2015 (12) TMI 1262 - AT - Central Excise

Denial of CENVAT Credit - input services - 100% EOU - Renting of Immovable Property services - Adjudicating authority has denied the benefit only on the ground that the rented premises Unit-II and Unit-III were located at different places than that of the registered premises - Held that - Unit I, Unit-II and Unit-III share same legal entity, production processes and interlinked. Raw materials have been sent to Unit-II and Unit-III by Unit-I but for production of intermediate products and the intermediate products are received back by Unit-I for the manufacture of final products. Unit-II and Unit-III are exclusively producing the goods only for Unit-I. Without processing at Unit-II and Unit-III, final products cannot be manufactured at Unit-I. Therefore, renting of immovable property service is having direct nexus in the manufacture of goods at Unit-I. Rule 2 (1) of CCR, 2004, clearly mentions that service utilized in or in relation to manufacture of final products is eligible as input services. Hence, the benefit of cenvat credit on input services cannot be denied to the appellants. In view of the foregoing, I find that the appellant has made out the case in their favour and the impugned order is liable to be set aside - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of availing credit on input services for rented premises at Unit-II and Unit-III by a 100% EOU.
2. Interpretation of Rule 2(1) of the Cenvat Credit Rules, 2004 regarding input services.
3. Nexus between renting of immovable property services and the manufacturing process at different units of the same legal entity.

Analysis:

Issue 1:
The appellant, a 100% EOU, rented new premises for Unit-II and Unit-III due to space shortage. The appellant claimed credit on input services for these premises, arguing they were part of the manufacturing process. The Commissioner (Appeals) and adjudicating authority denied the credit, leading to the appeal. The appellant contended that the rented premises were essential for manufacturing goods at Unit-I, citing relevant case laws.

Issue 2:
The Ld. AR for the Revenue argued that the services for Unit-II and Unit-III were not used for manufacturing final products at Unit-I, emphasizing the necessity of a nexus between the service and the manufacturing process. The appellant, on the other hand, relied on Rule 2(1) of the Cenvat Credit Rules, 2004, which defines input services, to support their claim for credit on renting of immovable property services.

Issue 3:
The Tribunal considered the interconnectedness of Unit I, Unit-II, and Unit-III, noting that raw materials were processed at the latter units before being sent to Unit-I for final product manufacturing. The Tribunal found a direct nexus between the renting of immovable property services and the manufacture of goods at Unit-I, emphasizing that without processing at Unit-II and Unit-III, final products could not be manufactured at Unit-I. The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief, if any.