2018 (3) TMI 321 - AT - Central Excise

CENVAT credit - job-work - supply of tangible goods - Held that - The goods in question are crane, diesel generator sets and other equipments for movement of heavy articles. These are essential in manufacturing process and there is no allegation in the show cause notice that these were put to use at a place other than that of job-worker. It is inconceivable that the job-worker may find a use for these equipments in any other manufacture. The definition of input service in rule 2(l) of CENVAT Credit Rules, 2004 is of sufficient latitude to allow service used directly or indirectly in relation to manufacture of final products. There is no ground to deny CENVAT credit on this particular service under CCR 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disallowance of CENVAT credit on service tax paid on supply of tangible goods utilized at job-worker's premises.
2. Requirement of nexus between service and business of assessee.
3. Interpretation of "input service" under CENVAT Credit Rules, 2004.

Analysis:
1. The impugned order upheld the disallowance of CENVAT credit on service tax paid for tangible goods supplied to a job-worker. The Commissioner of Central Excise (Appeals) upheld the demand for recovery and penalty under rule 15(1) of CENVAT Credit Rules, 2004.

2. The appellant supplied cranes, forklifts, and other equipment to their job-worker for processing goods. The decision in Commissioner of Central Excise, Nagpur v. Manikgarh Cement Works required a nexus between the service and the business of the assessee, which the appellant failed to establish. Consequently, the appeal was dismissed.

3. The appellant argued that the tangible goods were procured for supply, tax was paid on the service, and the goods were used at the job-worker's premises for processing semi-finished goods. They claimed entitlement to credit as "input service" under CENVAT Credit Rules, 2004. The definition of "input service" allows for services used directly or indirectly in relation to manufacturing final products. The goods in question were essential for the manufacturing process and were used in relation to manufacturing, justifying the CENVAT credit.

4. The goods, including cranes and diesel generator sets, were crucial for the manufacturing process, and there was no evidence that they were used elsewhere. The definition of "input service" under CENVAT Credit Rules, 2004 sufficiently covers services used in relation to manufacturing. As the goods were used in the manufacturing process, the denial of CENVAT credit was deemed unjustified.

5. The Tribunal set aside the impugned order and allowed the appeal, emphasizing that the tangible goods were used in the manufacturing process, justifying the CENVAT credit under the CENVAT Credit Rules, 2004.