2025 (2) TMI 314 - AT - Central Excise

CENVAT Credit - input services under Rule 2(l) of the Cenvat Credit Rules 2004 - call centre services - extended period of limitation - levy of interest and penalty as well - HELD THAT - There is no provision in the format of the ER-1 Returns to mention the amount of Cenvat credit availed under each service category or transaction-wise. Only the total availment of Cenvat credit is required to be reflected in the return. Therefore the finding that the Appellant did not inform the Department of such availment of Cenvat credit on the said services is unsustainable. The issue of Cenvat Credit on invoices of Authorized Service Station for the services provided during the warranty period has already been dealt by the Tribunal in the Appellant s case M/S L.G. ELECTRONICS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE CGST GHAZIABAD 2024 (8) TMI 787 - CESTAT ALLAHABAD where it was held that CESTAT has constantly been taking view in respect of admissibility of CENVAT credit in on warranty services provided through third party authorized service centres. Extended period of limitation - HELD THAT - The present case involves interpretational issues involving complex legal provisions to determine the correct admissibility of Cenvat credit. It is a settled position that a case involving interpretation of the statutory provisions cannot be construed to be a case of wilful misstatement or suppression of facts with intent to evade payment of tax or avail Cenvat credit in a fraudulent manner. Levy of penalty - HELD THAT - As per Section 11AC of the Act read with Rule 15 of Cenvat Credit Rules 2004 the penalty can be imposed only in cases of fraud collusion wilful misstatement or suppression of facts or contravention of provisions of Excise Act with an intention to evade payment of duty. The Appellant has already stated that they have not contravened any provisions of law as they did not avail any credit in contravention of any provisions of law. Levy of interest - HELD THAT - According to Rule 14 read with Section 11AA interest is chargeable only when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded or Cenvat credit has been erroneously taken and utilized. The situations contemplated under Rule 14 as well as under Section 11AA are absent in this case. Therefore where the demand of Cenvat credit is itself liable to be set aside as a necessary consequence interest is also not payable. Therefore the impugned order confirming recovery thereof is liable to be set aside. Conclusion - i) The services related to sales promotion and brand building have a direct nexus with manufacturing and are eligible for Cenvat credit. The demand interest and penalties imposed on the Appellant set aside. ii) The order of Learned Member (Judicial) is agreed by order of Learned Member (Technical). Appeal allowed.

Summary

The Court considered the appeal against the Order-In-Original which denied the Appellant the Cenvat credit on call centre services, alleging that these services did not qualify as 'input services' under Rule 2(l) of the Cenvat Credit Rules, 2004. The primary issues were whether the call centre services qualify as input services and whether the extended period for demand under Section 11A(4) of the Central Excise Act, 1944, was applicable.

The relevant legal framework involved the interpretation of the term 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, which includes services used in relation to the manufacture of final products. The Appellant argued that the call centre services are used for sales promotion and customer service, thus qualifying as input services. The Appellant relied on precedents such as CCE, Nagpur v. Ultratech Cement Ltd. and Coca Cola India Pvt. Ltd. v. Commissioner, which supported a broad interpretation of 'input service'.

The Court found that the Commissioner had erred by not considering the inclusive part of the definition of 'input service'. The Tribunal emphasized that the phrase "in or in relation to" should be interpreted broadly, covering services with an indirect nexus to manufacturing. The Tribunal noted that the call centre services help in building the brand image and sales promotion, thereby having a direct connection with the manufacturing and sale of final products.

The Court rejected the reliance on precedents like Vikram Cement v. CCE, Indore, which dealt with inputs rather than input services. The Tribunal clarified that the definition of 'input service' is broader and not restricted to services used within the factory premises. The Tribunal also distinguished the present case from the Kohinoor Biscuits case, as the latter involved goods assessed under Section 4A, whereas the present case involved services related to manufacturing and sales promotion.

The Tribunal concluded that the call centre services qualify as input services under Rule 2(l) and that the Appellant was entitled to the Cenvat credit. The Tribunal also found that the demand raised was time-barred as the extended period under Section 11A(4) was not applicable due to the absence of fraud, suppression, or misstatement by the Appellant. The Tribunal noted that the audit report did not establish any wilful intent by the Appellant to evade duty.

Significant holdings include the Tribunal's emphasis on a harmonious interpretation of statutory provisions, considering both the means and inclusive clauses in the definition of 'input service'. The Tribunal reiterated that services related to sales promotion and brand building have a direct nexus with manufacturing and are eligible for Cenvat credit. The Tribunal set aside the demand, interest, and penalties imposed on the Appellant, allowing the appeal with consequential relief.