2016 (7) TMI 1102 - AT - Central Excise

Disallowance of credit on input services - whether fabrication services having been availed outside the factory are not eligible for credit as they do not qualify as input services? - Held that - By bringing in the amendment vide Notification No.10/2008 dt. 01/03/2008 to the definition of input services w.e.f. 01/04/2008 a radical change was introduced expanding the clearances of final products upto the place of removal. Further in the case of Endurance Technology (P) Ltd. (2015 (6) TMI 82 - BOMBAY HIGH COURT ), the Hon ble High Court of Bombay has categorically held that no such restriction is imposed. The arguments advanced by Revenue regarding fabrication services are untenable. All the other services for which the credit has been denied have been held to be eligible input services in a catena of judgments cited supra as these services would get covered under the activities relating to business. Denial of credit is unjustifiable - Decided in favour of assessee.

Summary

Issues: Disallowance of credit on input services

Analysis:
1. The appellants, engaged in manufacturing Isolators and Electrical Switchgear Equipments, faced disallowance of credit on input services during an audit for the period April 2008 to March 2009.
2. A show-cause notice was issued proposing disallowance of credit, recovery of the same with interest, and imposition of penalties. After adjudication, the primary authority ordered recovery and penalties, which were upheld by the Commissioner(Appeals).
3. The appellant's counsel argued on merits and limitation issues, highlighting denial of credit on various services like Fabrication services, CHA services, Rent-a-cab services, Air travel, and more for different periods.
4. The counsel emphasized the broad definition of input services pre-01/04/2011, arguing that services need not be received at the factory premises but should be used directly or indirectly in the manufacturing process.
5. The appellant relied on several case laws to support their argument that the denied services were essential for their manufacturing business.
6. The respondent's representative contested the admissibility of credit on Fabrication services, stating that the services were rendered outside the factory premises.
7. The judge, after hearing both parties, ruled in favor of the appellants, stating that the denial of credit on fabrication services was unjustified. Citing relevant case laws, the judge emphasized the broad scope of input services and ruled that all denied services were eligible input services.
8. The judge set aside the impugned orders, allowing the appeals with consequential reliefs, without delving into the issue of limitation.

This detailed analysis covers the issues involved in the disallowance of credit on input services and provides a comprehensive overview of the arguments presented by both parties, the legal principles applied, and the final ruling by the judge, ensuring a thorough understanding of the judgment.