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2020 (3) TMI 1182 - AT - Service TaxCENVAT Credit - input services - service tax paid on rent of premises which is used as office of the company outside the company - Department was of the view that the appellant is not eligible for credit of service tax paid towards rent as well as maintenance charges for the premises outside the factory - HELD THAT - The restriction that credit can be availed for materials that has been brought into the factory is applicable only in the case of inputs and not that of input services. In regard to input services, it is immaterial whether the services are availed within the factory or outside the factory. It is only necessary that the manufacturer has to avail it in relation to the manufacture of the final product. In the present case, the department does not dispute that the said premises is used by the appellant as office for their manufacturing factory. In NITCON INDUSTRIES (P.) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II 2014 (9) TMI 681 - CESTAT MUMBAI , the Tribunal has analyzed the very same issue and held that it is immaterial whether the rented premises is within the factory or outside but the same should be availed in the course of manufacture of final product. Appeal allowed - decided in favor of appellant.
Issues: Disallowance of credit of service tax paid on rent and maintenance charges for premises outside the factory.
In this case, the appellant, engaged in manufacturing activities, availed CENVAT credit on input services, including service tax paid on rent of premises used as an office outside the factory. The department disallowed the credit, leading to a Show Cause Notice for recovery and penalties. The original authority and Commissioner (Appeals) upheld the demand. The appellant argued that the premises were essential for office purposes, crucial for manufacturing activities. They cited the definition of 'input service' in CENVAT Credit Rules, emphasizing that any service related to manufacturing is credit eligible. The appellant also referenced a previous Tribunal decision supporting credit for service tax on rented premises outside the factory. The Tribunal analyzed the issue of disallowance of credit for service tax on rent and maintenance charges for premises outside the factory. It noted that the restriction on availing credit for materials brought into the factory applies to inputs, not input services. For input services, it is essential that the service is related to manufacturing the final product, irrespective of its location. As the rented premises were used as an office for the manufacturing factory, the disallowance of credit was deemed unjustified. The Tribunal referred to a previous case where it was established that the location of the rented premises is irrelevant as long as it contributes to the manufacturing process. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief. The judgment delivered by the Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) at the Appellate Tribunal CESTAT CHENNAI in 2020 addressed the issue of disallowance of credit for service tax paid on rent and maintenance charges for premises outside the factory. The decision clarified the eligibility of input services for credit, emphasizing the necessity of the service in relation to the manufacturing process rather than its physical location.
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