2023 (11) TMI 146 - AT - Central Excise

Admissibility of Cenvat Credit Rules paid on service tax under reverse charge mechanism - service fees paid to the principals namely Honda Motor Company Ltd., Japan for development of Part Manual and Service Manual - HELD THAT - 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. Orders are placed by referring to the part as codified in this manual and is essential uniform understanding of the part by all in the chain. Without this manual all the operations of the appellant will be haphazard. So, 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 - there are no merits in the submissions or the observations made by the lower authority contrary to this. It is quite evident that 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. Thus, denial of CENVAT credit in respect of services of development of Part Catalogue and Maintenance, Repair and Construction Manual cannot be upheld. As no demand survives the demand for interest and penalties imposed also are set aside. There are no merits in the impugned order and the same is accordingly set aside - appeal allowed.

Summary

Issues Involved:
1. Admissibility of CENVAT credit on service tax paid for "Electronic Parts Catalogue" and "Service Manual".
2. Whether the impugned services qualify as input services under Rule 2(l) of the CENVAT Credit Rules.
3. Applicability of extended period of limitation.

Summary:

1. Admissibility of CENVAT Credit on Service Tax Paid for "Electronic Parts Catalogue" and "Service Manual":
The Appellant argued that the services received for the preparation of the "Electronic Parts Catalogue" and "Service Manual" qualify as input services. These services codify various parts for effective identification, procurement, retrieval, and dispatch, making business operations more efficient. The Tribunal agreed, noting that the part catalogue is essential for inventory management, procurement, and supply system of parts, and the service manual standardizes repair and maintenance activities, promoting the sale of genuine parts.

2. Whether the Impugned Services Qualify as Input Services Under Rule 2(l) of the CENVAT Credit Rules:
The Tribunal found that the impugned services are integral to the Appellant's business operations. The part catalogue and service manual are essential for managing inventory and ensuring standardized repair and maintenance, respectively. These services are directly related to the Appellant's manufacturing activities and sales promotion, thus qualifying as input services. The Tribunal referenced the Coca Cola India Pvt. Ltd. case, where it was held that service tax paid on services forming part of the final product's assessable value must be allowed as input credit.

3. Applicability of Extended Period of Limitation:
The Appellant contended that the extended period of limitation should not be invoked as there was no suppression of facts, and the unit was regularly audited. The Tribunal did not find any evidence of suppression or intent to evade duty, thus rejecting the applicability of the extended period of limitation.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief. It held that the denial of CENVAT credit for the development of the "Part Catalogue" and "Maintenance, Repair and Construction Manual" could not be upheld. Consequently, the demand for interest and penalties was also set aside. The appeal was allowed, with the operative part of the order pronounced in open court.