2019 (3) TMI 1365 - AT - Central Excise

CENVAT Credit - input services - capital goods - Repair and Maintenance Charges of air conditioners installed in the factory premises - Held that - The learned counsel adverted to the definition of input services and submitted that the inclusive part of the definition specifically mentions the service of repair and maintenance. Indeed, the said services do not restrict itself to repair and maintenance of capital goods alone. For this reason, the disallowance of credit alleging that the air conditioners installed in office are not capital goods is incorrect - credit availed on such input services is eligible for credit. Service tax paid on common facility charges - denial on account of nexus - Held that - The credit availed on Renting of premises has been allowed by Commissioner (Appeals). When the premises is taken on rent, the appellants have to pay maintenance charges, for the common facility also - the disallowance of credit on such maintenance charges paid for common facility is incorrect - credit allowed. Charges paid by the appellants for taking Xerox copies - Held that - The charges paid by the appellants for taking Xerox copies is explained to have incurred by them for taking copies of documents in the Head Office of the appellants. Such necessity for taking photocopy of documents is related to the activity of manufacture and appellants are eligible for credit - credit allowed. Appellants have availed services of M/s. Esvin Advanced Technologies Ltd., for improving the quality of molasses by desalting - Held that - The appellants have availed services of M/s. Esvin Advanced Technologies Ltd., for improving the quality of molasses by desalting. These services are intended to improve the quality of their finished product - the credit on such services is eligible - credit allowed. Membership Fees has been paid by the appellants to take membership specifically in M/s. Indian Sugar Mills Association and M/s. South Indian Sugar Mills Association - Held that - Such association helps its members to understand the trends in the market and allows a common platform to raise their grievances before the concerned authorities. The credit availed on such services is eligible - credit allowed. AMC for maintenance of attendance machines - Held that - The AMC for maintenance of attendance machines is indeed directly related to the manufacturing activity. Such machines are used to monitor attendance of employees and also to monitor their presence within the factory. The credit availed on such charges is eligible - credit allowed. CENVAT Credit - capital goods - Roofing sheets, GI Pipes, Welding Electrodes and RM White Metal etc. - Held that - The Larger Bench of the Tribunal in the case of M/s. Modi Rubber Ltd., 2000 (5) TMI 64 - CEGAT, NEW DELHI has held that when the goods fall either in capital goods or inputs , the credit ought to have been allowed - In the present case, the department cannot disagree that these items fall within the definition of inputs . After 01.04.2011, the definition of inputs is so wide to include almost all goods that are brought into the factory - credit allowed. The disallowance of credit on various input services and items which are availed under the category of capital goods is unjustified - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Disallowance of credit on input services.
2. Disallowance of credit on capital goods.

Issue-wise Analysis:

1. Disallowance of Credit on Input Services:

Repair and Maintenance of Air Conditioners:
The service tax paid on AMC charges for air conditioners installed in the office premises was disallowed on the grounds that air conditioners used in the office do not qualify as "capital goods." However, the definition of 'input services' includes repair and maintenance services, which are not restricted to capital goods alone. Therefore, the credit availed on such 'input services' is eligible.

Common Facility Charges:
The service tax paid on common facility charges was disallowed, alleging no nexus with manufacturing activity. The credit availed on renting of premises was allowed by the Commissioner (Appeals). Since maintenance charges for common facilities are part of the rental agreement, the disallowance of credit on such charges is incorrect and is eligible for credit.

Charges for Xerox Services:
The charges paid for Xerox services were disallowed, stating they were used in the Head Office. However, the necessity for taking photocopies of documents is related to the manufacturing activity, making the appellants eligible for credit.

Services from M/s. Esvin Advanced Technologies Ltd.:
The appellants availed services to improve the quality of molasses by desalting. These services directly relate to the manufacture of the final product, making the credit on such services eligible.

Membership Fees:
The appellants paid membership fees to Indian Sugar Mills Association and South Indian Sugar Mills Association. These associations help members understand market trends and provide a platform for raising grievances. Thus, the credit availed on such services is eligible.

AMC for Attendance Machines:
The credit availed on AMC charges for maintaining attendance machines was disallowed. These machines monitor employee attendance and presence within the factory, directly relating to manufacturing activity, making the credit eligible.

Fire Insurance Policy for Bagasse:
The credit availed on the fire insurance policy for Bagasse storage was denied, stating Bagasse is a waste product. However, Bagasse is inflammable, and its storage is part of the manufacturing activity. Therefore, the credit on such services is eligible.

2. Disallowance of Credit on Capital Goods:

Roofing Sheets, GI Pipes, Welding Electrodes, and RM White Metal:
The department denied credit on these items, alleging they did not fall within the definition of "capital goods." However, the Tribunal's Larger Bench in M/s. Modi Rubber Ltd. held that credit should be allowed if items qualify as 'inputs.' The definition of 'inputs' post-01.04.2011 is broad enough to include almost all goods brought into the factory. The decision in M/s. Kisan Sahakari Chini Mills Ltd. supports this view, holding that credit on items like Asbestos Sheets and Welding Electrodes is eligible under 'inputs' even if availed under "capital goods."

Conclusion:
The disallowance of credit on various input services and items availed under the category of "capital goods" is unjustified. The impugned order is set aside, and the appeal is allowed with consequential reliefs, if any.

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