2013 (10) TMI 792 - AT - Central Excise

CENVAT Credit on Input Services nexus of input services with manufacturing - Waiver of Pre-deposit Held that - The demand is confirmed on a ground different from what was proposed in the SCN - during the relevant time there was no stipulation that the services cannot be assigned or transferred to any one factory for payment of duty on final products - there was no distribution but it was only transfer and that was the reason why the applicant was not registered as input service distributor At any rate, this was not a ground in the Show Cause Notice - The inclusive part of the definition of input services that many services of same nature as the impugned services are specifically included - brand promotion is on the same footing as sales promotion - it is to be kept in mind that services being intangible the standard for proving nexus cannot be same as that in the case of inputs which are tangible - It is this aspect which comes out from the inclusive part of the definition - waiver of pre-deposit of dues granted during pendency of the appeals Stay granted.

Summary

Issues: Availment of cenvat credit on input services, nexus of input services with manufacturing activity, applicability of past judgments, pre-deposit requirement for appeal.

Analysis:
1. The applicant, a manufacturer of excisable goods, availed cenvat credit on various input services for a specific period. Two show cause notices were issued, alleging that the services were not used in relation to the manufacture of the final product. The Commissioner disallowed the credit, stating lack of nexus with manufacturing activity and uncertainty regarding service allocation to the specific unit where credit was utilized.

2. In response, the applicant argued that the demand was confirmed on different grounds than proposed in the show cause notice. They contended that during the relevant period, there was no restriction on assigning or transferring services to a specific factory for duty payment on final products. The applicant emphasized that there was no distribution but only transfer, hence not requiring registration as an input service distributor.

3. The Revenue opposed the appeal, asserting that the impugned services lacked nexus with manufacturing activity, and credit was not received at the factory where utilized. The Revenue relied on past judgments such as Maruti Suzuki Ltd. v. CCE Delhi, CCE Nagpur v. Manikargh Cement, and CCE Chennai v. Sundaram Brake Linings to support their argument.

4. Upon considering both sides, the Tribunal noted that the Maruti Suzuki Ltd. case pertained to inputs, not input services. Additionally, the Tribunal highlighted doubts raised by another Bench of the Supreme Court regarding the applicability of the Maruti Suzuki Ltd. decision to input services. The Tribunal also emphasized that services, being intangible, required a different standard to establish nexus compared to tangible inputs.

5. The Tribunal found that the objections raised by the Revenue regarding the factory taking credit based on invoices addressed to the company's headquarters were not the substantive issues raised in the show cause notice. Consequently, the Tribunal granted a waiver of pre-deposit for the dues arising from the impugned order and ordered a stay on the collection of such dues during the pendency of the appeals.