2019 (8) TMI 380 - AT - Central Excise

CENVAT Credit - job-work - input services - courier services - place of removal - April 2005 and September 2009 - HELD THAT - Courier service was undisputedly, utilised for shipment of samples. Admittedly, the samples themselves are not the finished product and the availment of courier service, even if for dispatch of samples is an expenditure that goes into the value of the final product. Though courier services are utilised for despatch of samples, transportation is an entirely different taxable entry, and the transportation that is referred to in the said definition pertain to tax on transportation of goods by road. There is also no doubt that the disputed CENVAT credit is related to manufacture of the finished goods. On a plain reading of the provisions of rule 2(l) of CENVAT Credit Rules, 2004 and the facts and circumstances of the present dispute, along with superfluity, of one to one correlation between input services and output, it would appear that the availment is not incorrect in law - The denial of CENVAT credit on availment of services of courier is not in accordance with law and must be set aside. However, in relation to the activity on which tax was discharged by the supplier of business auxiliary service, we find that the coverage of business auxiliary service cannot be held to extend to such activity for the purpose of availment of CENVAT credit. Time limitation - HELD THAT - The fact that there had been regular audits does not anywhere hide the suppression of relevant information which could have been laid to crystallisation of tax liability. Audit can only unearth which is declared and which is on record - plea of limitation does not merit acceptance. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of CENVAT credit on taxes paid for procurement of 'courier service' and services of 'job workers'
- Interpretation of the definition of 'input service' in CENVAT Credit Rules, 2004
- Eligibility of taxes paid for services of job workers as CENVAT credit
- Jurisdictional validity of show cause notice
- Connection of courier service with manufacturing activity
- Coverage of business auxiliary service for CENVAT credit
- Bar of limitation in invoking the extended period

Analysis:
1. The appeal challenged the denial of CENVAT credit on taxes paid for 'courier service' and 'job workers.' The contention was that 'courier service' was essential for despatching samples to potential customers, directly linked to manufacturing orders. The appellant argued that the denial of credit was inconsistent with subsequent periods and violated established law, citing relevant case law. Additionally, the eligibility of taxes paid for job workers' services as CENVAT credit was disputed, emphasizing differences in tax laws and the reopening of assessments at the time of availment.

2. The Authorized Representative argued that 'courier service' primarily related to transport, not directly connected to manufacturing. They relied on the definition of 'courier' in the Finance Act, 1994, emphasizing that post-removal expenses were not eligible for CENVAT credit. The representative also highlighted the Supreme Court's decision in Ultra Tech Cement Ltd case and a Tribunal ruling to support the exclusion of outward transportation activities from CENVAT credit eligibility.

3. Regarding taxes on conversion fee by job workers, the Tribunal found a lack of evidence linking the tax paid to services conforming to the definition of 'input service' under CENVAT Credit Rules, 2004. The Tribunal emphasized the necessity of evidence showing a connection between the taxed service and the manufacturing process to claim CENVAT credit, which was lacking in this case.

4. The Tribunal concluded that 'courier service' was integral to the manufacturing process, even if used for sample dispatch. Citing various precedents, including decisions on courier services' relevance to manufacturing activities, the Tribunal found the denial of CENVAT credit on courier services to be incorrect in law. However, the coverage of business auxiliary service for CENVAT credit was not upheld due to insufficient evidence linking the taxed service to manufacturing processes.

5. The Tribunal addressed the plea of limitation, noting that regular audits do not absolve the suppression of relevant information affecting tax liability. The plea of limitation was rejected concerning the business auxiliary service's eligibility for CENVAT credit. Ultimately, the appeal was allowed in part, setting aside the denial of CENVAT credit on courier services but upholding the decision on business auxiliary services.