2018 (2) TMI 1485 - AT - Central Excise

CENVAT credit - input services - catering service - quality audit - garden maintenance - testing of samples - Held that - The credit in dispute on testing services is a mere 143 and that on catering services is a meagre 384. Quality audit - Held that - Quality audit is not intended to protect the intellectual property of the concentrate used in manufacture of beverages but has a direct bearing on the product served to the customer; it is therefore an inextricable part of the manufacturing process - credit allowed. Garden maintenance - Held that - The decision of the Hon ble High Court of Karnataka in Commissioner of Central Excise Bangalore - II v. Millipore India Pvt Ltd 2011 (4) TMI 1122 - KARNATAKA HIGH COURT would sustain that claim to credit of tax paid on use of garden maintenance service - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of CENVAT credit on various services

Analysis:
1. Background: M/s Coca-Cola India Pvt Ltd challenged an order confirming a demand of &8377; 2,62,429, with interest, and a penalty under section 11AC of the Central Excise Act, 1944. The penalty was reduced to &8377; 2000 while the recovery of inadmissible CENVAT credit along with interest was upheld.

2. Disallowed Services: The disallowance of CENVAT credit and subsequent recovery related to catering services, quality audit, garden maintenance, and testing of samples. The first appellate authority found these services not directly linked to the manufacturing activity of the appellant.

3. Arguments: During the hearing, it was highlighted that the credit amounts for testing services and catering services were minimal (&8377; 143 and &8377; 384, respectively), while substantial amounts were attributed to quality audit and garden maintenance services (&8377; 1,56,801 and &8377; 1,05,101, respectively) availed between March 2012 and August 2012.

4. Legal Analysis: The Tribunal examined the nature of quality audit, emphasizing its direct impact on the final product rather than protecting intellectual property. It was deemed an integral part of the manufacturing process, citing the decision in Castrol India Limited v. Commissioner of Central Excise [2013 291 ELT 469]. Similarly, the Tribunal referred to the High Court decision in Commissioner of Central Excise, Bangalore - II v. Millipore India Pvt Ltd [2012 26 STR 514 (Kar)] to support the claim for credit on garden maintenance services. The services provided by catering facilities were also deemed essential to the manufacturing process.

5. Conclusion: The Tribunal ruled that the disallowance of CENVAT credit by lower authorities was not justified, and the appeal by M/s Coca-Cola India Pvt Ltd was allowed.

Final Decision: The appeal was allowed, and the disallowance of CENVAT credit on the mentioned services was overturned by the Tribunal.