2021 (8) TMI 752 - AT - Central Excise

CENVAT Credit - renting of immovable property service - input services of renting have been received undisputedly in the second unit which is the job worker of Unit-I - April, 2012 to February, 2015 - HELD THAT - The input services of renting have been received undisputedly in the second unit which is the job worker of Unit-I. Further, Assistant Commissioner of Central Excise of the Division by letter dated 18 April, 2013 have granted permission under Rule 4(6) of CCR, 2004 for removal of final products from the premises of job worker Unit-II. Thus, Unit-II is an extended arm of the Unit-I - the appellant is eligible for taking credit of input service tax paid on rent etc. relating to their Unit-II. Hon ble High Court in the case of COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, AURANGABAD VERSUS ENDURANCE TECHNOLOGY PVT LTD 2015 (6) TMI 82 - BOMBAY HIGH COURT have held that the assessee manufacturing unit is entitled to take Cenvat credit of service tax received at their windmill set up for generation of electricity, which is located several kilometres away from the manufacturing unit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant rightly took Cenvat credit of service tax paid by Unit-II on renting of immovable property.

Analysis:

Issue 1: Cenvat Credit Eligibility
The appellant, a manufacturer of shot blasting machines, had two units - Unit-I and Unit-II. Unit-II was set up in rented premises solely to manufacture goods for Unit-I on job work basis. Both units were registered separately under Central Excise. Unit-II paid service tax on rent and repair services for its plant and machinery. The dispute arose when Unit-I claimed Cenvat credit for the service tax paid by Unit-II, which the Revenue challenged, arguing that the services were not received by Unit-I. However, the Commissioner (Appeals) held that since permission was granted for removal of final products from Unit-II, it was an extension of Unit-I, making the appellant eligible for the credit. The appellant argued that input services need not be received at the factory but should be used in manufacturing final products, citing a Bombay High Court decision. They contended that the services were used as costs incurred formed part of production costs. The Revenue argued that Unit-II and Unit-I were separate entities, and the services had no nexus with Unit-I's manufacturing activity. The Tribunal found that input services were received by Unit-II, which was an extended arm of Unit-I, thus allowing the appellant to claim the credit.

Issue 2: Nexus of Input Services
The Revenue contended that the services had no nexus with Unit-I's manufacturing activity, as they were used by Unit-II, a separate entity. However, the Tribunal noted that the services were availed by Unit-II for running its operations, and permission was granted for removal of final products from Unit-II, establishing it as an extension of Unit-I. Referring to a similar case, the Tribunal held that the appellant was entitled to take Cenvat credit for services used at a location away from the manufacturing unit. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant consequential benefits.

In conclusion, the Tribunal ruled in favor of the appellant, allowing them to claim Cenvat credit for service tax paid by Unit-II on renting of immovable property, as the services were used in relation to manufacturing final products and Unit-II was considered an extended arm of Unit-I.