2017 (11) TMI 1041 - AT - Central Excise

100% EOU - CENVAT credit - input service distribution - Held that - I have perused the invoice and it is in the name of Gokuldas Images Pvt. Ltd. (GI) Division and service tax has been paid on the advance amount and therefore, this finding of the Commissioner (A) is wrong that the service has not been provided to Gokuldas Images Pvt. Ltd. (GI) Division. Moreover, appellant is the division of Gokuldas Images Pvt. Ltd., who is working as ISD and this credit has been distributed to the appellant by ISD - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against partial allowance of CENVAT credit by Commissioner (A)
- Interpretation of input service under Rule 2(l) of CENVAT Credit Rules, 2004
- Reversal of credit prior to show-cause notice and liability for interest and penalty

Analysis:

Issue 1: Appeal against partial allowance of CENVAT credit
The appeal challenged the order by the Commissioner (A) partially allowing CENVAT credit related to input services utilized by a 100% EOU engaged in manufacturing readymade garments. The appellant availed CENVAT credit on various services like printer charges, AMC for different equipment, professional services, legal services, etc. The dispute arose as to whether these services qualified as input services under Rule 2(l) of the CENVAT Credit Rules, 2004. The appellant contended that the definition of input service is broad enough to cover any activity related to business and provided evidence through invoices to support their claim. The Tribunal examined each service individually based on the nature of the service and its relation to the business activities of the appellant.

Issue 2: Interpretation of input service under Rule 2(l) of CENVAT Credit Rules, 2004
The appellant argued that all input services were essential for the manufacturing activity and not personal in nature. They relied on precedents like Commissioner v. Micro Labs Limited and Commissioner v. Stanzen Toyotetsu India (P) Ltd to support their claim that services like professional services, air ticket charges, and transportation charges for employees qualified as input services. The Tribunal considered the nature and purpose of each service to determine whether they fell within the ambit of the definition of input service. The Tribunal analyzed the invoices and submissions to ascertain the nexus between the services availed and the business operations of the appellant.

Issue 3: Reversal of credit prior to show-cause notice and liability for interest and penalty
The appellant contested the demand for interest and penalty on the credit reversed before the issuance of the show-cause notice. Citing cases like Balrampur Chini Mills Ltd. v. CCE, the appellant argued that if credit was reversed and not utilized, no interest or penalty should be imposed. The Tribunal considered the legal precedents cited by the appellant and evaluated the applicability of these decisions to the present case. The Tribunal assessed the timing of credit reversal, the reasons behind it, and the legal provisions governing the imposition of interest and penalty in such situations.

In conclusion, the Tribunal allowed the appeal of the appellant by setting aside the impugned order, considering the broad interpretation of input services and the relevance of the services availed to the appellant's business activities. The decision was based on a detailed analysis of each service, legal precedents, and the applicability of interest and penalty in cases of credit reversal.