2018 (8) TMI 1098 - AT - Service Tax

CENVAT Credit - inputs - AFFF Concentrate - Industrial Paint/Thinner/Primer and Grease - Safety Vests - Angles - Channels - Coils - Barbed Tapes - Rheoduild 821 etc. Industrial paints - Held that - These are used for corrosion control of the steel structures and physical barrier between the steel substrate and corrosive elements such as atmosphere. Therefore, continuously having nexus in providing the output service - credit allowed. Industrial lubricants - Held that - These are used for lubricating marine loading arms which are part of capital goods for handling and loading of petroleum products, therefore, it has also nexus with the output services provided by the appellant - credit allowed. AFFF Concentrate - Held that - The same is used for prevention of accidents by fire or explosion on such premises of Rule 16 of Inflammable Liquids Substance Regulations, 1953. Accordingly, used for provided output service - credit allowed. Rheobuild 821 - Angles and Panels used for structure of storage tanks - Held that - The Angles and Panels used in the storage tanks, which ultimately used for providing storage and warehousing service, are eligible to credit - The Rheobuild 821 is also used for mixing with cement for construction of structures, hence, admissible to credit - credit allowed. Safety Work Vest - Coil - Barbed Tapes - Held that - The appellant-assessee has not pressed denial of credit in respect of Safety Work Vest and Coil and Barbed Tapes involving total credit of ₹ 2,271/- and 10,665/- - credit not allowed. Appeal allowed in part.

Summary

Issues:
- Eligibility of Cenvat credit on various inputs under Rule 2(k) of CCR, 2004
- Nexus of inputs with output services provided by the appellant
- Denial and allowance of credit by the Ld. Commissioner (Appeals)
- Appeal by Revenue and Assessee against the order of the Ld. Commissioner (Appeals)

Analysis:

The judgment involves two appeals filed by the Revenue and the assessee against the order passed by the Commissioner (Appeals-III), Central Excise-Rajkot. The dispute revolves around the eligibility of Cenvat credit amounting to ?14,22,086/- availed by the appellant on various inputs during the period 2008-2009 to 2010-2011. The Revenue contended that certain inputs, including AFFF Concentrate, Industrial Paint/Thinner/Primer, Grease, Safety Vests, Angles, Channels, Coils, Barbed Tapes, and Rheoduild 821, did not fall within the definition of inputs as per Rule 2(k) of CCR, 2004, leading to a demand for recovery of credit, interest, and penalty. The Ld. Commissioner (Appeals) partially allowed the appeals, distinguishing between inputs eligible for credit and those not eligible, prompting both the Revenue and the Assessee to file appeals.

The Ld. Advocate for the assessee argued that certain items like Industrial Paints and Thinners, Grease, AFFF Concentrate, and Rheobuild 821 were integral to the maintenance and functioning of capital goods or for safety compliance. Industrial Paints and Thinners were used for corrosion control of steel structures, Grease for lubricating marine loading arms, AFFF Concentrate for fire prevention, and Rheobuild 821 for construction purposes. The Ld. AR for the Revenue contested the nexus of these inputs with the services provided by the assessee.

After hearing both parties and examining the records, the judgment upheld the Ld. Commissioner (Appeals)'s decision to allow Cenvat credit on Industrial Paints and Thinners, Grease, AFFF Concentrate, and Rheobuild 821, as these inputs were found to have a direct connection with the output services provided by the appellant. However, credit was denied on Safety Work Vest, Coil, and Barbed Tapes. The judgment reasoned that inputs like Angles and Panels, used in storage tanks for warehousing services, and Rheobuild 821 for construction purposes, were eligible for credit. Consequently, the Revenue's appeal was dismissed, and the assessee's appeal was partly allowed, permitting them to avail a portion of the disputed credit amount.

In conclusion, the judgment resolved the issues surrounding the eligibility of Cenvat credit on various inputs by analyzing the nexus between the inputs and the output services provided by the appellant, ultimately providing a balanced decision based on the merits of each input category.