2024 (6) TMI 576 - AT - Central Excise

Recovery of CENVAT Credit with interest and penalties - input service - garden maintenance service - catering service - housekeeping service - input service credit distribution - HELD THAT - If the claim of the appellant that it is the transformer division that was billed for the impugned services is correct, the proceeding acquire a different complexion; the credit would have been taken by the proper entity. Furthermore, the case made out against the appellant is that the they could not have taken the entire credit pertaining to common input service to the transformer division which would be a plausible proposition if the credit was to be distributed. Such contingency would not arise of the service was procured by the transformer division and not by an office of the appellant-company. The claim of the appellant has not been controverted in the impugned order. The appellant, too, has not evinced any documents in support of the claim. Determination of this claim is crucial as it has a bearing on the process by which credit of input service could be distributed. Only then would it be possible to ascertain if the failure to obtain registration as input service distributor did impact distribution of credit. The impugned order is set aside to ascertain the correctness of the claim that bills were raised on a department of the transformer division and, if not, to determine the correctness of the contention that procedural irregularity would not stand in the way of taking the credit entirely as the rule, then in existence, allowed. Appeal allowed by way of remand.

Issues involved: Challenge to recovery of credit u/s CENVAT Credit Rules, 2004 for procurement of various services, identity of divisions for credit distribution, and procedural irregularity in credit distribution.

Issue 1: Challenge to credit recovery under CENVAT Credit Rules, 2004
The appeal challenges the recovery of credit amounting to Rs. 58,35,374 taken on procurement of 'garden maintenance service', 'canteen service', 'housekeeping service', and 'fire protection service' u/s 11A of Central Excise Act, 1944. The impugned order held that these services do not conform to the definition of 'input service' in CENVAT Credit Rules.

Issue 2: Eligibility of services under CENVAT Credit Rules
The appellant argued that the impugned services are eligible under rule 3 of CENVAT Credit Rules, 2004, citing decisions of Hon'ble High Courts which interpret 'input service' broadly to include various activities related to business. The appellant contended that the services have a nexus with the business of manufacturing final products, making them eligible for credit.

Issue 3: Identity of divisions and credit distribution
The main factors in the litigation were the identity of divisions housed at the Kanjur Marg complex and the procedure followed to distribute credit. It was confirmed that the divisions were separate Central Excise entities with different registration numbers, making them technically different assessees. The billing procedure was found improper as there were no provisions allowing one registered assessee to take credit on behalf of another.

Issue 4: Procedural irregularity in credit distribution
The claim that the 'central service department' is part of the 'transformer division' and not a separate entity raised questions about the proper entity for credit procurement. The appellant's claim that the credit was taken by the 'transformer division' was not refuted in the impugned order, but lack of supporting documents led to a remand for further verification.

In conclusion, the appeal was allowed by way of remand to ascertain the correctness of the claim regarding billing and procedural irregularity in credit distribution.

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