2017 (11) TMI 876 - AT - Central Excise

Refund of unutilised CENVAT credit - input services - Documentation fees - freight charges - rent - travelling expenses - denial on the ground of nexus - Held that - the appellants are manufacturing the PP bags in the shed at Tumkur which has been taken on monthly rent for eventual export - the Tumkur factory was registered under Central Excise but was doing only stitching, printing and packing for appellant s unit at Doddaballapur. Therefore the activity undertaken by the appellant at Tumkur is in relation to the final product manufactured/exported and thus eligible to CENVAT credit. Refund claim - rent - Held that - reliance also placed in the case of Commissioner of C. Ex., Delhi-III Versus Sunbeam Hi Tech Medicare 2015 (2) TMI 1166 - CESTAT NEW DELHI , where it was held that the rent paid for the sister unit also fall in the definition of input service as the same is being used for the purpose of manufacturing the products which is eventually exported - denying the refund on account of rent paid for the sister concern is wrong and not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund disallowance on documentation fee and rent for input services in Central Excise manufacturing activities.

Analysis:
The appeal challenged the Commissioner(Appeals) order disallowing a refund of specific amounts while allowing others in a Central Excise manufacturing context. The appellants sought refund for unutilized credit on input services related to finished goods under CENVAT Credit Rules and a specific notification. The Assistant Commissioner sanctioned a portion of the refund but rejected a claim for four input services, including documentation fees, freight charges, rent, and traveling expenses, citing lack of nexus with exported goods. The Commissioner(Appeals) allowed the refund for documentation fees but denied it for rent, stating it did not meet the input service definition. The appellant contested this decision, emphasizing the interconnectedness of manufacturing activities and the role of sister concerns in supporting the main activity.

The appellant's argument centered on the legal sustainability of the order, asserting that the manufacturing processes at different locations were integral to the final product. They contended that rent payments for a sister concern were part of the manufacturing activity and should qualify as input services under the law. The appellant referenced several relevant decisions to support their position. Conversely, the learned AR supported the findings of the impugned order, maintaining the denial of the refund for rent based on the existing assessment.

Upon review, the Judicial Member found merit in the appellant's submissions. They determined that the activities at the Tumkur factory, though limited to specific tasks, were crucial to the manufacturing and export process, making them eligible for CENVAT credit. The Judicial Member also relied on precedent cases cited by the appellant to establish that rent payments for the sister unit fell within the input service definition, aligning with the purpose of manufacturing goods for export. Consequently, the Judicial Member set aside the Commissioner(Appeals) decision to deny the rent refund, allowing the appeal in favor of the appellant.

In conclusion, the appellate tribunal overturned the Commissioner(Appeals) order regarding the refund disallowance on rent for input services in a Central Excise manufacturing scenario. The decision highlighted the interconnected nature of manufacturing activities across different locations and affirmed the eligibility of rent payments for a sister concern as valid input services under the CENVAT Credit Rules.