2017 (12) TMI 1080 - AT - Central Excise

CENVAT credit - input services - Intellectual Property Services - Repair and Maintenance (Civil Work) services - Membership Subscription Charges - Telephone Services - Insurance services - Development Charges - freight charges - denial on account of nexus - Held that - When analysis is made to the scope of Rule 2(l) of the Cenvat Credit Rules, 2004, that demonstrates the legal position as contended by appellant stated herein before. Appellant says that documents were available on record and those were ignored by learned Commissioner (Appeals) without calling the record from learned adjudicating authority, is nothing untrue. He did not assign any reason to reject integral connection of input services to the manufacture. Therefore in absence of reasoning in the order and also for the lack of verification of record, appellant should not suffer - Ld. adjudicating authority shall re-examine as to whether the freight charges paid were in terms of contract for delivery at the destination following guidelines given by the Board Circular aforesaid and pass appropriate order. Appeal allowed in part by way of remand.

Issues involved:
1. Denial of CENVAT credit on input services availed.
2. Disallowance of service tax credit on intellectual property services.
3. Rejection of CENVAT credit on repair and maintenance services.
4. Denial of CENVAT credit on membership and subscription charges.
5. Rejection of CENVAT credit on telephone and insurance services.
6. Disallowance of CENVAT credit on development charges.
7. Denial of input service credit on freight charges.

Analysis:
1. The appellant argued that once an integral connection is established between the input service availed and the output manufactured, CENVAT credit should not be denied. The appellant specifically addressed various amounts related to different input services availed during specific periods. The Tribunal noted that Rule 2(l) of the Cenvat Credit Rules, 2004, provides for the eligibility of service tax credit based on a direct or indirect nexus between the input service and the final product's manufacture. The Tribunal found that the Revenue did not provide a valid reason for denying credit on intellectual property services. Therefore, the Tribunal allowed the appellant to avail CENVAT credit on the service tax paid for intellectual property services.

2. Regarding repair and maintenance (civil work), the Tribunal disagreed with the Commissioner (Appeals) who claimed that there was no evidence to support the claim. The Tribunal highlighted that without contrary evidence, the denial of credit is unwarranted. Therefore, the appellant was permitted to claim CENVAT credit on repair and maintenance services.

3. The Tribunal addressed the membership and subscription charges, emphasizing their relevance to the business. The Tribunal disagreed with the Commissioner (Appeals) and allowed the appellant to claim CENVAT credit on these charges due to their business necessity.

4. Concerning telephone and insurance services, the Tribunal found that the denial of the claim based on the unavailability of documentary evidence was unjustified. The Tribunal noted that insurance policies were essential for safeguarding the company's interests, and without relevant evidence, the dismissal of the appellant's plea was unwarranted.

5. The Tribunal discussed development charges, highlighting their necessity for testing newly developed products. The Tribunal emphasized that without evidence showing the irrelevance of the service, the appellant was entitled to claim input credit on the service tax paid for development charges.

6. Addressing the freight charges, the Tribunal noted that the denial of credit by the Commissioner (Appeals) was based on limited grounds. The Tribunal highlighted that the Commissioner did not consider relevant factors such as the delivery of goods at the destination and a specific Board Circular. Consequently, the Tribunal allowed the appellant to claim input service credit on freight charges and remanded the issue to the adjudicating authority for re-examination.

7. Ultimately, the Tribunal allowed all three appeals, remanding the issue of freight charges to the adjudicating authority for further assessment in accordance with the law and due process of justice.

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