2018 (8) TMI 950 - AT - Central Excise

CENVAT Credit - input services - Banking & Financial Services regarding realisation of the export proceeds - case of Revenue is that this is a post export activity and therefore not covered under the definition of Input Service provided under Rule 2(1)(ii) of CCR, 2004 - Held that - Realization of export proceeds is a necessary concomitant of export and therefore the same is also eligible for input service credit. Realization of export proceeds is a sine qua non of export business. Otherwise also, Banking and other financial services, although related to post export period, but are covered in the inclusive part of definition of input service in Rule 2(l) under the head Financing . Tribunal in the matter of Commr.of C.Ex., Delhi-III vs. Fiamm Minda Automotive Ltd. 2016 (3) TMI 64 - CESTAT NEW DELHI has been held that the CENVAT credit of Service Tax paid on the Banking and other financial services which have been used/utilised for accomplishing the purpose of business towards payment of export clearance of the final produce, is available to the manufacturer/service provider in terms of Rule 2(l) of CENVAT Credit Rules, 2004. So far as the extended period of limitation is concerned, since on merits the case is decided in favour of the Appellant therefore there is no need to go into this issue. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT Credit for post export activities under Rule 2(1)(ii) of Cenvat Credit Rules, 2004; Recovery of irregularly availed credit; Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The appellant, engaged in manufacturing Electric Energy Meters, Gas Meters, etc., was denied CENVAT Credit of ?3,78,176 for the period April 2012 to March 2013 related to Banking & Financial Services for post export activities. A show cause notice was issued invoking the extended period of limitation for recovery of the credit and imposition of penalty under Section 11AC of the Central Excise Act, 1944.

2. The appellant contended that services for export realization are essential and covered under the definition of input service. The Adjudicating Authority imposed a penalty under Section 11AC(1)(a) indicating no willful misstatement, hence the extended period of limitation should not apply. The department upheld the denial and penalty. The appellant argued for credit eligibility under Rule 2(l) of Cenvat Credit Rules, 2004, and Section 11AC(1)(a) of the Central Excise Act, 1944.

3. Rule 2(l) of Cenvat Credit Rules, 2004 defines input service broadly, covering services used directly or indirectly in manufacturing or providing output services. Section 11AC(1)(a) of the Central Excise Act, 1944 specifies penalties for non-payment or short-payment of duty without intent to evade payment. The appellant argued that post export services are eligible as they are essential for export business.

4. The Tribunal found in favor of the appellant, stating that services for export realization are integral to the export process and thus eligible for credit. The Tribunal referenced a previous case supporting credit availability for services used in export activities. Banking and financial services, though post export, fall under the inclusive part of the input service definition, specifically under "Financing."

5. The Tribunal ruled that since the case favored the appellant on merits, the issue of the extended period of limitation was not relevant. Consequently, the appeal was allowed, and the denial of CENVAT Credit and penalty imposition were overturned.

This detailed analysis of the judgment highlights the key arguments, legal provisions, and the ultimate decision of the Tribunal in favor of the appellant regarding the denial of CENVAT Credit for post export activities.