2024 (12) TMI 5 - AT - Central Excise

CENVAT Credit - input services - Air Travel Agent service - Architect service - Business Support Service - Clearing Forwarding service - Club Membership service - Telephone service - GTA service - Housekeeping service - Design Development service - Chartered Accountant Services - Sponsorship services - Outdoor Catering services - denial of credit on the ground that the disputed services are not in conformity with the definition of input service as per Rule 2(l) of the CENVAT Credit Rules, 2004 - period of dispute involved in the present case is from January, 2005 to January, 2014 - HELD THAT - The case of the appellants is covered under both the un-amended as well amended definition of input service . Such definition clause, effective upto 31.03.2011, has specifically provided the phrase activities relating to business , for consideration of certain taxable services as input service , for the purpose of availment of CENVAT Credit of Service Tax paid thereon. Since the appellants are a corporate entity and maintained adequate records to demonstrate that the expenses incurred were in context with the services used by them for their business activities, the disputed services received prior to 01.04.2011 should be considered as input service for the purpose of taking of CENVAT Credit of Service Tax paid thereon. The definition of input service was substituted by Notification No. 03/2011-C.E. (N.T.) dated 01.03.2011 w.e.f. 01.04.2011. The effect of the substituted definition is that the phrase means was enumerated in the said definition clause, which covers any services used directly or indirectly, in or in relation to manufacture of the final products and clearance of the finished products upto the place of removal for consideration as input service . Since such definition clause is very wide and cover various services for consideration as input service, narrow interpretation cannot be placed to deny the benefit of CENVAT Credit availed by the appellants on the disputed services - the CENVAT Credit availed by them on the disputed services are in fact, input services and denial of the benefit of such credit in terms of Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944, shall not stand the scrutiny of law. Considering the submissions of the appellant that they are not contesting the credit of Service Tax paid by them on cable operator service and rent-a-cab service, we hold that the appellants are liable to reverse the CENVAT Credit amounting to Rs.68,709/- availed on such services. Learned Advocate fairly concedes that the said amount of Rs.68,709/- has already been reversed by the appellants. Since such aspect of reversal is required to be examined at the original stage, the original authority is directed to examine such reversal of CENVAT Credit. The impugned order to the extent it has denied the CENVAT Credit benefit amounting to Rs. 9,49,18,339/- is set aside and appeal to such extent is allowed in favour of the appellants - the original authority should examine the records to ascertain whether, the CENVAT Credit amounting to Rs.68,709/- has already been reversed by the appellant and if such amount had already been reversed, no proceedings shall be initiated by the Department for recovery of the same from the appellants. Appeal disposed off.

Summary

Issues Involved:

1. Validity of CENVAT Credit availed on various input services.
2. Applicability of the definition of 'input service' under CENVAT Credit Rules, 2004.
3. Requirement for reversal of CENVAT Credit on specific services.

Issue-wise Detailed Analysis:

1. Validity of CENVAT Credit availed on various input services:

The appellants, engaged in the manufacture of tyres and tubes, availed CENVAT Credit on various services such as Air Travel Agent, Architect, Business Support Service, Clearing & Forwarding, among others. The Department disputed the credit on the grounds that these services did not conform to the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004. The appellants argued that the definition of input service was broad, covering services used directly or indirectly in the manufacture of final products, and essential for day-to-day manufacturing activities. The Tribunal found that the services used by the appellants were indeed input services as they were used in relation to the manufacture of final products. The Tribunal relied on various judicial pronouncements that supported the appellants' case, thereby allowing the CENVAT Credit on these services.

2. Applicability of the definition of 'input service' under CENVAT Credit Rules, 2004:

The period of dispute was from January 2005 to January 2014, covering both the un-amended and amended definitions of 'input service'. Prior to 01.04.2011, the definition included "activities relating to business", which the Tribunal found applicable, allowing the credit for services received before this date. Post 01.04.2011, the definition was amended to include services used directly or indirectly in manufacturing and clearance of products. The Tribunal held that the definition was wide and inclusive, supporting the appellants' claim that the disputed services qualified as input services. The Tribunal emphasized that the services were not listed in the exclusion clause of the definition, thus confirming the eligibility of the services for CENVAT Credit.

3. Requirement for reversal of CENVAT Credit on specific services:

The appellants conceded to reversing the CENVAT Credit on cable operator service and rent-a-cab service, amounting to Rs.68,709/-. The Tribunal directed the original authority to verify if this amount had already been reversed by the appellants. If confirmed, no further proceedings for recovery would be initiated by the Department. The Tribunal's decision to set aside the denial of CENVAT Credit amounting to Rs. 9,49,18,339/- was contingent on this verification.

Conclusion:

The Tribunal allowed the appeal in favor of the appellants, setting aside the impugned order to the extent it denied the CENVAT Credit benefit. The original authority was directed to verify the reversal of the specific credit amount, ensuring compliance with the Tribunal's findings. The appeal and miscellaneous applications were disposed of accordingly.