2017 (11) TMI 26 - AT - Central Excise

CENVAT credit - whether Cenvat credit availed on manpower and business support service in terms of Rule 2(l) and Rule 3(l) of Cenvat Credit Rules, 2004 is admissible or otherwise? Held that - the appellants are being charged by the service provider towards wages of the staff/ members of the society. As the invoices dated 30.6.2013 being invoice number 7 has been raised on the appellant by Sun Growth Manpower Service Private Ltd. wherein they have raised the bill for staff service charges for the month of April, 2012 to June, 2013. To such staff charges and raised the bills which have been paid admittedly by the appellants. From the annexure to the bill, I find that it is with respect to various persons named in annexure and it is mentioned that they have been paid according to number of days of their work. The bill admittedly pertains to man power (for the wages) incurred by the appellant. Further, it is admitted fact that the appellant is engaged in the manufacture of biris which are hand rolled. As per the practice in the said industry, the workers collect the raw material from factory and roll biris at their homes and thereafter semi-finished biris are given back to the manufacturer for further processing and thereafter for packing and selling. I find that only reason given in the impugned order for disallowance of cenvat credit is that such services or input services have not been provided in the factory premises which is registered premises but outside the factory premises and as such, held to be not qualified for cenvat credit as input service. The appellant have received the input service in question, in manufacture of final products and clearance of the same - appeal allowed - decided in favor of appellant.

Summary

Issues:
Admissibility of Cenvat credit on manpower and business support service as per Rule 2(l) and Rule 3(l) of Cenvat Credit Rules, 2004.

Analysis:
1. The issue in these appeals revolves around the admissibility of Cenvat credit on manpower and business support services in relation to the manufacture of excisable goods. The appellant, a registered co-operative society, engaged in the processing of raw-hand made biris faces the challenge of justifying the availed Cenvat credit on services provided at a 'Collection Centre' where raw material is supplied and processed goods are collected.

2. The appellant appointed service providers to manage activities at the Collection Centre, involving manpower services for delivery of input and collection of processed goods. The dispute arises from a show cause notice alleging wrongful availing of Cenvat credit for services used outside the factory premises, specifically at the Collection Centre, for activities not directly related to the final dutiable products.

3. The adjudication resulted in disallowance of Cenvat credit amounting to ?1,82,853 along with interest and imposition of a penalty under Rule 15 of Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld the disallowance citing that services provided at locations other than the registered premises cannot be considered part of the manufacturing activities for availing Cenvat credit.

4. The Tribunal, after considering the contentions and records, observed that the services provided at the Collection Centre, though outside the factory premises, were directly related to the manufacturing of final dutiable products. The invoices raised by the service provider for staff service charges, paid by the appellant, pertained to manpower for the manufacturing process of hand-rolled biris.

5. The Tribunal emphasized that the definition of 'input service' under Rule 2(l) does not impose a condition that services must be provided within the factory premises for availing Cenvat credit. It concluded that the services received by the appellant at the Collection Centre were integral to the manufacture of final dutiable products, entitling them to the Cenvat credit.

6. Consequently, the Tribunal allowed the appeals, setting aside the impugned orders and granting the appellants consequential benefits in accordance with the law. The judgment highlights the importance of the direct relation of services to the manufacturing process for the admissibility of Cenvat credit, irrespective of the location where such services are rendered.