2017 (3) TMI 928 - AT - Central Excise

Input credit - Drain Trap - Steel Furniture - Outward freight - sales commission - Held that - the credit with respect to drain trap ₹ 5,655/- and the credit of ₹ 28,248/- with respect to steel furniture, admittedly used in the factory premises, particularly in the change room etc. are fully allowable as the appellant cannot manufacture drugs without complying with the good manufacturing practices under the Drugs and Cosmetics Rules. Outward freight - Held that - Goods Transport Agency service for transportation of final products from place of removal is an eligible input service as the expression activities relating to business , covers transportation upto customer s place and the word relating widens scope. Thus, credit is not deniable relying on coverage of outward transportation up to place of removal in inclusive clause. Sales commission - Held that - Commission has been paid to service providers for procuring orders, which is essential for effecting sale and/or clearances of the manufactured goods. Such expenditure forms part of the cost of manufacturing on which admittedly Excise duty is paid - also sales promotion expenses is specifically includable u/r 2(l)(ii) of CCR, 2004. Accordingly, the credit for the same is fully allowable. Appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against denial of input credit on Drain Trap, Steel Furniture, Outward freight, Sales Commission.

Issue 1 - Drain Trap:
The appellant argued that Drain Trap credit is essential for complying with 'good manufacturing practices' under Drugs and Cosmetics Rules. Referring to schedule M of the Rules, the appellant highlighted clauses related to drainage design, material usage, and furniture requirements. The counsel contended that Drain Trap credit of ?5,655 is fully allowable as it is crucial for manufacturing drugs in compliance with the Rules.

Issue 2 - Steel Furniture:
Regarding Steel Furniture credit of ?28,248, the appellant asserted that it is used in the factory premises, especially in areas like change rooms, essential for maintaining 'good manufacturing practices.' The counsel argued that Steel Furniture credit is fully allowable as the appellant cannot manufacture drugs without adhering to the Rules regarding equipment material and design.

Issue 3 - Outward Freight:
The appellant cited a Tribunal ruling in ABB Ltd. Vs. CCE and S.T., Bangalore, stating that outward freight credit of ?18,453 is eligible as 'Goods Transport Agency service' for transportation of final products up to the customer's place is an allowable input service. The appellant argued that outward transportation up to the place of removal falls under the inclusive clause of 'activities relating to business,' making the credit permissible.

Issue 4 - Sales Commission:
Regarding Sales Commission credit of ?10,663, the appellant contended that it is paid to service providers for procuring orders necessary for selling manufactured goods. The counsel highlighted that such expenses are part of the manufacturing cost on which Excise duty is paid. Referring to Rule 2(l)(ii) of CCR, 2004, the appellant argued that Sales Commission credit is fully allowable.

The Tribunal, after considering the arguments and records, held in favor of the appellant. It allowed the Cenvat Credit of ?5,655 for Drain Trap, ?28,248 on Steel Furniture, ?18,453 towards outward freight, ?10,663 for sales commission, and ?654 paid on Courier services. The Tribunal set aside the impugned order, stating that the appellant is entitled to Cenvat credit in accordance with the law, except for the amount of ?7,361 towards Misc. invoices, which were not contested.