2024 (7) TMI 470 - AT - Central Excise

Interpretation of statute - input service - nexus of service with the manufacturing activity either directly or indirectly and as specified under the definition of Rule 2(l) of the CENVAT Credit Rules, 2004 - HELD THAT - The definition covered activities relating to business but we do not see anywhere as to the revenue agitating that the other services which were disputed, were never used in the business of the appellant. Further, para 20 of the impugned order makes it very clear that the denial is made on the ground that the setting up of business was not an activity related to the business. It is difficult to understand the logic behind this conclusion. It is not their case that the appellant having undertaken the activity of setting up of the factory did not carry any manufacturing activity in that premises and therefore, the denial of input credit was called for. It is the settled position of law that the ambit of the definition prior to 01.04.2011 was large enough to cover all such activities that are disputed here, in this case, as long as there is no denial by the revenue that after setting up of the factory, no business was carried on from that premises. The denial of input credit is contrary to law and therefore, the impugned order cannot sustain - Appeal allowed.

Summary

Issues:
Interpretation of 'input service' from 2008-09 to 2010-11.

Analysis:
The dispute in this case revolves around the interpretation of 'input service' as applicable to the period from 2008-09 to 2010-11. The appellant availed CENVAT credit on duty paid on inputs and service tax on input services related to commercial and industrial construction, fabrication, erection, manpower supply, and Goods Transport Agency during the setting up of a unit. The Revenue contended that the credit availed did not have a nexus with manufacturing activities as per Rule 2(l) of the CENVAT Credit Rules, 2004. The Show Cause Notice proposed disallowing the credit, leading to the appeal.

The original authority allowed credit on some services but disallowed it on services like fabrication, erection, and manpower supply for construction. The dispute centered around the determination of the exact place of removal in this case. The first appellate authority concluded that services received during the setting up phase, where no manufacturing or clearance of goods occurred, did not qualify as input services under the definition during the material period.

The taxpayer argued that services like inward transportation for establishing the cement grinding plant were indeed input services eligible for credit. They contended that the definition of input service had a broader scope, covering services not directly related to manufacturing but provided at a different location. The appellant also justified consultancy services as essential for technical inspection and certification during plant setup.

The appellant further argued that the nexus theory between services and manufacturing activity was not a prerequisite for availing input service tax credit. They emphasized that even services used after setting up the plant qualified for credit. The appellant cited relevant case laws to support their arguments.

After hearing both sides, the tribunal focused on the key issue of whether the Revenue was justified in denying input service credit due to a perceived lack of nexus with manufacturing activities. The tribunal analyzed the definition of 'input service' applicable during the dispute period and found the denial of input credit contrary to law. They set aside the impugned order and allowed the appeal, granting consequential benefits as per law.

In conclusion, the tribunal's decision centered on the correct interpretation of 'input service' and the application of the law to the specific facts of the case. The judgment clarified the scope of input services and upheld the appellant's right to avail credit on services related to setting up the manufacturing unit, even if not directly linked to manufacturing activities.