2019 (2) TMI 202 - AT - Central Excise

CENVAT Credit - input services - services provided under Business Auxiliary Services - post manufacturing activity or not? - allegation of the department is that such activity carried out by TVSFS does not amount to promotion of sale or marketing of the goods belonging to appellants - period of 2005-06 to 2008-09 - Held that - Prior to 01.04.2011, the definition of input services included the words activities relating to business - The appellants being engaged in manufacture of motor vehicle looks upon the authorised dealers to sell their vehicles. The loan facility available at the dealer s premises would naturally enhance the sale of motor vehicles. Thus, the agreement entered by the appellants with TVSFS for arranging and disbursing of loans to customers at the dealers premises is indeed a sales promotion activity rendered by TVSFS to the appellants. Such services cannot be considered as post-manufacturing activity, so as to take it away from the ambit of definition of input services. The sale of motor vehicles is directly linked to the business of manufacture. Any activity which relates to business of manufacture falls within the definition of input service. The definition of input service has a means part and an inclusive part . In the means part, the second sub-clause says that any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal . The, phrase whether directly or indirectly, in or in relation is so wide so as to include all activities pertaining to manufacture of finished product. In the case of M/s. Mahindra & Mahindra Ltd., 2012 (8) TMI 530 - CESTAT, MUMBAI , it was observed that after sale service activities rendered by the dealers as part of warranty offered by manufacturer would qualify as input services, when such expenses have been included in the assessable value - In the present case, the department does not deny the fact that such charges have been included in the assessable value of the appellants. Since, during the relevant period, the definition of inputs included the words all activities relating to the business , we have to safely conclude that the said activity rendered by TVSFS is an activity relating to the business of manufacture of appellants. The impugned services qualify as input service and is eligible for credit - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility of Cenvat credit on services provided by TVSFS under Business Auxiliary Services (BAS).
2. Interpretation of the definition of 'input services' under Cenvat Credit Rules, 2004.
3. Nexus between the services provided by TVSFS and the manufacturing activity of the appellants.
4. Allegation of suppression of facts and the applicability of the extended period for demand.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Services Provided by TVSFS under BAS:
The appellants, engaged in the manufacture of motorcycles, entered into an agreement with TVSFS to provide finance facilities to customers purchasing their two-wheelers. TVSFS raised invoices including service tax for these services, which the appellants availed as Cenvat credit. The department contended that these services did not qualify as input services for the appellants, proposing to disallow the credit and recover the same with interest and penalties. The Tribunal examined whether the services rendered by TVSFS, which included setting up infrastructure at dealers' premises to facilitate loan disbursements, amounted to sales promotion activities directly related to the appellants' business of manufacturing motorcycles.

2. Interpretation of the Definition of 'Input Services' under Cenvat Credit Rules, 2004:
The definition of 'input services' under Rule 2(l) of the Cenvat Credit Rules, 2004, includes services used directly or indirectly in relation to the manufacture of final products and their clearance up to the place of removal. The inclusive part of the definition covers services related to advertisement, sales promotion, and market research, among others. The Tribunal noted that the phrase "activities relating to business" in the definition has a wide ambit, encompassing any service that has a nexus with the final product's manufacture, whether directly or indirectly.

3. Nexus Between the Services Provided by TVSFS and the Manufacturing Activity of the Appellants:
The Tribunal found that the loan facilities provided by TVSFS at the dealers' premises promoted the sale of the appellants' motorcycles, thereby qualifying as sales promotion activities. These services were considered directly linked to the business of manufacturing motorcycles, and not merely post-manufacturing activities. The Tribunal referred to the decision in M/s. Mahindra & Mahindra Ltd., where after-sales service activities were deemed input services when included in the assessable value. The Tribunal concluded that the services provided by TVSFS were integral to the appellants' business and fell within the definition of input services.

4. Allegation of Suppression of Facts and Applicability of the Extended Period for Demand:
The department alleged that the appellants had not properly disclosed the availment of service tax credit, constituting suppression of facts. However, the Tribunal noted that the credit details were disclosed in ER-1 returns, and the appellants' actions did not amount to suppression. Therefore, the invocation of the extended period for raising the demand was deemed incorrect.

Conclusion:
The Tribunal held that the services provided by TVSFS were indeed input services as they were related to the business of manufacturing motorcycles. The credit availed by the appellants was found to be eligible, and the demand for disallowing the credit was set aside. The appeal was allowed with consequential relief, if any.

(Operative part of the order pronounced in open court)