2024 (5) TMI 324 - AT - Central Excise

Recovery of the cenvat credit wrongly availed along with interest and penalty - input services or not - Management Consultancy or Business Services - credit availed based on the invoices issued by M/s. Biocon Ltd. for mark-up fees / milestone fees against permanent services agreed to be provided - January 2009 to November 2012 - burden to prove on manufacturer. The adjudicating authority has held that the permanent services include ineligible services like supply of electricity, back-up power, steam, supply of water, extending canteen facilities, Effluent Treatment Plant(ETP) charges, potable water supply charges, etc.; hence not input service; accordingly the mark-up fees / milestone fees paid to the Biocon Limited in connection with ineligible permanent services are not covered under the scope of Rule 2(l) of the Cenvat Credit Rules, 2004. HELD THAT - The reasoning of the adjudicating authority deserves to be rejected on two grounds on going through the individual services i.e. supply of electricity, back-up power, steam, supply of water, extending canteen facilities, Effluent Treatment Plant(ETP) charges, potable water supply charges, etc. necessary for manufacturing activities and it cannot be said to have not been used in or in relation to the manufacture of finished excisable goods from the same premises, which was taken over by the appellant from Biocon Limited. Secondly, putting all these individual services under the taxable category of Management Consultancy Services on which service tax paid by Biocon Limited and not objected to by the Department for the relevant period from 2009 to 2012 cannot be questioned in the hands of the receiver i.e. appellant while availing cenvat credit on the said taxable services. This principle has been upheld by the Hon ble Supreme Court in the cases of SARVESH REFRACTORIES (P) LTD. VERSUS COMMISSIONER OF C. EX. CUSTOMS 2007 (11) TMI 23 - SUPREME COURT and COMMISSIONER OF CENTRAL EXCISE CUSTOMS VERSUS MDS SWITCHGEAR LTD. 2008 (8) TMI 37 - SUPREME COURT which has been followed subsequently by this Tribunal in a series of cases - it was held in the case of MDS SWITCHGEAR LTD. that 'A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be con tested or challenged by the officers in charge of recipient unit.' There are no reason to deny the cenvat credit availed by the appellant on Business Support Services received against Support Services Agreement dated 18.07.2007 on which service tax paid by M/s. Biocon Limited under the Management Consultancy Services during the said period - the impugned order is set aside. Appeal allowed.

Summary

Issues involved:
Appeal against orders passed by Commissioner of Central Excise, Bangalore regarding availing cenvat credit on input services.

Facts of the case:
The appellants are engaged in the manufacture of excisable goods and availed cenvat credit on input services based on invoices issued by another company. The dispute arose regarding the nature of services provided and whether they qualify as input services for cenvat credit.

Appellant's argument:
The appellant entered into a Business Sale Agreement with the other company, under which certain services were agreed to be provided during the transfer of business. The services were essential for the manufacturing activity and were classified under 'Management Consultancy Services'. The appellant contended that since the services were used in the manufacture of final products and the service tax was paid by the other company, the credit should not be denied.

Revenue's argument:
The Revenue argued that the services availed by the appellant were not directly or indirectly used in relation to the manufacture of final products, thus not qualifying as input services under the CENVAT Credit Rules. They also highlighted that post-01.04.2011, credit on all expenses relating to business activities cannot be allowed.

Decision:
The Tribunal considered the agreements between the parties and the nature of services provided. It was observed that the services were necessary for manufacturing activities and were paid for by the other company under 'Management Consultancy Services'. The Tribunal rejected the Revenue's contention and allowed the appeals, setting aside the impugned orders.

Conclusion:
The Tribunal ruled in favor of the appellant, stating that the cenvat credit availed on the services provided during the business transfer should not be denied. The impugned orders were set aside, and the appeals were allowed with consequential relief, if any, to the appellant.