2016 (7) TMI 593 - AT - Central Excise

CENVAT credit on service tax paid availing the security service - Held that - When the buyer always opt to take delivery of the goods only upon pre-dispatch testing. The place where such testing was carried out was subjected to security provision for protection of the goods. Therefore the service tax suffered in respect of security service availed cannot be said to be out of the zone of consideration of the input service. Accordingly, the service tax paid availing the security service entitles the appellant to the CENVAT credit. See Ramala Sahkari Chini Mills Ltd. Versus Commissioner Central Excise, Meerut-I 2016 (2) TMI 902 - SUPREME COURT - Decided in favour of assessee

Summary

Issues:
1. Denial of CENVAT credit on service tax paid for security service availed in connection with testing of vehicles and generators.

Analysis:
The appellant argued that the service tax paid on rent for premises used for testing vehicles and generators, as well as the service tax on security service availed, should entitle them to CENVAT credit due to the integral connection of the services with the manufacturing process. They emphasized that quality testing at the premises was essential for delivering vehicles and generators, establishing a clear nexus between the services and the manufacturing objective.

The Revenue, on the other hand, relied on the adjudicating authority's findings to oppose the CENVAT credit claim, citing a lack of integral connection between the services. They also referenced a Supreme Court decision in the case of Maruti Suzuki Ltd. Vs. Commissioner of Central Excise to support their argument.

After hearing both sides and examining the records, the Tribunal found merit in the appellant's argument. They agreed that the service tax paid for security service availed was within the scope of input services, considering the necessity of protecting goods during testing before delivery. The Tribunal referenced a larger Bench decision of the Supreme Court in Ramala Sahkari Chini Mills Ltd. Vs. Commissioner of Central Excise to support their conclusion.

As a result, the Tribunal allowed the appeal, acknowledging the appellant's entitlement to CENVAT credit on the service tax paid for security service availed in connection with the testing of vehicles and generators.