2024 (6) TMI 1106 - AT - Central Excise

Input service credit - consultancy service availed from EVIPL for trading carbon credit points - denial of credit on the ground being neither connected with the manufacture or for providing any output service - Rule 2(l) of the CCR - HELD THAT - It is not the case of the Revenue that the appellant was using separate establishment for the manufacture of R-23. It is the admitted position that the R-23 gas is the most natural by-product generated during the manufacture of R-22, which is destroyed without releasing into the atmosphere for which the manufacturer becomes eligible to earn CC towards CER norms of the Kyoto protocol. The order of Delhi Bench in the case of SHREE BHAWANI PAPER MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE. LUCKNOW 2012 (12) TMI 741 - CESTAT NEW DELHI would apply to the facts of the present case as well, where it was held that ' I fully agree with the learned advocate that the above contention of the Revenue that the amount earned as a result of consultancy must be either subject to excise duty or should be taxable under the Service Tax is nothing but a fallacy. The amount earned as a result of such service availed by the party is the income of the appellant and is not required to be leviable to Service Tax.' Thus, the credit claimed and availed by the taxpayer is in accordance with law as applicable during the year under dispute and therefore the denial of the same was uncalled for - the impugned order is set aside - appeal allowed.

Summary

Issues involved:
- Availing input service credit on consultancy charges related to trading carbon credit points.

Analysis:
1. Facts of the Case and Revenue's Allegations:
The taxpayer earned Carbon Credits (CC) under Clean Development Mechanism (CMD) Project by destroying HFC-23 produced during the manufacture of R-22 refrigerant gas. The Revenue alleged that availing service tax credit on consultancy charges paid for trading CC was not allowable as it was not connected to manufacturing or output services.

2. Show Cause Notice and Adjudication:
A show cause notice was issued proposing to demand the availed credit under Rule 14 of CCR, 2004. The adjudicating authority confirmed the demands, stating the consultancy services were solely for trading CC and not related to manufacturing. The authority distinguished a Delhi Tribunal order in this regard.

3. Appellant's Contentions:
The appellant argued that consultancy services from Emergent Ventures India Pvt. Ltd. (EVIPL) were in relation to carbon credit management, falling under the definition of input service. They cited various tribunal and court decisions to support their claim.

4. Judgment and Analysis of Relevant Rules:
The Tribunal analyzed Rule 2(l) of CCR, which includes services used in relation to business activities like accounting, auditing, and quality control as input services. The Tribunal found that the consultancy services were related to the taxpayer's activities, similar to a Delhi Tribunal's decision in another case.

5. Decision and Conclusion:
The Tribunal held that the credit availed by the taxpayer was in accordance with the law applicable during the disputed period. Citing the Delhi Tribunal's decision, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits, if any, as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, allowing them to avail input service credit on consultancy charges related to trading carbon credit points, based on the interpretation of relevant legal provisions and precedents.