2022 (4) TMI 422 - AT - Central Excise

CENVAT Credit - Input Services - services of electricity expenses in connection with their head office is admissible to the factory or otherwise? - service in connection with overall business activity of the manufacturing unit or not - HELD THAT - The appellant factory is the sole factory for which the head office is located outside the factory. The head office is involved in the activity related to the factory s manufacturing and sale of the goods. The Head office is not operating for any other activity other than the activity relating to the factory operations, therefore, merely because the head office is located outside the factory, it cannot be said that the service received and used in head office does not relate to the manufacturing activity. Had this same office is maintained in the factory premises, there would not have any objection by the Revenue. The location of the head office is immaterial so long it is used only for the operation of the factory s activities, therefore, any service received in head office is in relation to the manufacturing activity of the appellant. This specific issue has been considered by this Tribunal in various judgements - reliance can be placed in the case of M/S. HID INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX BANGALORE 2016 (11) TMI 99 - CESTAT BANGALORE , where on similar issue, credit was allowed. Thus, even though the input service was received by the head office but since it is in connection with overall business activity of the manufacturing unit, the credit is admissible - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Admissibility of services of electricity expenses in connection with the head office to the factory.

Analysis:
The main issue in this case revolves around whether the services of electricity expenses in connection with the head office are admissible to the factory or not. The appellant argues that even though the service was received in respect of the head office, it is exclusively for activities related to the factory's manufacturing process, making the credit admissible. The appellant cites various judgments to support this argument. On the other hand, the Revenue contends that only services integrally connected to the manufacturing activity are admissible as input services. The Revenue argues that since the service was received in the head office, without a direct nexus to the manufacturing activity at the factory, the credit is inadmissible.

The Tribunal carefully considers the submissions from both sides and examines the records. It notes that the head office is solely dedicated to activities related to the factory's manufacturing and sale of goods. The Tribunal emphasizes that the location of the head office outside the factory does not negate the connection between the service received and the manufacturing activity. The Tribunal refers to previous judgments to support its decision, highlighting that services received in the head office can still be considered in relation to the manufacturing activity of the appellant.

In specific reference to the judgments of Jindal Pipes Ltd. and HID India Pvt. Ltd., the Tribunal underscores the importance of considering the broader business activities of the manufacturing unit when determining the admissibility of input services. The Tribunal distinguishes the judgments relied upon by the appellant from those cited by the Revenue, emphasizing the relevance of the services to the overall business activity of the manufacturing unit.

Ultimately, the Tribunal concludes that even though the input service was received by the head office, its connection to the overall business activity of the manufacturing unit renders the credit admissible. Consequently, the impugned order is set aside, and the appeal is allowed.