2019 (4) TMI 1406 - AT - Central Excise

Valuation - inclusion of processing charges paid to WBIDC for capital subsidy and power incentive in assessable value - penalty - HELD THAT - It is not in dispute that without power incentive and capital subsidy, the project would not have been viable. Hence, the subsidy has got direct nexus with the manufacturing activity - In order to procure the capital goods, subsidy was allowed by State Government. Power incentives/subsidy has direct nexus with the manufacturing activities. Penalty - HELD THAT - There is no element of suppression of facts or willful mis-statement etc. with intent to evade payment of service tax - Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Disallowance of cenvat credit on service tax paid for processing fees.
3. Nexus of capital subsidy and power incentives with manufacturing activities.
4. Imposition of penalty.

Analysis:
1. The appellant filed a Miscellaneous Application for condoning a 71-day delay in filing the appeal, which was allowed due to reasons stated in the application.
2. The appellant, engaged in manufacturing M.S. Ingots & Industrial Oxygen & Nitrogen Gas, availed cenvat credit on service tax paid to West Bengal Industrial Development Corporation (WBIDC). The Revenue contended that the service tax was not related to the manufacture of final products. The adjudicating authority disallowed the credit, leading to a demand of duty, interest, and penalty. The appeal was filed against this order.
3. The appellant argued that the capital subsidy and power incentives from WBIDC were crucial for their manufacturing activities, reducing project and manufacturing costs. The subsidy directly related to procurement of capital goods and power supply for manufacturing excisable goods. The Tribunal found that without these incentives, the project would not have been viable, establishing a direct nexus with manufacturing activities.
4. The Tribunal noted no suppression of facts or intent to evade service tax, setting aside the impugned orders and allowing the appeal against the disallowance of cenvat credit on service tax paid for processing fees.