2016 (12) TMI 22 - AT - Central Excise

Denial of CENVAT credit - cement and clinker - eligibility for cenvat credit of tax paid on input services, namely, insurance services, courier services and telephone services - Held that - The appellants availed service tax paid on insurance service availed to insure the machinery used in the plant. Various types of insurance are taken by the appellants to insure the stock of raw material, fuel etc. all these are in connection with the activities relating to business of the assessee. Service tax paid on courier services was also availed by the appellants. Courier services were availed mainly for delivery of various letters, business correspondence, bill etc. to the customer and other person in connection with business. Similarly, telephone and mobile services were availed by the appellant and the expenditure is borne by them alongwith service tax. These mobile phones were provided for business use and the whole expenditure is with reference to the business activity of the company. We find that the reasoning given in the impugned order to the effect that these services are not mentioned by name in the definition of input services and hence not eligible for credit, is legally untenable. Input service has been examined by various decisions of this Tribunal as well as High Courts. Hon ble High Court of Bombay in case of Commissioner vs. Ultratech Cement 2010 (10) TMI 13 - BOMBAY HIGH COURT considered the issue at length and held that the definition of input service under Rule 2(l) of the Cenvat Credit Rules is very wide and covered services whether directly or indirectly used in or in relation to manufacture of final product and also after manufacturing of the final product. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of cenvat credit for specific input services - insurance, courier, and telephone services.

Analysis:
The appeals were made against the Commissioner of Central Excise's order denying cenvat credit for specific input services totaling a significant amount. The dispute revolved around the eligibility of the appellants, engaged in cement and clinker manufacturing, for cenvat credit on tax paid for insurance, courier, and telephone services. The Revenue argued that these services were not covered under "activities relating to business" as per an amending notification, excluding them from credit eligibility. The original authority upheld this view and imposed penalties on the appellants.

Upon hearing both sides, the Tribunal examined the nature of the services in question. The appellants had availed insurance services to cover machinery and stock, courier services for business-related deliveries, and telephone services for business communication. The Tribunal found the Revenue's argument, based on the amending notification, legally untenable. It rejected the notion that the exclusion of these services was clarificatory and should apply retrospectively. Previous tribunal decisions supported the appellants' position, allowing credit for similar services.

The Tribunal referenced various tribunal decisions and a High Court ruling to emphasize the broad scope of the definition of input services under the Cenvat Credit Rules. It highlighted that input services, directly or indirectly used in or related to manufacturing, are eligible for credit. Citing precedent, the Tribunal concluded that the impugned order denying credit was not legally sustainable. Consequently, the Tribunal set aside the order and allowed the appeals in favor of the appellants.

In conclusion, the Tribunal's decision on the denial of cenvat credit for specific input services, namely insurance, courier, and telephone services, was in favor of the appellants engaged in cement and clinker manufacturing. The Tribunal deemed the Revenue's argument regarding the exclusion of these services as ineligible for credit legally untenable, emphasizing the broad interpretation of input services under the Cenvat Credit Rules. The Tribunal's ruling set aside the impugned order and allowed the appeals, providing relief to the appellants.