2018 (11) TMI 735 - AT - Central Excise

Input Tax credit - input services - security services - Held that - The appellants were compelled to remove and store the hazardous waste outside the factory and to engage security for providing protection for the hazardous waste - the security services are related to manufacturing activity and therefore the denial of input tax credit is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of input tax credit on security services.

The judgment deals with an appeal filed by the appellant against the disallowance of input tax credit on security services. The appellants, engaged in manufacturing asbestos brake linings, availed CENVAT credit on various inputs and services, including security services. The issue arose when the authorities proposed to disallow the credit of &8377; 32,864/- on security services, leading to a demand for recovery, interest, and penalties. The original authority, followed by the Commissioner (Appeals), upheld the disallowance, prompting the appellant to file this appeal.

During the proceedings, the appellant's counsel argued that the security services were essential for protecting the area where hazardous waste generated from the manufacturing activity was stored. The hazardous waste had to be managed in compliance with Hazardous Waste Rules and guidelines from the Tamil Nadu Pollution Control Board, necessitating security services at the designated storage area. The appellant contended that the denial of credit was unjustified due to the direct link between the security services and the manufacturing activity.

On the other hand, the respondent's representative supported the decision to disallow the credit, emphasizing that the security services were provided outside the factory premises and lacked a direct connection to the manufacturing operations. However, after hearing both sides, the tribunal concluded that the appellants were obligated by legal requirements and environmental guidelines to store hazardous waste in an approved location outside the factory premises. Failure to comply could result in the cancellation of the factory license. Recognizing the necessity of security services for safeguarding the hazardous waste, the tribunal held that the denial of input tax credit on security services was unwarranted. Consequently, the tribunal set aside the impugned order disallowing the credit and allowed the appeal with any necessary consequential relief.