2019 (3) TMI 780 - AT - Central Excise

CENVAT Credit - duty paying invoices - ISD registration - rent and maintenance charges paid to marketing office, commission charges and rent paid for storage of machinery before putting it into use in the factory of production - period December 2013 to June 2014 - Held that - The convenience of ISD registration is to have a single unit which can avail the credit and thereafter make pro-rata distribution to other units. The invoices ought to have been raised in the name of the ISD unit. Thus there is a procedural lapse in availing the credit - Credit allowed. CENVAT Credit - rent for the premises in which the capital goods were stored - Held that - The premises were used by Wayne Burt for their job work manufacture of cylinders which were solely supplied to the appellant. The capital goods and the tooling equipment were thus kept in the premises where during the period, Wayne Burt was doing the manufacturing activity. Even though after the disputed period the capital goods were transferred to the appellant s factory, since the premises was solely used by Wayne Burt for their manufacturing activities, the credit of service tax paid on rent of such premises is not eligible for credit - credit not allowed. Time limitation - Held that - It is held in the impugned order that the issue is interpretational - the first issue is only a procedural lapse. The department has not put forward any positive act of suppression of facts with intent to evade payment of duty. The credit availed in respect of first issue is only a procedural error - In the second issue, the rent was paid by appellant for the premises and the service tax also was collected from them. They were under the belief that the credit is eligible - thus there are no ingredients for invocation of extended period - SCN is time-barred. The appeal succeeds on limitation.

Summary

Issues:
1. Availment of CENVAT credit on service tax for rent and maintenance charges.
2. Eligibility of CENVAT credit on service tax for rent of premises where capital goods were stored.
3. Application of limitation period for Show Cause Notice issuance.

Analysis:

Issue 1: Availment of CENVAT credit on service tax for rent and maintenance charges
The appellant contended that since the invoices for rent were issued in the name of the marketing office in Chennai, they, as a manufacturing unit in Chennai, availed the credit. The appellant argued that prior to 1.4.2016, there was no requirement for pro-rata distribution of credit. However, the Tribunal found a procedural lapse in availing the credit, stating that invoices should have been raised in the name of the ISD unit at Telangana. Despite this procedural error, the credit was deemed available to the appellant.

Issue 2: Eligibility of CENVAT credit on service tax for rent of premises where capital goods were stored
Regarding the credit availed on service tax for rent of premises where capital goods were stored, the appellant argued that since the capital goods were later used in their factory, the credit was eligible. However, the Tribunal examined the Manufacturing and Tooling Agreement, which indicated that the premises were used by another entity for job work manufacturing, not directly related to the appellant's final products. Consequently, the Tribunal concluded that the credit on such rent was not eligible.

Issue 3: Application of limitation period for Show Cause Notice issuance
The appellant raised the issue of limitation, asserting that the Show Cause Notice was time-barred as they had reflected the credit availed in their returns, believing it to be eligible. The Tribunal agreed, noting that there was no suppression of facts by the appellant to evade duty payment. The Tribunal found no grounds for invoking the extended period, as the issues were procedural errors and lack of positive acts of suppression. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant on the basis of limitation. The appeal was allowed, emphasizing that the Show Cause Notice was time-barred.

In conclusion, the Tribunal addressed the issues of CENVAT credit availment on service tax for rent and maintenance charges, eligibility of credit on rent for premises storing capital goods, and the application of the limitation period for the Show Cause Notice issuance. The judgment highlighted procedural lapses, eligibility criteria, and the absence of suppression of facts in determining the outcome of the appeal.