2023 (8) TMI 788 - AT - Central Excise

CENVAT Credit - input services - service fees paid to principals namely Honda Motor Company Ltd., Japan for development of Part Manual and Service Manual - reverse charge mechanism. HELD THAT - Part Catalogue is nothing but a part of the inventory management system for the appellant in respect of the parts procured and supplied by them through their dealers to the ultimate customers. It is a well established fact that every automobile - four wheeler vehicle comprises of hundreds of small parts which need to be identified for the effective and comprehensive repair and maintenance of the vehicle. Part catalogue is the document created for codification of all the parts for proper understanding and management of inventory. This codification is used not only for inventory management but also for placing the orders on the suppliers and receiving the orders from the dealers/customers. Even the storage bins are to be identified as per these part catalogue - this part catalogue is essentially the part inventory management, procurement and supply system of the parts to the dealers and through them to the ultimate customers. The maintenance repairs and construction manual, is like an idiot guide to the dealers for undertaking the work of repairs and maintenance of the vehicles ensuring compliance with the high safety standards set by Honda Motors, by use of the genuine parts supplied by the appellant. It provides how to further maintain and repair the vehicles brought to the dealers by their customers. Such standardization is absolutely essential to ensure that standard set by the manufacturer are achieved irrespective of the person or the dealer servicing the vehicle. This standardization will promote the sale of genuine parts which are supplied or sold by the appellants. Thus this manual is essential to the activities undertaken by the appellant through supply of genuine spare parts. The denial of CENVAT credit in respect of services of development of Part Catalogue and Maintenance, Repair and Construction Manual cannot be upheld. Since it is held that the credit is admissible to the appellant we are not recording any separate finding on the issue of limitation, interest and penalties imposed. As no demand survives the demand for interest and penalties imposed also are set aside. There are no merits in the impugned order - appeal allowed.

Summary

Issues Involved:
1. Admissibility of CENVAT Credit on services used for preparation of Part Catalogue and Service Manual.
2. Invocation of extended period of limitation.
3. Imposition of interest and penalties.

Summary:

Admissibility of CENVAT Credit:
The core issue was whether the fees paid for the development of Part Catalogue and Service Manual qualify as "input services" under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant argued that these services are essential for the efficient management and commercial expediency of their business operations, thereby qualifying as input services. The Tribunal found that the Part Catalogue is integral to the inventory management, procurement, and supply system, while the Service Manual standardizes repair and maintenance procedures, promoting the sale of genuine parts supplied by the appellant. Therefore, the Tribunal held that the services received for the development of these manuals qualify as input services, allowing the appellant to avail CENVAT Credit.

Invocation of Extended Period of Limitation:
The appellant contended that the extended period of limitation could not be invoked as there was no suppression of facts, and the unit was regularly audited. The Tribunal did not provide a separate finding on this issue, as the primary demand itself was not upheld.

Imposition of Interest and Penalties:
Given that the demand for CENVAT Credit was not sustained, the Tribunal set aside the imposition of interest and penalties. The Tribunal referenced the Hon'ble Bombay High Court's decision in Coca Cola India Pvt. Ltd., which supports the inclusion of service tax paid on input services as part of the assessable value of the final product.

Conclusion:
The Tribunal allowed the appeal, granting consequential relief and setting aside the impugned order, including the demands for interest and penalties.