2024 (9) TMI 454 - AT - Central Excise

CENVAT Credit - Business Support Service - denial on the ground that the BSS services have no nexus with the output service/manufacturing activities of the appellant - Revenue took a stand after amendment of Rule 2(l) of Cenvat Credit Rules, 2004 with effect from 01/04/2011, wherein Business activities have been excluded from the definition of input service - HELD THAT - Based on the Show Cause Notice issued by the Revenue to Tata Motors they have classified the entire group of services put together as Business Support Service and have raised their Bills under the category of BSS. There is nothing to indicate that Revenue had any objection towards such classification by Tata Motors and officers were accepting their Returns towards such services. Therefore, as a whole Tata Motors have provided the service of BSS to the Appellant. After this, it is to be concluded as to whether such service has any nexus with the manufacturing/output service of the appellant. This issue has also been considered by this Bench in M/S. HINDALCO INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II 2023 (6) TMI 457 - CESTAT KOLKATA where it was held that ' the services rendered by the ABMCPL is rightly classifiable under the category of Business Support Service and ABMCPL has rightly paid Service Tax under the said category. The service tax paid by ABMCPL has been rightly distributed to their group companies, including Appellant. 15. The Appellant has raised the issue of limitation. They stated that the period involved in the Notice is from March 2007 to March 2012 whereas the Show cause Notice was issued on 22.02.2012 and 29.06.2012.' Thus, the issue is no more res integra - the impugned order is set aside - appeal allowed.

Summary

Issues:
1. Entitlement to Cenvat Credit on Business Support Services (BSS) provided by Tata Motors to the appellant.
2. Nexus between the BSS services and the manufacturing/output activities of the appellant.
3. Validity of denial of Cenvat Credit by the Revenue based on the exclusion clause of Rule 2(l) of Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Entitlement to Cenvat Credit on BSS:
The case involved a dispute regarding the entitlement of the appellant, M/s. TML Drivelines Ltd., to Cenvat Credit on Business Support Services (BSS) provided by Tata Motors. The Department contended that the BSS provided by Tata Motors fell under the category of 'Business Support Service' and issued a Show Cause Notice demanding Service Tax for the period in question. The appellant argued that the BSS services were not excluded under the Cenvat Credit Rules and relied on previous decisions where similar services were held eligible for Cenvat Credit. The Tribunal noted that Tata Motors had classified the services as BSS and issued invoices charging Service Tax, indicating that the services were indeed provided. The appellant's counsel argued that the services were used towards manufacturing activities, making them eligible for Cenvat Credit.

Issue 2: Nexus with Manufacturing/Output Activities:
The Tribunal examined whether the BSS provided by Tata Motors had a nexus with the manufacturing/output activities of the appellant. Referring to previous case laws, including Hindalco Industries Ltd. cases, the Tribunal found that the services provided by ABMCPL (a group company) were rightly classified as BSS and were closely related to the business activities of the appellant. The Tribunal held that the BSS services were used to benefit from specialization in manufacturing activities and achieve economies of scale, establishing a clear nexus between the services and the appellant's business.

Issue 3: Validity of Denial of Cenvat Credit by Revenue:
The Revenue contended that the appellant was not entitled to Cenvat Credit based on the exclusion clause of Rule 2(l) of the Cenvat Credit Rules, 2004, which excluded 'Business activities' from the definition of input service. However, the Tribunal found that the BSS services provided by Tata Motors were rightly classified as BSS, and the Service Tax paid was distributed to group companies, including the appellant. The Tribunal held that since the Department did not challenge the assessment made by Tata Motors and accepted the returns, they could not question the Cenvat Credit passed on to the appellant. Relying on previous decisions, the Tribunal set aside the demands confirmed by the Revenue, concluding that the denial of Cenvat Credit was not sustainable.

In conclusion, the Tribunal allowed the appeals, stating that the issue was no longer res integra based on previous decisions, and set aside the impugned orders, providing consequential relief as per law.