellant was regarding the limitation period for raising the demand. The appellant argued that the proceedings were not barred by the one-year limitation period due to the suppression of material facts, allowing a larger period for the Department to raise the demand. However, the Court disagreed with this argument. It noted that the input tax credit was claimed in the assessee's returns regularly, indicating that there was no suppression of facts. As all relevant facts were disclosed, the normal limitation period of one year applied. Since the proceedings were initiated after the expiry of this one-year period, the Court concurred with the Tribunal's decision that the demand was indeed barred by limitation.

In conclusion, after considering the arguments and the Tribunal's findings, the Court found no grounds for interference. The appeals were deemed meritless and subsequently dismissed.