2016 (12) TMI 584 - AT - Central Excise

Disallowance of Cenvat credit - manufacture of sugar and molasses - security service - expenses incurred for safe keeping the sugar Cane purchased (input), situated outside the factory of production (Cane Collection Centre) - Held that - I find that the security services utilizing at the Cane Collection Centre, located outside the factory of production squarely falls in the inclusive part of the definition of input service, which specifically provides for services used in relation to procurement of inputs under Rule 2 (i) of Cenvat credit Rules, 2004. I find that the ruling relied upon by the Revenue is distinguishable and not in the facts of the present case In the case of the Deepak Fertilizers & Petrochemicals Corpn. Ltd. 2013 (1) TMI 165 - CESTAT, MUMBAI the input service was utilized in installation of the storage tank outside the factory. Whereas in the present case input services have been utilizing for procurement of inputs, that is sugar Cane, required for manufacture of excisable goods, being sugar and molasses. Accordingly the appeal is allowed - decided in favor of appellant-assessee.

Summary

Issues: Disallowance of Cenvat credit on security service and expenses for safekeeping sugar cane purchased outside the factory premises.

Analysis:
1. The appellant, a manufacturer of sugar and molasses, appealed against the disallowance of Cenvat credit on security service and expenses for safekeeping sugar cane purchased outside the factory premises.
2. The dispute arose when the appellant claimed input credit of service tax on security services provided at Cane Collection Centers located outside the factory premises. A show cause notice was issued proposing to disallow the credit along with interest and penalty.
3. The appellant argued that the security service is related to their business activity and falls under the definition of input service, citing a Supreme Court ruling. However, the adjudicating authority confirmed the demand and imposed penalties.
4. The Commissioner (Appeals) partially allowed the appeal, stating that security services at the cane collection center were not eligible for Cenvat credit as they did not have a direct or indirect nexus with the manufacturing activity.
5. The appellant challenged this decision before the Tribunal, relying on a previous tribunal decision that held security services at the Cane Collection Center as eligible input services related to business activities.
6. The Revenue argued that the services used in the installation of storage tanks outside the factory were not allowable as input services, citing a tribunal judgment.
7. After considering the arguments, the Tribunal found that security services at the Cane Collection Center fell within the inclusive part of the definition of input service under the Cenvat Credit Rules, 2004, related to the procurement of inputs.
8. The Tribunal distinguished the previous case cited by the Revenue, as in the present case, the input services were used for the procurement of sugar cane required for manufacturing excisable goods.
9. Consequently, the appeal was allowed, the impugned order was set aside, and the appellant was entitled to the consequential benefit in accordance with the law.