2016 (12) TMI 223 - AT - Central Excise

Denial of CENVAT credit - there are some input services which have been used for trading activity - Held that - it appears that during the personal hearing held before the lower authority i.e. Commissioner, the appellant took the plea that they had taken cenvat credit only in respect of input service(s) which were used in the manufacturing of goods. However, this submission has not been supported by any evidence either before the lower authority i.e. Commissioner or before the Tribunal. Hence when there is no evidence produced to establish nexus between the input service and the manufacturing conducted by the appellant, the cenvat credit based on such invoices/bills/challans issued by the ISD is not admissible - appeal dismissed - credit not allowed - decided against appellant-assessee.

Summary

Issues:
- Dispute over cenvat credit claimed by M/s Roca Bathroom Products Pvt. Ltd.
- Competency of Central Excise Authorities to disallow cenvat credit based on ISD invoices.
- Admissibility of cenvat credit for input services used in manufacturing vs. trading activities.
- Requirement of nexus between input services and final product for claiming cenvat credit.

Analysis:
1. The appellant, M/s Roca Bathroom Products Pvt. Ltd., claimed cenvat credit amounting to ?78,93,729/- based on invoices from their head office as Input Service Distributors (ISD) for various services. The Department contended that these services were also used in connection with trading activities, not just manufacturing.

2. The dispute arose when the appellant failed to provide a breakdown of input services used for manufacturing versus trading activities. Consequently, show cause notices were issued, leading to the Commissioner confirming the demand for cenvat credit along with interest in Orders-in-Original.

3. The appellant challenged the Commissioner's orders before the Tribunal, arguing that the Central Excise Authorities at the factory were not authorized to disallow cenvat credit based on ISD invoices. They emphasized that unless the credit distribution by the ISD was irregular, it should not be denied.

4. The Tribunal analyzed the provisions of the Cenvat Credit Rules regarding the usage of inputs or input services directly or indirectly in relation to manufacturing or clearance of final products. It was established that cenvat credit could only be claimed when there is a clear nexus between the input services and the output goods or final products.

5. The Tribunal upheld the impugned order, stating that the appellant had claimed cenvat credit for input services related to traded or stored goods, which was not permissible. It was clarified that Central Excise Authorities were competent to verify the eligibility of invoices for claiming cenvat credit. As the appellant failed to provide evidence establishing the nexus between input services and manufacturing activities, the claimed cenvat credit was deemed inadmissible.

6. Ultimately, the Tribunal rejected the appeal, deeming it without merit and sustaining the impugned order issued by the Commissioner. The judgment was pronounced on 25.11.2016.