2018 (2) TMI 1660 - AT - Central Excise

CENVAT credit - mobile networking service - security agency service - Held that - It is seen that mobile phone service is a permitted input used in relation to manufacturing activities. The appellant has elaborately demonstrated the nature of mobile networking as a communication system that is essential for monitoring production activities. No flaw can be found in this submission and the availment of credit cannot be denied. In Castrol India Ltd v. Commissioner of Central Excise, Vapi 2013 (9) TMI 709 - CESTAT AHMEDABAD , the Tribunal has held that security agency service cannot be alienated from the production process if used in a factory. No evidence to the contrary has been produced by Revenue. The availment of credit of tax paid on procurement of this service cannot be faulted. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over availment of credit for specific services disallowed by original authority; rejection of tax paid on certain services upheld; penalties under section 11AC of Central Excise Act, 1944 set aside.

Analysis:
The Appellate Tribunal CESTAT Mumbai addressed three appeals by M/s Mahindra CIE against orders-in-appeal. The dispute centered on the availment of credit disallowed by the original authority, including amounts for specific periods. The first appellate authority reversed the disallowance of credit for "annual maintenance contract" and "association membership fee" but upheld the rejection of credit for "mobile networking service" and "security agency service." Additionally, penalties under section 11AC of the Central Excise Act, 1944, were set aside.

During the hearing, the Learned Consultant for the appellant and the Learned Authorised Representative presented arguments. The latter referenced specific findings related to the "Networking Service of Mobile Company" and the "Security and Detective Agency Services." Regarding the mobile networking service, it was established that the service provided by the mobile company to the appellant's employees differed from computer networking covered by the definition of input service eligible for cenvat credit. Lack of evidence on the usage or consumption of the service in relation to manufacturing led to the conclusion that the credit was inadmissible. Similarly, the engagement of security and detective agency services for surveillance was deemed unrelated to the manufacturing process, making the credit inadmissible.

The appellant relied on previous court decisions to support their entitlement to credit for tax paid on mobile network services. The nature of mobile networking as essential for monitoring production activities was emphasized, highlighting mobile phone service as a permitted input for manufacturing activities. The Tribunal found no flaw in this argument and concluded that the credit for mobile network services could not be denied.

In a related judgment, the Tribunal referred to a previous case where it was held that "security agency service" used in a factory cannot be separated from the production process. With no contrary evidence provided by the Revenue, the Tribunal determined that the credit for tax paid on procurement of security agency services was valid. Consequently, the appeals of M/s Mahindra CIE were allowed, and the decisions were pronounced in court.