2009 (6) TMI 74 - AT - Service Tax

Cenvat Credit - denial of credit on Colomony Powder, Welding Electrodes, Plastic Crates/Pallets and credit on input-services viz. Taxi Service, Mobile Phones and Telephones held that - Colomony Powder is used for the repairing of moulds and dies. It is seen that the Colomony Powder is used for filling of the cracks of the damaged moulds and dies, which is subsequently used in the finished goods, eligible for credit - Welding Electrodes used for repair and maintenance of plant and machinery is eligible for credit - the Mobile Phones were allotted to the Managers and installed at the residence of the Managers, there is no allegation in the show cause notice that these items were not used in relation to the manufacture of final products and business activities credit allowed - denial of credit on Colomony Powder, Welding Electrodes, Plastic Crates & Pallets and Input Services viz. Taxi Service, Mobile Phones and Telephones are set aside. Accordingly, penalty is set aside

Summary

Issues:
- Denial of credit on Colomony Powder, Welding Electrodes, Plastic Crates/Pallets
- Denial of credit on input services: Taxi Service, Mobile Phones, Telephones

Analysis:

Colomony Powder:
The appellant appealed against the denial of credit on Colomony Powder used for repairing moulds and dies. The advocate argued that the powder is essential for maintaining capital goods, citing precedents where similar items were allowed credit. The Departmental Representative (DR) contended that repair and maintenance items are not eligible for credit. The Tribunal found that Colomony Powder was indeed used for repairing moulds and dies, making it eligible for credit based on previous rulings allowing credit for similar purposes.

Welding Electrodes:
Regarding Welding Electrodes, the Commissioner (Appeals) acknowledged their use for plant and machinery repair and maintenance. Citing a judgment by the Rajasthan High Court, it was established that Welding Electrodes used for such purposes are eligible for credit. Consequently, the Tribunal upheld that Welding Electrodes qualify for Cenvat credit.

Plastic Crates & Pallets:
The denial of credit on Plastic Crates and Pallets was challenged as these items were used for transferring materials within the factory premises. The advocate argued that these items are accessories, supported by a Tribunal ruling stating that such accessories are eligible for credit as capital goods. The Tribunal agreed, overturning the denial of credit on Plastic Crates and Pallets.

Credit on Input Services: Taxi Service, Mobile Phones, Telephones:
The appellant sought credit for input services like Taxi Service, Mobile Phones, and Telephones used by managers and employees. The DR contended that evidence of these services' direct relation to manufacturing activities was lacking. The Tribunal noted that Mobile Phones were used by managers at their residences, but there was no evidence suggesting non-relevance to business activities. Relying on precedents, the Tribunal ruled in favor of granting credit for these input services, setting aside the denial of credit.

In conclusion, the Tribunal set aside the denial of credit on Colomony Powder, Welding Electrodes, Plastic Crates & Pallets, as well as input services like Taxi Service, Mobile Phones, and Telephones. The penalty was also waived, and the appeal was allowed with consequential relief.