2019 (11) TMI 1330 - AT - Service Tax

Availment and utilization of CENVAT Credit - input services availed in the R D units of the appellants and distributed by the Head Office - Department was of the view that R D activities are not integrally connected to the manufacturing process of finished products - HELD THAT - The said issue is discussed by the Allahabad Tribunal in the case of Jubilant Life Sciences Ltd 2017 (8) TMI 358 - CESTAT ALLAHABAD as upheld by the Hon ble Supreme Court in Appeal allowed - decided in favor of appellant.

Summary

Issues: Eligibility of credit on input services availed in R&D units and distributed by Head Office.

Analysis:

Issue 1: Eligibility of credit on input services in R&D units
The appellants, registered as pharmaceutical manufacturers, availed input service credit on services in their R&D units and distributed the credit. The department contended that R&D activities are not integral to the manufacturing process of finished products. The original authority confirmed the demand to deny the credit. The appellant argued that R&D activities improve products, connecting them to manufacturing. Citing precedents, the appellant sought credit eligibility.

Issue 2: Legal standing of the demand
The department argued that R&D activities are not part of the manufacturing process, justifying the demand. The Tribunal analyzed the Allahabad Tribunal's decision in Jubilant Life Sciences Ltd, upheld by the Supreme Court, which supported credit eligibility for R&D activities. Considering these precedents, the Tribunal held that the demand was not sustainable.

Conclusion:
After hearing both parties, the Tribunal found in favor of the appellants. Relying on legal precedents, the Tribunal concluded that the demand to deny credit on input services availed in R&D units was not justified. Therefore, the impugned orders were set aside, and the appeals were allowed with consequential relief, establishing the eligibility of credit for the appellants in this case.