2019 (2) TMI 1231 - AT - Central Excise

CENVAT Credit - inputs - maintenance charge paid by the appellant against the lease for establishing and running the factory - Held that - The consideration paid under the lease deed is classified as annual lease rent as well as the annual maintenance charges for the development of the industrial area. It is observed that the said lease annual rental has been acknowledged as the eligible input for availing cenvat credit. Since the maintenance charges, irrespective for industrial area, are very much the part of the same lease document thereby forming the part of annual lease rental, to my opinion, falls into the same category as that of annual lease rental - the adjudicating authority has denied the credit on these maintenance charges by wrongly holding the said amount towards the construction services. Otherwise also it is apparent from the lease deed itself that the said maintenance charges though are for the maintenance of the industrial area beyond the impugned factory but are calculated at the rate of per square meter of the leased factory wherein the final product of the appellant has to be manufacture - Availability of suitable industrial plot is an essential requirement for the manufacture of the goods of the appellant. The maintenance charges are also the eligible inputs - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of cenvat credit on maintenance charges paid by the appellant against the lease for establishing and running the factory.

Analysis:
The appellant availed cenvat credit on inputs, capital goods, and input services, including maintenance charges paid to M/s Madhya Pradesh Audyogik Kendra Vikas Nigam (MPAKVN). The Department proposed recovery of allegedly wrongly availed cenvat credit, leading to a Show Cause Notice (SCN) and subsequent adjudication. The Order-in-Original dropped some demands but confirmed the denial of cenvat credit on maintenance charges. The appellant's appeal against this denial was rejected, prompting the appeal to the Tribunal.

The appellant argued that maintenance charges are integral to the lease rent and should be eligible for cenvat credit. They cited relevant case laws to support their claim. On the other hand, the Department justified the denial by emphasizing that maintenance of roads and parks is not directly related to manufacturing. They referenced a Supreme Court decision to support their stance.

After considering both parties' arguments and examining the lease agreement, the Tribunal found that maintenance charges are part of the annual lease rental and should be eligible for cenvat credit. The Tribunal highlighted that the maintenance charges are essential for the manufacturing process and are indirectly related to the business premises. Citing a previous case with similar facts, the Tribunal concluded that the maintenance charges are indeed eligible inputs. The Tribunal distinguished the Supreme Court decision cited by the Department, as it pertained to goods clearance, not maintenance charges as input services. Consequently, the Tribunal set aside the Order under challenge and allowed the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, holding that maintenance charges are eligible inputs for cenvat credit, contrary to the Department's denial. The decision was based on the integral connection between maintenance charges and the manufacturing process, as established in the lease agreement.