2018 (9) TMI 905 - AT - Central Excise

CENVAT credit - Input service distributor - Club Membership Fees - exclusion clause in Rule 2 (l) (ii) (C) of the Cenvat Credit Rules - whether the appellant is entitled to the Cenvat Credit to Service Tax paid on the membership fees paid to various association? Held that - The exclusion clause (C) has excluded certain types of services but these have been qualified with the wordings, when such services are used primarily for personal use or consumption of any employee - Keeping in view the fact that the appellant is engaged in the manufacture and sale of cement, it is reasonable to conclude that such services have been used for accomplishing their business activities. It cannot be said that such services are for the personal use of any employee. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Entitlement to Cenvat Credit on membership fees paid to various associations.

Analysis:
The appeal revolved around the entitlement of the appellant to Cenvat Credit for Service Tax paid on membership fees to various associations. The appellant, engaged in cement manufacturing, availed the credit transferred from their head office, registered as an Input Service Distributor. The Revenue contended that the appellant was not entitled to the credit due to an exclusion clause in the Cenvat Credit Rules. The lower authorities denied the credit, a decision upheld by the Commissioner (Appeals), leading to the filing of the present appeal.

The appellant argued that the membership fees were paid for associations like Confederation of Indian Industry and Cement Manufacturers Association, essential for furthering their business, not for personal benefit. Thus, the exclusion clause in the Cenvat Credit Rules did not apply. Reference was made to a previous order allowing similar credit for an earlier period and the case of Hinduja Foundries Ltd. v/s Commissioner Of Central Excise, Chennai-I.

The Revenue reiterated the Commissioner (Appeals)' findings, emphasizing the mention of club membership fees in the exclusion clause of the Cenvat Credit Rules, supporting the denial of credit. The Tribunal analyzed the issue, focusing on the exclusion clause's wording, "when such services are used primarily for personal use or consumption of any employee." Given the nature of the appellant's business and the purpose of the services, it was deemed that the membership fees were utilized for business activities, not personal use. This interpretation aligned with previous decisions, including the Tribunal's ruling in the case of Hinduja Foundries Ltd.

Consequently, the Tribunal set aside the impugned order and allowed the appeal, affirming the appellant's entitlement to Cenvat Credit on the membership fees paid to various associations.