2024 (1) TMI 331 - AT - Central Excise

CENVAT Credit - input services - Manpower Supply Services - denial on the ground that the Manpower supply was in relation to Depot management, Sales and other activities which are not directly connected to manufacturing activity - Time limitation - HELD THAT - The Adjudicating Authority has taken a very narrow view holding that the Manpower Service should be relatable only to the manufacturing activity and not to any other activities outside the factory premises - this view is found to be grossly erroneous. Had he taken care to go through the definition of input service in a harmonious way, he would have found that there are many services which are provided by the service provider outside the manufacturing factory premises, which are all eligible for Cenvat Credit. Therefore, the OIO set aside on merits and the Appeal allowed. Time Limitation - HELD THAT - The Department has been accepting their ER 1 Returns wherein the Cenvat Credit taken by them would have been shown on a regular basis. After the audit had taken an objection on this issue in 2006, the Appellant has filed their reply after which no further action was taken up by the Department. As a matter of fact, since Audit has raised this issue in 2006, the Department should not have waited for more than four years to issue the Show Cause Notice. Therefore, the Show Cause Notice issued is hopelessly time barred. The Appeal stands allowed both on merit as well as on account of time bar.

Summary

Issues involved:
The issues involved in the judgment are the denial of Cenvat Credit for services availed from a Manpower Services provider and the time bar for issuing the Show Cause Notice.

Denial of Cenvat Credit:
The Appellant, a manufacturer of razor and razor blades, availed services of Manpower Services for activities not directly related to manufacturing. The Department sought to deny Cenvat Credit of Rs. 79,10,922 based on the nature of services provided. The Adjudicating Authority confirmed the demand, which led to the appeal before the Tribunal.

The Counsel for the Appellant argued that the services provided by the Manpower Services provider fell under the definition of Input Services as per Rule 2(l) of CCR, 2004. The Counsel highlighted that various activities mentioned in the definition, such as sales promotion and market research, are applicable to all services provided by the manpower service provider. The Tribunal found the Adjudicating Authority's narrow interpretation of the definition to be erroneous and allowed the appeal on merits.

Time Bar for Show Cause Notice:
The Show Cause Notice was issued on 24/12/2010 for the period December 2005 to February 2008, invoking the extended period provisions. The Counsel for the Appellant argued that there was no suppression on their part as they regularly filed Monthly Returns and were subject to audits during the period in question. The Department did not take any action on the audit objection raised in 2006 until the Show Cause Notice was issued. The Tribunal held that the Show Cause Notice was time-barred, as the Department should not have waited more than four years to issue it after the audit objection. Therefore, the Appeal was allowed on the grounds of both merit and time bar, making the Appellant eligible for any consequential relief as per law.