2017 (9) TMI 1317 - AT - Central Excise

CENVAT credit - input services - mounting activities on the vehicles at the premises of M/s.Tata Motors Ltd. - Held that - The erection and commissioning of the machine is different from the mounting activities of body for motor vehicles. The agreement between the parties to engage the assessee for mounting activities is at the convenience of M/s.Tata Motors Ltd., which cannot be the basis for admissibility of the Cenvat Credit ignoring the provisions of Cenvat Credit Rules, 2004 - the mounting activities at the premises of M/s.Tata Motors Ltd., has no relation with the process of manufacture of the finished products of the assessee. Hence, the assessee is not eligible to avail credit on the input service. Extended period of limitation - Penalty - Held that - the demand of Cenvat Credit for the extended period of limitation cannot be sustained - As the issue involved in this case is interpretation of the provisions of the Rules, imposition of penalty is not justified. Appeal allowed - decided partly in favor of Revenue.

Summary

Issues:
1. Disallowance of Cenvat Credit on Service Tax paid by a third party for mounting activities.
2. Classification of mounting activities as an essential part of the manufacturing process.
3. Eligibility of the assessee to avail credit on the input service for mounting activities.
4. Applicability of the extended period of limitation for demanding Cenvat Credit.
5. Imposition of penalties based on the interpretation of the Rules.

Analysis:
1. The case involved a dispute regarding the disallowance of Cenvat Credit on Service Tax paid by M/s.Mahalaxmi Enterprises for mounting activities on vehicles at M/s.Tata Motors Ltd.'s premises. The Commissioner(Appeals) set aside the adjudication order, leading to an appeal by the Revenue.
2. The Revenue contended that mounting activities were post-manufacturing and not an integral part of the manufacturing process. They argued that the resultant product, a fully built vehicle, was a new product distinct from the body for motor vehicles. The Commissioner(Appeals) failed to appreciate this distinction, according to the Revenue.
3. The adjudicating authority examined the statutory provisions and commercial aspects, concluding that mounting activities at M/s.Tata Motors Ltd.'s premises did not relate to the manufacturing process at the assessee's premises. The authority emphasized the differences in excisable products and noted that mounting activities were not integral to the manufacture of the body for motor vehicles.
4. The Tribunal agreed with the adjudicating authority that the mounting activities were not eligible for Cenvat Credit as they did not have a direct or indirect nexus with the manufacturing process of the assessee. However, the demand for Cenvat Credit for the extended period of limitation was not sustained.
5. Given the issue's nature involving the interpretation of rules, the Tribunal held that the imposition of penalties was not justified. Consequently, the order of the adjudicating authority was restored, with the exclusion of the extended period of limitation for demanding Cenvat Credit and the setting aside of penalties.

This detailed analysis of the judgment highlights the key legal arguments, interpretations of statutory provisions, and the Tribunal's decision on each issue involved in the case.