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2024 (6) TMI 1263 - AT - Central ExciseCENVAT Credit - services not related to the manufacture of final products - interpretation of expression in or in relation to manufacture of goods - HELD THAT - It is found that the expression activities in or in relation to manufacture postulates activities which are integrally connected to the manufacture of the goods. The Hon ble Supreme Court in M/S. COCA COLA INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2009 (8) TMI 50 - BOMBAY HIGH COURT , held ' input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal.' It is found that all the services have got a nexus to the manufacturing process and hence input credit on the same cannot be denied. The services are not used primarily for personal use or consumption of any employee in their individual capacity. Most of the amounts involved are less than Rs.10,000/-. Further, there has been a frequent change in the definition of inputs over a period of time and hence the legal issue was complex with different interpretation given by different forums from time to time. The issue has been decided on merits in favour of the appellant and hence the impugned order merits to be set aside - Appeal allowed.
Issues:
- Disallowance of credit of service tax paid on inadmissible services related to the manufacture of final products under sec. 11A of the Central Excise Act, 1944. - Interpretation of the expression "in or in relation to manufacture of goods" in the context of credit eligibility for various services. - Invocation of the extended period of limitation due to alleged intention to evade tax. - Applicability of input service credit on services provided in relation to the manufacturing process. Analysis: 1. Disallowance of Credit on Inadmissible Services: - The appellant, a manufacturer of plastic processing machinery, faced disallowance of service tax credit on various services not directly related to the manufacture of final products. - The Show Cause Notice proposed to recover Rs.4,03,207 under sec. 11A of the Central Excise Act, 1944, with interest and penalty. - After appeals, the demand was reduced to Rs.2,62,914 with interest and equal penalty, leading to the current appeal. 2. Interpretation of "In or in Relation to Manufacture": - The appellant argued that services integral to the production process should be considered "in or in relation to manufacture of goods." - Citing various judgments, the appellant contended that the disputed services were directly or indirectly connected to the production of finished goods. - The services were analyzed, and it was shown that they had a nexus to the manufacturing process as per the defined categories. 3. Extended Period of Limitation and Intention to Evade Tax: - The appellant claimed a bonafide belief in the eligibility for input tax credit (ITC) on the disputed services, indicating no intention to evade tax. - The argument was made against invoking the extended period of limitation based on the alleged lack of intent to evade tax. 4. Applicability of Input Service Credit: - The Tribunal noted that the services in question had a nexus to the manufacturing process, aligning with the categories specified by the Hon'ble Supreme Court. - The input credit on these services could not be denied as they were not primarily for personal use and were related to the manufacturing activities. - Given the complexity of the legal issue and varying interpretations, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential benefits. This detailed analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT Chennai regarding the disallowance of service tax credit on certain services and the interpretation of the expression "in or in relation to manufacture of goods" in the context of input tax credit eligibility.
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