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2025 (2) TMI 141 - AT - Central ExciseDenial of Cenvat Credit on various input services - canteen services - hospitality charges - real estate agent commissions - construction services - levy of interest and penalty - Extended period of limitation. Denial of CENVAT Credit - HELD THAT - It is found that definition of input services for the period until 01.04.2011 as provided under Rule 2(l) of the Cenvat Credit Rules 2004 clearly provides that the input services include services used by the manufacturer directly or indirectly in the manufacturing process. The said definition has been widely interpreted by various courts to include all services used in relation to the manufacture of final products. It is found that each of the input services involved in the present case has been held to be input service by various decisions cited above wherein it has been held that the services such as Outdoor Catering/Canteen Services Hospitality Charges Commission Charges by Real Estate Agent Construction Services used by the appellant for design installation of the factory premises are held as input services and the Cenvat Credit cannot be denied with regard to these services. Invocation of extended period of limitation - HELD THAT - It is found that it was an interpretational issue and the appellant had a bona fide belief that they were entitled to Cenvat Credit on the input services which were used for the purpose of carrying the business for manufacturing. Further the department has not established any of the ingredients such as fraud collusion wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or Rules with intent to evade the payment of tax which are required for the purpose of invocation of extended period. Further it is found that only during the audit of the appellant it was discovered the appellant has taken the Cenvat Credit on these impugned services which also shows that there is no intention to evade payment of tax; therefore the entire demand is also barred by time. Interest - penalty - HELD THAT - The question of interest and penalty does not arise when the demand itself is not sustainable. The impugned order set aside - appeal allowed on merits as well as on limitation.
The appeal before the Tribunal revolved around the denial of Cenvat Credit on various input services, including canteen services, hospitality charges, real estate agent commissions, and construction services, by the Commissioner of Central Excise. The appellant, a manufacturer of automotive components, contested the denial of credit amounting to Rs.1,89,67,111/- along with interest and penalty, arguing that these services were integral to their manufacturing process and thus eligible for Cenvat Credit under the Cenvat Credit Rules, 2004.
Issues Presented and Considered The core legal issues considered by the Tribunal included:
Issue-Wise Detailed Analysis 1. Canteen Services Relevant Legal Framework and Precedents: The definition of 'input services' under Rule 2(l) of the Cenvat Credit Rules, 2004, prior to 01.04.2011, included services used directly or indirectly in the manufacturing process. The appellant relied on precedents where canteen services were deemed 'input services' as they contributed to employee productivity and were mandated under the Factories Act, 1948. Court's Interpretation and Reasoning: The Tribunal acknowledged that canteen services, provided to employees to enhance productivity and comply with statutory obligations, were integral to the manufacturing process. The Tribunal cited previous judgments where similar services were deemed eligible for Cenvat Credit. Conclusion: The Tribunal concluded that canteen services qualified as 'input services' and allowed the credit. 2. Hospitality Charges and Real Estate Agent Commissions Relevant Legal Framework and Precedents: The appellant argued that these services were necessary for accommodating key personnel crucial to the manufacturing process. The Tribunal considered precedents where such services were held to be indirectly related to manufacturing activities. Court's Interpretation and Reasoning: The Tribunal found that these services facilitated business operations by ensuring the availability of essential personnel, thus qualifying as 'input services' under the broad definition applicable prior to 01.04.2011. Conclusion: The Tribunal allowed the Cenvat Credit for hospitality charges and real estate agent commissions. 3. Construction Services Relevant Legal Framework and Precedents: The appellant contended that construction services were essential for setting up the manufacturing facility, a prerequisite for production. The Tribunal referred to precedents affirming that services related to setting up a factory were eligible for credit. Court's Interpretation and Reasoning: The Tribunal recognized that construction services were directly linked to the establishment of the manufacturing unit, thus falling within the ambit of 'input services'. Conclusion: The Tribunal upheld the appellant's claim for Cenvat Credit on construction services. 4. Extended Period of Limitation Relevant Legal Framework: The extended period of limitation under the Central Excise Act is applicable only in cases of fraud, collusion, or willful misstatement. Court's Interpretation and Reasoning: The Tribunal noted that the issue was interpretational, with no evidence of fraud or intent to evade tax. The appellant's actions were based on a bona fide belief supported by existing judicial interpretations. Conclusion: The Tribunal held that the extended period of limitation was not applicable, rendering the demand time-barred. 5. Interest and Penalty Relevant Legal Framework: Interest and penalty are consequential to the sustainability of the demand. Court's Interpretation and Reasoning: Since the demand was not sustainable, the Tribunal found no basis for imposing interest and penalty. Conclusion: The Tribunal set aside the interest and penalty. Significant Holdings The Tribunal reaffirmed the broad interpretation of 'input services' under the Cenvat Credit Rules, 2004, emphasizing that services contributing directly or indirectly to the manufacturing process are eligible for credit. It also reinforced the principle that interpretational issues do not warrant the invocation of the extended period of limitation without evidence of malfeasance. Final Determination: The Tribunal allowed the appeal, setting aside the impugned order and confirming the appellant's entitlement to Cenvat Credit on the contested services. The demand was deemed time-barred, and the associated interest and penalty were nullified.
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