2024 (7) TMI 683 - AT - Central Excise

Disallowance of Input Tax Credit - appellant has not established that these services have been used directly or indirectly or in relation to the manufacturing of final products - HELD THAT - When there is no dispute raised by the jurisdictional authorities against the input service distribution centres for availing the credit and distributing the same, the department cannot deny the credit at the end of the manufacturing unit on very vague allegations. The show cause notice does not make any specific allegation with respect to particular input service. In the appellant's own case for a different period the very same issue of disallowing credit at the manufacturing unit distributed by the Cost Centres and has been considered by the Tribunal in BHARAT HEAVY ELECTRICALS LTD VERSUS COMMISSIONER OF CENTRAL TAX (APPEALS-II) CGST CENTRAL EXCISE, CHENNAI 2018 (12) TMI 438 - CESTAT CHENNAI - Almost all the services listed in the above table was held to be eligible for credit by the Tribunal, by the Commissioner (Appeals) and by the adjudicating authority as pointed out by the Ld. Counsel. The appellant has given the details of the case law in respect of each input service in the last column of the table. Outdoor catering services - HELD THAT - It is seen that the services have been availed prior to 01.04.2011. So, also in the case of works contract services/ civil work these are availed for repair and maintenance as well as modernization and not of setting up of a factory. There is no allegation by the department that such civil works were availed for setting up of a factory. All the services are eligible input services. The credit cannot be denied on such vague allegations at the end of the manufacturing unit without disputing the credit availed by the input service distributor. The impugned order cannot sustain and is set aside - appeal allowed.

Summary

Issues Involved:
1. Eligibility of input service credit availed by the appellant.
2. Nexus between the input services and the manufacturing activity.
3. Validity of the show cause notice issued by the department.
4. Previous judgments in similar cases of the appellant.

Issue-wise Detailed Analysis:

1. Eligibility of Input Service Credit:
The appellant, engaged in manufacturing Electrostatic Precipitators and Industrial Fans, availed input service credit based on Input Distributor Service Invoices from their Input Service Distributor (ISD) called "Cost Centres." The department contended that the services availed through ISD invoices lacked a nexus with the manufacturing activity, making them ineligible for credit. The services under dispute included Maintenance or Repair Service, Advertising Agency Service, Telecommunication Service, among others.

2. Nexus Between Input Services and Manufacturing Activity:
The appellant argued that the input services were used directly or indirectly in relation to the manufacture and clearance of final products, thus qualifying as input services under Rule 2(l) of Cenvat Credit Rules 2004. The Cost Centres, registered as ISDs, distributed the service tax credit to various manufacturing units and erection divisions based on turnover. The appellant maintained that the services procured and distributed by ISDs were essential for their manufacturing activities.

3. Validity of the Show Cause Notice:
The show cause notice alleged that the appellant failed to establish the use of input services in manufacturing activities. However, the appellant countered that the invoices for each service were available at the ISD level, and the credit distribution complied with Rule 7 of Cenvat Credit Rules 2004. The department's vague allegations lacked specific findings to deny the credit. The Cost Centres, subject to verification and audit by jurisdictional officers, had not faced any adverse findings regarding the credit availed.

4. Previous Judgments in Similar Cases:
The appellant cited previous judgments where similar show cause notices were issued and subsequently set aside. In the appellant's own case for earlier periods, the Tribunal and Commissioner (Appeals) had ruled in favor of the appellant, recognizing the eligibility of the disputed input services for credit. The Tribunal's Final Order No.42996/2018 dated 05.12.2018 and other orders highlighted that the department could not deny credit distributed by ISDs without disputing the credit availed by the ISDs themselves.

Conclusion:
The Tribunal found that the department's allegations were vague and unsupported by specific findings. The Cost Centres, registered as ISDs, had distributed the credit in compliance with the law, and no disputes were raised against them. The services in question were deemed eligible input services, and the credit could not be denied based on the department's vague allegations. Consequently, the impugned order was set aside, and the appeal was allowed with consequential reliefs.