2018 (7) TMI 1185 - AT - Central Excise

CENVAT Credit - legal services availed by the appellant for defence of suit filed against the Chief Executive of the appellant-company - denial on account of nexus - Held that - It is very clear that the legal services were availed by the appellant and that legal services are permissible input service for availment of CENVAT credit as per rule 2(l) of the CCR 2004 - Legal services availed in the present dispute was necessary for the continuation of the production facility of the appellant and hence the nexus with the manufacturing process is undeniable - Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT credit on legal services availed by the appellant for defense against a suit filed against the Chief Executive.

Analysis:
The dispute in this appeal revolves around the denial of CENVAT credit amounting to ?92,700 on legal services availed by the appellant for the defense of a suit filed against the Chief Executive. The Commissioner of Central Excise (Appeals), Mumbai Zone - II, upheld the order of the lower authority, which was the basis for this appeal.

The impugned order denied the CENVAT credit on the grounds that the legal services were provided to an individual and, therefore, did not have a nexus with manufacturing activity. However, the appellant argued that the legal services were essential to defend against the alleged theft of technical know-how, which, if lost, would have resulted in the extinguishment of the entitlement to use the know-how.

After hearing arguments from both parties, the Tribunal noted that legal services are considered permissible 'input service' for CENVAT credit under rule 2(l) of the CENVAT Credit Rules, 2004. The legal services availed by the appellant were deemed necessary for the continuation of the production facility, establishing a clear nexus with the manufacturing process. Consequently, the Tribunal held that the disallowance of CENVAT credit was incorrect in law.

As a result, the impugned order was set aside, and the appeal was allowed. It is important to note that the Cross-Objection had already been disposed of in a separate order dated 28th July, 2017. The judgment, delivered by Shri C J Mathew, Member (Technical), concluded with the pronouncement in court.