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2020 (2) TMI 174 - AT - Central ExciseCENVAT Credit- input services - renting of immovable property outside the manufacturing unit - place of removal - HELD THAT - The Commissioner (Appeals) had rejected appellants appeal on the ground that sale of goods that had taken place from the immovable property taken on rent was situated away from the place of removal. Further appellant had acknowledged to have registered as an ISD. Therefore, availing total credit on renting services in the factory was not convincing as the rented premises were used for marketing and sale of goods manufactured in both the units of appellant s factory. Also, appellant had replied to the query of the respondent department concerning its registration as ISD in which case, as an input service distributor, it had the discretion to distribute the inputs but the Commissioner (Appeals) had not believed its reply by observing that appellant was using the rented premises for sale of goods and marketing of products being manufactured in two units of Appellant and such issue of ISD registration was not agitated in the show cause notice. What is more important is that the Commissioner had accepted the Appellant s contention that appellant was using the rented premises for marketing purposes which is in conformity to Rule 2(l) of Cenvat Credit Rules that clearly covers advertisement or sales promotion within the definition of input services. Therefore, appellant is eligible to avail the credits and its specific non-reflection in ER-1, could be due to non-availability of such specific narration in the format meant for filing of ER-1 returns itself. Appeal allowed - decided in favor of appellant.
Issues:
Inadmissibility of Cenvat Credit on tax paid for renting of immovable property outside the manufacturing unit. Analysis: The appeal challenges the confirmation of demand against the availed Cenvat Credit on tax paid for renting immovable property outside the manufacturing unit. The appellant, a manufacturer of piston rings, availed Cenvat Credit for renting office premises in Delhi and Mumbai for marketing and after-sales services. The demand was raised during the EA 2000 audit, resulting in a demand for duty, interest, and penalty. The Commissioner (Appeals) upheld the demand, imposing a 50% penalty under Rule 15(2) of CCR 2004. The appellant contended that the rented premises were used for various business activities covered under the definition of "activities relating to business" in the Cenvat Credit Rule 2004. The appellant cited precedents supporting the admissibility of such credits for marketing and sales promotion activities. The appellant argued that the credits were valid and should not have been disallowed. During the hearing, the Authorized Representative for the respondent department argued that the activities in the rented premises were beyond the place of removal of final products and that the appellant, registered as an Input Service Distributor (ISD), had availed credits only in its factory at Nasik. The Managing Director of the appellant had acknowledged the irregular Cenvat Credit and promised to pay it back. The Authorized Representative contended that the facts of non-admissibility were admitted by the appellant, citing a Supreme Court decision. The Commissioner (Appeals) rejected the appeal based on the location of the sale of goods and the appellant's ISD registration. The Tribunal observed that the rented premises were used for marketing and sale of goods manufactured in both units of the appellant's factory. While the Commissioner (Appeals) endorsed the demand, interest, and penalty, the Tribunal referred to a precedent where renting immovable property for various business activities was considered admissible. The Tribunal noted that the appellant's use of rented premises for marketing purposes aligned with the definition of input services. The Tribunal found that the appellant's failure to disclose the availed Cenvat Credit in ER-1 Returns did not invalidate the credits. The Commissioner's acceptance of the appellant's marketing activities supported the eligibility of the credits. The Tribunal rejected the argument that the appellant's acknowledgment of inadmissibility constituted admission under the Indian Evidence Act, allowing the appeal and setting aside the Commissioner (Appeals) order. The Tribunal allowed the appeal, providing consequential relief by setting aside the Commissioner (Appeals) order dated 31st May 2018.
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