2019 (2) TMI 135 - AT - Central Excise

CENVAT Credit - input services - Labour Charges - Testing Charges - Technical Inspection Charges - Payroll Processing outsourced to the external agency - Technical, Testing and Analysis Services - denial on account of nexus. Payroll Processing services - Held that - The Payroll Processing to be integrally connected to the business and hence allowed the credit on the same - credit allowed. Labour Charges - Testing, Technical Inspection - Technical Analysis Service - Held that - There is no dispute on eligibility and the disallowance of Credit was only for want of necessary documentary evidences, which have now been duly furnished and annexed herein by the appellant - The matter is required to be sent back to the file of the adjudicating authority for verification of the documentary evidences on the issue of Labour Charges, Testing Charges and Technical Inspection Charges and thereafter, pass a de novo adjudication Order - matter on remand for re-verification. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Eligibility of CENVAT Credit on various services availed by the appellant.
2. Disallowance of Credit on Payroll Processing, Labour Charges, Testing Charges, and Technical Inspection Charges.
3. Interpretation of the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004.
4. Verification of documentary evidence regarding the nexus of services with the manufacturing process.

Analysis:
1. The appellant, engaged in manufacturing industrial valves, regulators, etc., availed CENVAT Credit on services like courier, business support, labour charges, etc. The Department alleged these services had no nexus with manufacturing. Show Cause Notices were issued, and Orders-in-Original confirmed the recovery of Credit. The first appellate authority upheld demands on some services but set aside penalties on others. The appellant appealed the disallowance of Credit on certain services.

2. The issue revolved around the eligibility of Credit on Payroll Processing, Labour Charges, Testing Charges, and Technical Inspection Services. The appellant argued that Payroll Processing had a clear nexus with their business and manufacturing activities. They cited a previous Tribunal decision supporting their claim. For Testing and Inspection Services, the appellant provided technical reports and contracts, seeking a remand for further evidence submission.

3. The Tribunal referred to a previous ruling supporting the appellant's claim on Payroll Processing, emphasizing the integral connection of certain services to business activities. The demand on Payroll Processing was set aside. Regarding Labour Charges and Testing Services, the Commissioner acknowledged their eligibility but sought more evidence of their link to manufacturing. The appellant submitted additional documentation, prompting a remand for verification by the adjudicating authority.

4. The judgment concluded by setting aside the demand on Payroll Processing and remanding the issue of Labour Charges and Testing Services for further verification. The appellant's appeal was disposed of accordingly, emphasizing the need for documentary evidence to establish the nexus between the services and the manufacturing process.