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2018 (7) TMI 1216 - AT - Service TaxCENVAT Credit - input service - success fee payable against the sale of Certified Emission Reduction - whether the appellants are entitled to service tax credit on Consultancy Engineering Services in relation to sale of Certified Emission Reduction? - Held that - When a particular service not mentioned in the definition clause is utilized by the assesse /manufacturer and service tax paid on such service is claimed as Cenvat credit, the question is what are the ingredients that are to be satisfied for availing such credit. If the credit is availed by the manufacturer, then the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any one of these two tests is satisfied, then such a service falls within the definition of input service and the manufacturer is eligible to avail Cenvat credit of the service tax paid on such service. An identical issue was considered by the Tribunal in the case of Heidelberg Cement India Ltd. Vs. Commr. of Central Excise, Bangalore 2016 (9) TMI 677 - CESTAT BANGALORE , wherein the consultancy services used for greenhouse gas emission reduction and Carbon Credit Management Services were held to be cenvatable. Appeal allowed - decided in favor of appellant.
Issues:
- Entitlement to service tax credit on "Consultancy Engineering Services" in relation to sale of Certified Emission Reduction. Analysis: 1. The appeal challenged the Order-in-Appeal upholding the Order-in-Original, where the Assistant Commissioner confirmed a demand for wrongly availed Cenvat credit on "success fee" related to Carbon Credits. The appellant manufactures Cement and avails Cenvat credit under the Cenvat Credit Rules, 2004. The dispute arose when the appellant claimed service tax credit on services provided by M/s. EYPL, Gurgaon for Carbon Credit Management Services. A show cause notice was issued proposing a demand of ?4,95,105 for wrongly availed credit. 2. The appellant contended that the impugned order failed to consider their submissions and relevant judgments. They argued that activities related to business use by the manufacturer, directly or indirectly in relation to final product manufacture, are eligible for Cenvat credit as per Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant emphasized the importance of Carbon Credits in mitigating greenhouse gas emissions from industries like Cement, aligning with environmental regulations and international protocols. 3. The appellant highlighted compliance with environmental norms, registration with authorities, and obtaining approvals for Clean Development Mechanism projects under the Kyoto Protocol. They received consultancy services for greenhouse gas emission reduction and Carbon Credit management to meet reduced emission norms. The services were considered essential for reducing the use of clinker in Cement manufacturing and decreasing CO2 emissions. 4. The Respondent-Revenue supported the Order-in-Appeal, leading to a hearing where both parties presented their arguments. The Tribunal analyzed Rule 2(l) of the Cenvat Credit Rules, 2004, defining "input service" as any service used directly or indirectly in or in relation to final product manufacture by the manufacturer. The definition includes various services like transportation, accounting, auditing, and legal services, among others. 5. The Tribunal referred to precedents like Heidelberg Cement India Ltd. and Shree Bhawani Paper Mills Ltd., where consultancy services for greenhouse gas emission reduction and Carbon Credit management were considered eligible for Cenvat credit. Based on the established legal principles and precedents, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. This detailed analysis of the judgment thoroughly examines the issues involved, the arguments presented by both parties, the legal framework under the Cenvat Credit Rules, 2004, and the application of precedents in determining the entitlement to service tax credit on "Consultancy Engineering Services" related to Certified Emission Reduction.
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