2018 (12) TMI 774 - AT - Central Excise

CENVAT Credit - input services - appellant s claim is that having included expenses for the cost of production, they are entitled to avail Cenvat Credit - Held that - Hon ble High Courts and the Tribunal in various decisions have specifically held that any expenditure incurred by an assessee, if it forms part of the price of the final product, on which Excise Duty is paid, Cenvat Credit must be allowed on the said Service Tax, if the manufacturer can demonstrate that the said expenses are in relation to the manufacture of final product. The Central Excise Duty paid by the appellant on their finished goods is on ad-velorom which has been arrived at after considering all the expenses that had gone into manufacturing of the finished goods. In so far as the present facts of the case is concerned, it is not in dispute that the credit of Service Tax has been availed on services such as Banking and other Financial Service, Courier Service, General Insurance Service, Group Health Insurance Service, etc. which were received and used by the assessee for the purpose of manufacture of the final product and these cost formed part of the excisable value on which Excise Duty was discharged. Service availed at the club premises - Held that - The maintenance and repair service of various civil and electrical work, carpenter work has been availed at the school, colony and the club maintained by the appellant for its employees. However, the Cenvat Credit of Service Tax Paid on service availed at the club premises cannot be allowed - credit not allowed. The period involved is prior to 01/04/2011, when the definition of input service during the relevant period had wide ambit as it included the words activities related to business - the respondent-assessee is eligible for availing credit of Service Tax paid on the Services availed for the purposes of its business activities except the services availed in respect of the club premises. Appeal allowed in part.

Summary

Issues:
Availment of Cenvat Credit on Service Tax for various services utilized in business activities.

Analysis:
The Respondent, engaged in manufacturing machinery, faced a Show Cause Notice for alleged wrong Cenvat Credit availment on Service Tax for 2006-07 to 2010-11. The Adjudicating Authority disallowed credit of ?47,89,026 and imposed penalties. On appeal, the Ld. Commissioner (Appeals) set aside the order, leading Revenue to appeal before the Tribunal. The Tribunal analyzed services like Banking, Courier, Insurance, Health Insurance, Cleaning, Gardening, and Maintenance, which were crucial for business operations. The Respondent argued that any service related to business activity is eligible for Cenvat Credit. The Tribunal noted judicial precedents allowing credit on expenses forming part of final product price. The Respondent availed credit on services directly related to manufacturing, which formed part of excisable value.

The Tribunal recognized the necessity for factories in remote locations to create integrated townships for personnel retention. The Respondent provided a certificate from a Chartered Accountant listing services availed for business activities. Detailed expenditure records were presented for 2006-07 to 2010-11. The Tribunal observed that services like maintenance at school and colony were eligible for credit, except services related to the club premises. The definition of input service during the relevant period had a wide ambit, including "activities related to business," as discussed in various High Court judgments.

Considering the submissions, the Tribunal held that the Respondent was eligible to avail credit on Service Tax paid for services utilized in business activities, except for services at the club premises. The appeal filed by the Revenue was partly allowed, affirming the Respondent's eligibility for Cenvat Credit on most services utilized for business purposes.