2015 (8) TMI 150 - AT - Central Excise

Denial of CENVAT Credit - Input service - activities relating to business - 100% of services covered under Rule 6(5) of the Cenvat Credit Rules 2004 - utilization of common input services - Trading activities - Held that - Definition of Input service given under Cenvat Credit Rules 2004 is very wide and it covers services used directly or indirectly in or in relation to manufacture of final products. The inclusive part of definition of input service at the material time in 2007-08 allowed credit of services used in any activity relating to business. Regarding cenvat credit pertaining to canteen services no evidence exists on record that any amount has been recovered from the employees of the appellant. The scope of activities relating to business is wide for admissibility of cenvat credit at the material time which was correctly allowed by Adjudicating authority. Accordingly, service tax paid on any activity relating to business of manufacturing will be available as Cenvat Credit to the appellant. Commissioner (Appeals) finding for not following the case law of Coca Cola India Pvt Ltd 2009 (8) TMI 50 - BOMBAY HIGH COURT , is not correct because, there is no stay on the operation of that decision and only filling appeal against the decision is not enough for not following the said decision which is also followed in CCE v/s Parth Poly Wooven Pvt. Ltd. - 2011 (4) TMI 975 - GUJARAT HIGH COURT and many other cases like 2014 (3) TMI 921 - GUJARAT HIGH COURT - CCE v/s INDUCTOTHERM INDIA P. LTD. Appellant claims that they are entitled to 100% credit in respect of services covered under Rule 6(5) of the Cenvat Credit Rules 2004, but they have also not come out with clarity on the actual services availed by them. Therefore, this factual aspect needs proper verification of the records of the appellant by the original adjudicating authority. The original adjudicating authority is directed to verify and examine whether such Cenvat Credit is covered under Rule 6(5) for the above 17 services and that these services are not used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. Needless to mention that appellant will be granted an opportunity of personal hearing to produce necessary documents to prove eligibility to credit claimed by them following principles of natural justice. - impugned Order demanding duty with equal penalty deserves to be modified - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat Credit under Rule 14 of Cenvat Credit Rules 2004 along with interest and penalty.

Analysis:

1. The appellant, a manufacturer of various lighting products, availed Cenvat Credit for input services like gardening, manpower recruitment, catering, rent-a-cab, tour operator services, and trading activities. The Revenue alleged wrongful availing of credit amounting to &8377; 46,05,092. The Adjudicating Authority allowed &8377; 30,88,512 but disallowed &8377; 15,16,580 related to trading activities. The Commissioner (Appeals) upheld the disallowance, leading to the current appeal.

2. The appellant's consultant argued that the definition of input service is broad, covering services related to the business of manufacturing. They contended that common input services used for both manufacturing and trading activities are eligible for credit under Rule 6(5) of the Cenvat Credit Rules 2004. They also raised concerns about the time-barring of the Show Cause Notice (SCN).

3. The Revenue argued that the services in question were not related to manufacturing and were attributable to trading activities. They supported the first appellate authority's findings.

4. The Tribunal found that the Adjudicating Authority correctly allowed credit for most input services. They agreed with the appellant's argument regarding the broad definition of input services and the eligibility for credit under Rule 6(5). The Tribunal also directed a re-examination of the disallowed credit related to trading activities for proper verification.

5. The Tribunal set aside the duty demand of &8377; 30,88,512 and remanded the matter concerning the disallowed credit of &8377; 15,16,580 to the Adjudicating Authority for fresh consideration. The appellant's appeal was allowed, overturning the Commissioner (Appeals) decision.

6. The Tribunal emphasized the importance of verifying the eligibility of services for credit under Rule 6(5) and directed the appellant to provide necessary documents for clarification. Additionally, the time-barring issue raised by the appellant was directed to be considered by the Adjudicating Authority.

7. Ultimately, the Tribunal modified the impugned order, allowing the appeal and setting aside the Commissioner (Appeals) decision.

This detailed analysis covers the issues, arguments, and findings of the judgment, providing a comprehensive overview of the legal aspects involved in the case.