2018 (8) TMI 1658 - AT - Central Excise

CENVAT Credit - Input Service Distributor - rent-a-cab service - denial on the ground of non-registration - gardening service - Held that - As far as the requirement of prior registration for availing of input service distributor is concerned the law is well settled and the impugned order is not sustainable to that extent - credit on rent-a-cab service cannot be denied on this count. Gardening service - Held that - The statutory requirement under the law relating to pollution control mandate such and, therefore, by no stretch can it be termed to be covered by the exclusionary provision - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues: Challenge to disallowance of CENVAT credit on 'rent-a-cab service' and 'gardening service' for specific periods. Interpretation of exclusionary provisions in CENVAT credit Rules, 2004. Requirement of registration for availing input service distributor status. Nexus of 'gardening service' with manufacturing operations.

In this judgment by Appellate Tribunal CESTAT MUMBAI, the appeal was filed by M/s Mysore Petrochemicals Ltd against the order-in-appeal dated 1st December 2015, challenging the disallowance of CENVAT credit on 'rent-a-cab service' and 'gardening service' for the period from 1st April 2011 to August 2013, while upholding the disallowance for the period from December 2008 to 31st August 2013 as 'input service distributor'. The appellant argued that registration is not essential for availing credit as an 'input service distributor', citing precedents. The disallowance was based on exclusionary provisions in rule 2(l) of CENVAT credit Rules, 2004, added after April 2011, which the appellant contended did not cover the said services. These services were deemed necessary for employee transportation and pollution control compliance. The Authorized Representative supported the lower authorities' decision, emphasizing the lack of registration and the absence of nexus of 'gardening service' with manufacturing operations.

The Tribunal noted that the law regarding the requirement of prior registration for availing input service distributor status is well settled, and the impugned order was unsustainable in that regard. Regarding the 'gardening service', it was observed that statutory pollution control requirements mandated such services, making them ineligible for exclusion under the law. The Tribunal highlighted a potential misinterpretation by the lower authorities of the exclusionary provisions, suggesting that limiting credit on services procured through vehicles to those who treat the vehicles as capital goods would create an impractical scenario. Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the misinterpretation of exclusionary provisions and the necessity of 'gardening service' for statutory compliance.

Overall, the judgment addressed the issues of CENVAT credit disallowance, interpretation of exclusionary provisions, the necessity of registration for input service distributor status, and the nexus of 'gardening service' with manufacturing operations. It clarified the legal position on these matters and provided a detailed analysis based on precedents and statutory requirements, ultimately ruling in favor of the appellant.