2018 (9) TMI 739 - AT - Central Excise

CENVAT credit - input service - renting of immovable property service (renting of godowns) - place of removal - denial of credit on the ground that these godown are beyond the place of removal - Held that - These godowns are places of removal in terms of Sec. 4(3)(c) of the Central Excise Act. Nevertheless, the nexus with manufacture is also decided in identical cases in the case of DSCL Sugar 2012 (12) TMI 830 - CESTAT NEW DELHI where it has been held that sugar factories are entitled to input service credit on rent paid on godowns in which they stored sugar after paying duty - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility for CENVAT credit on input service of renting immovable property for storage of goods beyond the place of removal.

Analysis:
The case involved two appeals concerning the eligibility of the appellant, a sugar manufacturer, for CENVAT credit on service tax paid for renting godowns outside the factory premises for storing duty-paid sugar. The issue was whether the godowns should be considered places of removal or not, impacting the entitlement to credit. The original authority and the first appellate authority had denied the credit, emphasizing the need for the input service to be integrally connected with the manufacturing process. The appellant argued that the definition of place of removal includes depots where goods are stored after clearance from the factory, thus justifying their entitlement to credit. The appellant cited precedents like DSCL Sugar and Thiru Arooran Sugars Ltd to support their claim.

The Departmental Representative contended that there should be a nexus with the manufacturing process for an input service to be eligible for credit, and since the duty was paid at the factory itself, the service tax on godowns rented after removal from the factory should not qualify as an input service. However, the Tribunal analyzed the arguments and found that the show cause notice only questioned the status of godowns as places of removal, not the nexus with manufacturing. The Tribunal concluded that the godowns fell under the definition of places of removal as per the Central Excise Act and cited precedents like DSCL Sugar and Thiru Arooran Sugar Ltd to support the appellant's entitlement to credit based on similar cases.

In the final judgment, the Tribunal allowed the appeals, setting aside the impugned orders. The Tribunal upheld the appellant's entitlement to CENVAT credit on the service tax paid for renting immovable property for storing goods beyond the place of removal, following the precedent set by previous decisions in similar cases. The judgment was pronounced on 28.08.2018 by Mr. P. Venkata Subba Rao, Member (Technical) of the Appellate Tribunal CESTAT Hyderabad.