2024 (3) TMI 1038 - AT - Central Excise

CENVAT Credit - input services - Construction Service - Rent a cab Service - Outdoor Catering (Canteen) Service - Services used by the Head Office (ISD) - C F and Cargo Handling Service - applicability of Notification No. 3/2011-CE dated 01.03.2011 - invocation of extended period of limitation. Construction Service - Denial on account of lack of nexus between the construction services and manufacturing of the goods - HELD THAT - The construction relates to the setting up of the factory which in turn, is directly used for manufacturing and is directly covers under the inclusive part of the definition of input service . Moreover, during the relevant period, construction service was included in the definition of input service and it is only after 01.04.2011 that it has been specifically excluded from it - the construction service, during the relevant time, was within the definition of input service and therefore, the appellant is entitled to Cenvat Credit of the same. Rent a cab Service - Credit denied only on the ground that this service is not used in relation to the manufacture of the product and the cost of the same has been recovered from the employees - HELD THAT - Rent a cab service has been mainly used for official purposes and the same relates to the business of the appellant. Here it is noted that a part of the cost of this service is recovered from the employees and as per the appellant, only 20% of it, is recovered from the employees and the same has been reversed along with interest and 80% is absorbed in the manufacturing cost. Accordingly, the appellant is entitled to avail 80% of the cost of this service and the Original Authority is directed to verify the quantum of Cenvat Credit reversed by the appellant as claimed by them. On principle, the appellant is entitled to avail Cenvat Credit on this service. Outdoor Catering (Canteen) Service - credit denied on account of the fact that it is not related to the manufacture of the product and the same is recovered from the employees - HELD THAT - It is a statutory requirement to provide this facility to the employees as required under the Factories Act and moreover, it enhances the productivity of the employees, which is indirectly related to the manufacture of the final products - As regards the submissions of the appellant that they have only recovered 30% of its cost from the employees and the same has been reversed along with interest, this fact of reversal needs to be verified by the Original Authority and for this purpose, the case is remanded back to the Adjudicating Authority to verify the same. Services used by the Head Office (ISD) - HELD THAT - Cenvat Credit in respect of courier service, mandap keeper service, event management, cargo handling and C F service has been denied on the ground that the same is not in relation to manufacturing activities of the appellant and hence, the same is not admissible - the Tribunal in the case of M/S. ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE C.R. BANGALORE 2016 (8) TMI 8 - CESTAT BANGALORE after following the decision of the Hon ble Karnataka High Court in COMMISSIONER OF C. EX., BANGALORE-I VERSUS ECOF INDUSTRIES PVT. LTD. 2011 (2) TMI 1130 - KARNATAKA HIGH COURT , has held that the assessee is entitled to Cenvat Credit of service tax as distributed by the ISD - the appellant is entitled to Cenvat Credit with regard to these services. C F and Cargo Handling Service - HELD THAT - The definition of place of removal as provided under Section 4(3)(c) of the Act inter alia includes depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory. Further, C F and Cargo services are used for the purpose of unloading, storing, accounting and thereafter dispatch of the goods to the specified dealers on FOR basis. In this regard, the learned Counsel for the appellant also referred to certain invoices issued by the appellant to prove that all the goods were supplied FOR upto the place of buyer s premises, entire risk is borne by the appellant and therefore, all the expenses incurred by the C F agent, on which service tax is charged, will fall within the definition of input service - the appellant is entitled to Cenvat Credit of service tax regarding C F expenses. Invocation of extended period of limitation - HELD THAT - The Revenue has not brought anything on record to satisfy the ingredient for invoking the extended period of limitation as the appellant was subjected to regular audit and the Department was aware of the fact that the appellant is availing Cenvat Credit of tax paid on input service and therefore, substantial demand in this case is barred by limitation. The impugned order is not sustainable in law and therefore, the same is set aside - with regard to the services of Rent a cab service and Outdoor catering service the Original Authority will verify the quantum of reversal made by the appellant; and for this limited purpose, the matter is remanded back to the Original Authority - appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Denial of Cenvat Credit on various input services.
2. Demand for interest u/s 11AA of the Central Excise Act, 1944.
3. Imposition of penalty u/s 11AC of the Central Excise Act, 1944.

Summary:

1. Denial of Cenvat Credit on Various Input Services:
The appellant challenged the denial of Cenvat Credit on input services like courier service, clearing and forwarding service, mandap keeper service, event management, cargo handling service, rent a cab service, construction service, pest control service, drinking water service, and testing service. The Commissioner disallowed the credit on the ground that these services were not used in or in relation to the manufacture of final products. The Tribunal analyzed each service under the definition of 'input service' u/r 2(l) of the CCR and concluded:

- Construction Services: Credit denied due to lack of nexus with manufacturing. Tribunal held construction services for setting up the factory are directly related to manufacturing and covered under the inclusive part of the definition. Credit allowed.

- Rent a Cab Service: Credit denied as not related to manufacturing and cost recovered from employees. Tribunal held services used for official purposes are related to business. Credit allowed for 80% of the cost, subject to verification of reversal of 20% recovered from employees.

- Outdoor Catering Services: Credit denied as not related to manufacturing and cost recovered from employees. Tribunal held canteen services are statutory and indirectly related to manufacturing. Credit allowed for 70% of the cost, subject to verification of reversal of 30% recovered from employees.

- Services Used by Head Office (ISD): Credit denied as services were not related to manufacturing activities. Tribunal held that during the relevant period, there was no condition under Rule 7 of CCR for distribution of credit by ISD. Credit allowed.

- Courier Services: Credit denied as services were used by head office. Tribunal held services used for business activities are covered under 'input service'. Credit allowed.

- Mandap Keeper Services: Credit denied as not related to manufacturing. Tribunal held services used for business activities like AGM, product launch, etc., are covered under 'input service'. Credit allowed.

- Event Management Services: Credit denied as not related to manufacturing. Tribunal held services used for product promotion are covered under 'input service'. Credit allowed.

- Clearing & Forwarding and Cargo Handling Services: Credit denied as services used beyond the place of removal. Tribunal held services used for unloading, storing, and dispatching goods to dealers are covered under 'input service'. Credit allowed.

2. Demand for Interest u/s 11AA of the Central Excise Act, 1944:
The Tribunal held that the demand for interest is not sustainable as the demand for duty itself is not sustainable.

3. Imposition of Penalty u/s 11AC of the Central Excise Act, 1944:
The Tribunal held that the imposition of penalty is not sustainable as the demand for duty is not sustainable. The extended period of limitation was not invoked correctly as the appellant was under a bona fide belief and regularly filed returns subjected to audit.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, remanding the matter to the Original Authority for verification of the quantum of reversal made by the appellant regarding 'Rent a Cab Service' and 'Outdoor Catering Service'. The appeal was disposed of in the above terms.