2014 (5) TMI 295 - AT - Central Excise

Cenvat credit of service tax paid on rent of premises - eligible input services - if the rent of the premises occupied by job worker is paid by him only, whether the appellant would be entitled to avail the credit of the service tax paid on the same? - Held that - Admittedly not, the appellant has extended the facility of the rented premises to its job worker out of his own sweet will. Such extended facility, along with installation of the machines would definitely have impact on the quantum of the job charges being charged by the job worker. Merely because the appellant has chosen to provide rented premises to his job worker, it cannot be said that such a facility extended to the job worker is associated with the appellant s business and is covered by the definition of input services. Extended period of limitation - Held that - As such, it is seen that a part of the demand is barred by limitation. Admittedly, the appellant was availing the credit by reflecting the same in their statutory records as also in the returns filed with the department. Further the issue involved is also a bona fide dispute on interpretation of law and does not involve any clandestine activities. - Benefit of extended period of limitation extended to assessee. While confirming the demand for the normal period with interest, penalty set aside. - Decided partly in favor of assessee.

Summary

Issues:
Availability of Cenvat credit on service tax paid for rented premises provided to job worker.

Analysis:
The appellant, engaged in manufacturing gears and gearboxes, claimed Cenvat credit on service tax paid for renting premises to their job worker. The appellant argued that providing rented premises for the job worker's exclusive use furthered their business and fell under the definition of input services. However, the Revenue contended that the job worker, being an independent entity under agreement with the appellant, could not be considered an extension of the appellant's business. Consequently, the credit availed by the appellant was denied, and a penalty imposed.

The Tribunal deliberated on whether renting premises for the job worker could be deemed an activity connected to the appellant's business for claiming Cenvat credit on the service tax paid. The appellant had no legal obligation to provide rented premises to the job worker, who operated independently under a separate agreement. Goods were moved to the job work premises and returned to the appellant's factory following proper procedures, indicating the job worker's independent status. The Tribunal concluded that activities at the job worker's end could not be considered related to the appellant's business, as it would lead to an endless extension of business connections.

Furthermore, the Tribunal considered whether the appellant could claim credit if the job worker paid the rent for the premises. It was noted that the appellant voluntarily provided the rented premises and machinery, impacting the job charges. Merely offering rented premises to the job worker did not establish a connection to the appellant's business under the definition of input services. Thus, the Tribunal rejected the appellant's claim for credit on these activities.

Regarding the demand raised for specific periods, the Tribunal found a part of the demand to be time-barred due to limitation. The appellant had disclosed the credit in statutory records and returns, and the dispute was based on a genuine interpretation of the law without any fraudulent intent. Consequently, the demand beyond the limitation period was deemed unjustifiable. The Tribunal instructed the lower authority to quantify the demand within the limitation period.

In terms of penalty, the Tribunal determined that the issue was a bona fide legal dispute without any malicious intent on the appellant's part. Therefore, the penalty was set aside. The appeal was disposed of based on the above analysis, with the judgment pronounced on a specific date.