2016 (7) TMI 1198 - AT - Central Excise

Disallowance of credit on capital goods - Held that - The appellant has explained that the hoses are used to connect / transport silicon carbide just like pipes. Air receivers serve the purpose of air compressors in the manufacture of final product. These goods are integral to the manufacturing process and would fall within the definition of capital goods/parts. In view thereof, hold that credit on Air receiver and corrugated hoses is admissible. Disallowance of credit on input services - The period involved is April 2006 to January 2011 - Held that - The contention of the appellant counsel that the service of payroll processing and C Form collection service is connected to the activity of accounting is not without substance. The definition of input service, as contained in Rule 2(l) of CENVAT Credit Rules, 2004 speaks about services used in relation to activities relating to business such as accounting, auditing, financing etc. Payroll processing of employees is part of maintaining proper accounts. So also C Form has to be collected and submitted which is necessary for upkeep of tax accounting. As such, I hold that the credit on these input services is admissible.

Summary

Issues: Disallowance of credit on capital goods and input services

Analysis:
1. Capital Goods Disallowance:
The appellants, engaged in Silicon Carbide manufacturing, faced disallowance of credit on capital goods and input services amounting to Rs. 11,49,720. The original authority partially allowed credit, but the Commissioner(Appeals) disallowed credit on capital goods and input services. The appellant challenged this disallowance. The counsel argued that the air receiver and corrugated hoses, though denied as capital goods, were essential for the manufacturing process. The invoices were submitted earlier, and the counsel referenced a case where credit on corrugated hoses was deemed admissible. The Tribunal's precedent also supported the credit on the air receiver. The appellate tribunal found no discrepancy in the invoices and deemed the items as capital goods, allowing the credit.

2. Input Services Disallowance:
The disallowance of credit on input services, including payroll processing and C Form collection, was contested. The appellant outsourced these services, and the counsel argued that they were integral to the business activities and qualified as input services. The authorities contended that these services were not connected to accounting and thus not eligible for credit. However, the tribunal held that these services were indeed related to business activities, falling within the definition of input services. The period involved was April 2006 to January 2011. Ultimately, the tribunal allowed the credit on input services, along with capital goods, totaling Rs. 1,10,338. The appeal was allowed accordingly with consequential reliefs, if any.