2016 (9) TMI 1240 - AT - Service Tax

Cenvat credit - service tax paid on input services - used in the manufacture of axles and gear boxes, which are used in the manufacture of final products i.e. motor vehicles & chasis Held that - by respectfully following the decisions of the Hon ble Bombay High Court in the case of Commissioner of Central Excise and Customs, Aurangabad vs. Endurance Technology Pvt. Ltd. 2015 (6) TMI 82 - BOMBAY HIGH COURT which is an uphelded decision of Tribunal reported in 2011 (7) TMI 373 - CESTAT, MUMBAI and the coordinate bench of the tribunal in the case of Parry Engg. & Electronics P. Ltd. vs. C.C.E. & S.T., Ahmedabad-I,II,III 2016 (1) TMI 546 - CESTAT AHMEDABAD , we hold that the appellants are the receiver of the services rendered by the 3rd party job worker and the said services have been used directly or in directly in or in relation to the manufacture of motor vehicles chassis. Hence, the appellants are entitled to credit of service tax paid on the input services. In the case on hand, the goods, on which services were provided, instead of coming to the appellants factory were dispatched to another job worker of the appellants i.e. HVAL/HVTL. The definition of input services does not specify that the services should be received in the factory of the manufacturer. The condition to avail cenvat credit on input service is that it should be used in or in relation to the manufacture of final products. In this case the service was used in the manufacture of motor vehicle chassis directly or indirectly. It is also a fact that the service charge paid by the appellant to the job worker is included in the assessable value of the final products. - Decided in favour of appellant

Issues:
1. Availing cenvat credit for duty paid on inputs and input services in the manufacture of commercial motor vehicles, chassis, and parts.
2. Supplying raw materials to job workers for manufacturing axles, gear boxes, and components.
3. Availing services of 3rd party processors for processing raw materials sent to job workers.
4. Disputed demand under Cenvat Credit Rules, 2004 and Central Excise Act, 1944.
5. Interpretation of the definition of input services and its application to the case.
6. Exemption claim based on Notification No.8/2005-S.T. dated 01.03.2005 for the taxable service of production of goods.

Analysis:
1. The appellants, engaged in manufacturing commercial motor vehicles, chassis, and parts, avail cenvat credit for duty paid on inputs and input services. They supply raw materials to job workers, HVAL and HVTL, for manufacturing axles, gear boxes, and components. The job workers do not sell the finished products back to the appellants, and no sales tax is charged as the raw materials always belong to the appellants.
2. The appellants also engage 3rd party processors to process raw materials sent to job workers. The processed inputs are then used in the manufacture of axles and gear boxes, which are further utilized in the production of motor vehicles by the appellants. The appellants pay processing charges to the 3rd party processors along with applicable service tax under Business Auxiliary Services.
3. A demand of &8377; 1,21,64,153/- was confirmed under Cenvat Credit Rules, 2004, and a penalty of &8377; 10,000/- was imposed. The appellants challenge this demand, arguing that the services rendered by job workers and 3rd party processors are directly or indirectly used in the manufacture of final products, entitling them to credit of service tax paid on input services.
4. The appellants assert that the impugned order failed to consider the wide import of the expression "services used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final product." They present a flowchart and legal references to support their claim that the services provided by 3rd party processors are covered by the definition of input services concerning the manufacture of motor vehicle chassis.
5. The Tribunal examines the case law and relevant notifications, particularly Notification No.8/2005-S.T., to determine the applicability of the exemption claimed by the appellants. Citing precedents, the Tribunal concludes that the appellants are indeed entitled to credit of service tax paid on input services rendered by job workers and 3rd party processors, as these services have a direct or indirect nexus with the manufacture of motor vehicles chassis.
6. Based on the above analysis, the appeal is allowed, granting the appellants consequential benefits, if any, in accordance with the observations made regarding the interpretation and application of the Cenvat Credit Rules and relevant legal provisions.

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