2012 (12) TMI 830 - AT - Central Excise

Eligibility to take Cenvat credit Whether storage up to the place of removal used in the definition of input service will cover storage at the place of removal also Held that - The place where goods are stored after clearance from the factory on payment of duty can be considered as place of removal for the purpose of Rule 2(l) of Cenvat Credit Rules, 2004 is no longer res integra because of the clarification issued by the CBEC in the matter and approved by the decision in the case of LG Electronics (2010 (4) TMI 322 - CESTAT, NEW DELHI) and Ambuja Cements v. Union of India 2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT . Therefore the godowns at Agra and Farrukhabad are to be considered as place of removal for the appellant notwithstanding the fact that sugar is an item subjected to specific rate of duty. Rule 2(l) of Cenvat Credit Rules specifically includes many post manufacturing activities like service relating to sales, promotion etc and therefore standard prescribed for inputs cannot be adopted for input services. Therefore not convinced by the argument advanced by Revenue that these services have no nexus the goods manufactured. No reason to deny Cenvat credit of tax paid on Rent of godown at Agra/ Farrukhabad, Sugar handling charges at the said godowns & Security services availed at the said godowns - cash disbursement is for procurement of raw material, and has direct nexus with the manufacturing activity & so is the case of insurance of cashier. In the matter of Vehicle Hire charges and insurance of company owned vehicles already there are decisions of the High Courts allowing credit of service tax paid on such service. In the case of charges of gay rope mask, assessee submits that this is services required for their efficient functioning at the place of procurement of raw material and it has got direct nexus in the manufacturing activity - appellants are eligible for the disputed Cenvat credits.

Summary

Issues:
- Eligibility of Cenvat credit on various services availed by the manufacturer for different periods.
- Interpretation of the definition of "input service" under Rule 2(l) of Cenvat Credit Rules, 2004.
- Determination of whether the godowns at Agra and Farrukhabad qualify as "place of removal."
- Analysis of whether the expression "storage up to the place of removal" includes storage at the place of removal itself.
- Assessment of the nexus between the services availed and the manufacturing activity for claiming Cenvat credit.

Analysis:

The judgment revolves around the eligibility of Cenvat credit on services availed by a sugar manufacturer for different periods. The primary issue is the interpretation of the definition of "input service" under Rule 2(l) of Cenvat Credit Rules, 2004. The manufacturer availed various services such as rent of godown, sugar handling charges, security services, insurance, vehicle hire charges, and installation charges. The Revenue contended that these services were not related to the manufacturing of sugar post-clearance from the factory, thus disqualifying them as input services.

The key contention was whether the godowns at Agra and Farrukhabad could be considered as a "place of removal" for the purpose of claiming Cenvat credit. The manufacturer argued that the godowns were places where sugar was stored post-clearance and sold, falling within the definition of "place of removal." Reference was made to a Circular issued by CBEC and a decision of the Tribunal supporting this interpretation.

Another crucial aspect was the interpretation of the expression "storage up to the place of removal." The manufacturer argued that this should include storage at the place of removal itself, emphasizing the practicality of such an interpretation. The Tribunal agreed, stating that excluding storage at the place of removal would render the expression meaningless.

The judgment also addressed the nexus between the services availed and the manufacturing activity. The Tribunal differentiated between tangible inputs and intangible input services, highlighting that services post-manufacturing were included in the definition of input services. The Tribunal rejected the Revenue's argument that the services lacked nexus with manufacturing, emphasizing the broader scope of input services.

Moreover, the Tribunal considered relevant amendments to the definition of "input service" but focused on the definition prevailing during the disputed period. Ultimately, the Tribunal ruled in favor of the manufacturer, allowing the disputed Cenvat credits for various services, including insurance, vehicle hire charges, and installation charges, based on the established nexus with the manufacturing activity and the interpretation of the relevant provisions.

In conclusion, the judgment clarified the eligibility criteria for claiming Cenvat credit on input services, emphasizing the importance of a direct nexus with the manufacturing activity and providing a detailed analysis of the interpretation of key legal provisions and definitions in the context of the case.