2021 (8) TMI 907 - AT - Central Excise

CENVAT Credit - input services - services used for carrying out trading of lube oil in the factory premises at Chennai - Rule 6(3) of CENVAT Credit Rules, 2004 - HELD THAT - It was noticed by the department that the appellant had availed CENVAT credit on various input services based on the invoices issued by the service provider as well as on the basis of ISD invoices issued by their regional and head office. The department entertained a view that as the appellants were carrying out trading in the factory premises where from the lube oil received from other factories were sold and since trading is deemed as exempt services, the appellants have to reverse the credit availed on the input service used for such trading activity. The appellant has also produced a copy of the reply to the RTI application dated 10.8.2021 wherein department has stated that no appeal has been filed against the order passed by the Commissioner (Appeals). It was held by the Commissioner (Appeals) that no exempt services / trading is rendered by the appellant through their registered depot at the Chennai lube plant which is only a place of removal for various manufacturing units. There are no hesitation to hold that the demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over CENVAT credit on input services used for trading activity at Chennai factory.

Analysis:
The appellants, engaged in lube oil manufacturing, faced a dispute regarding CENVAT credit on input services at their Chennai factory, also registered as a depot. The issue revolved around whether the trading activity at the Chennai premises necessitated reversal of the credit under Rule 6(3) of CENVAT Credit Rules, 2004.

The consultant for the appellant argued that the Chennai premises acted as a depot for storage and distribution, not engaging in trading. Referring to Rule 2(l) of CENVAT Credit Rules, it was highlighted that input services are meant for the manufacture and clearance of final products up to the place of removal, which includes the Chennai plant. The appellant did not conduct any trading at the depot.

The appellant drew attention to a previous Order-in-Appeal where it was held that no credit reversal was required as no sales took place at the depot. Citing the principle that an order attains finality when not appealed against, the appellant contended that the department could not alter its stance.

The department contended that trading occurred at the factory premises, necessitating credit reversal for input services. However, the Commissioner (Appeals) had previously ruled that the depot did not engage in trading activities, serving only as a place of removal for manufactured goods from various units.

The Tribunal, after considering the arguments and previous rulings, concluded that the demand for credit reversal was unjustified. The impugned orders were set aside, and the appeals were allowed, providing consequential reliefs as per law. The decision highlighted that the Chennai depot did not engage in trading activities, affirming the appellant's position and rejecting the department's claim.