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2025 (3) TMI 1241 - AT - Central ExciseCENVAT Credit - input services or not - services provided by call centres - services used for sales promotion or not. As per P. K. Choudhary Member (Judicial) HELD THAT - From the bare reading of the definition of Input Service as defined under Rule 2(l) of the Cenvat Credit Rules 2004 it is clear that the definition is divided into two parts i.e. (i) Means- Clause and (ii) Inclusive- Clause. Further vide Notification No. 3/2011-CE (NT) an Exclusion-Clause was included in the definition. The services excluded were Construction Service Rent-a-Cab Service General Insurance Service for motor vehicles and Repair Service. The Cenvat credit in relation to these services is allowable either to certain service providers only or on the satisfaction of certain conditions. Furthermore the services that are used primarily for personal use or consumption of any employee like outdoor catering beauty treatment health services cosmetic and plastic surgery membership of a club etc. are also excluded from the definition of the input services. In the present case the Appellant is receiving the service of Call Centres which helps in building brand image of the Appellant which ultimately leads to sale of the final products. Such sale being the goal of undertaking the activity of manufacture and the aforementioned services having been received in relation to sale of the final product manufactured by the Appellant can be said to have been used in relation to manufacture of the final product of the Appellant. Hence they qualify as an input service. The services in relation to Sales Promotion have nexus with the manufacturing activity as sale is the most logical conclusion of manufacturing activity and any effort made to boost the sale is bound to influence the manufacturing. Therefore credit in question is admissible to the Appellant. There is no provision in the format of the ER-1 Returns to mention the amount of Cenvat credit availed under each service category or transaction-wise. Only the total availment of Cenvat credit is required to be reflected in the return. Therefore the finding that the Appellant did not inform the Department of such availment of Cenvat credit on the said services is unsustainable. Suppression of facts or not - demand of interest and penalty - time limitation - HELD THAT - The present case involves interpretational issues involving complex legal provisions to determine the correct admissibility of Cenvat credit. It is a settled position that a case involving interpretation of the statutory provisions cannot be construed to be a case of wilful misstatement or suppression of facts with intent to evade payment of tax or avail Cenvat credit in a fraudulent manner. As per Section 11AC of the Act read with Rule 15 of Cenvat Credit Rules 2004 the penalty can be imposed only in cases of fraud collusion wilful misstatement or suppression of facts or contravention of provisions of Excise Act with an intention to evade payment of duty. There are no ingredient to indicate that the Appellant contravened any provisions of law as they did not avail any credit in contravention of any provisions of law. According to Rule 14 read with Section 11AA interest is chargeable only when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded or Cenvat credit has been erroneously taken and utilized. The situations contemplated under Rule 14 as well as under Section 11AA are absent in this case. Therefore where the demand of Cenvat credit is itself liable to be set aside as a necessary consequence interest is also not payable. The impugned order is set aside and appeal is allowed. As per Sanjay Srivastava Member (Judicial) CENVAT Credit of input services - services provided by call centres - sales promotion services or not - HELD THAT - In respect of input services there is no requirement for admissibility of credit that services should received within the registered manufacturer/premises of the appellant till the time loose nexus can be established between the use of the services directly or indirectly in relation to output goods being manufactured by the appellant. The credit in such cases need not be denied. Issue has been decided by Hon ble Bombay High Court in the case of M/s Coca Cola India Pvt. Ltd. 2009 (8) TMI 50 - BOMBAY HIGH COURT where it was held that It is therefore clear that the burden of service tax must be borne by the ultimate consumer and not by any intermediary i.e. manufacturer or service provider. In order to avoid the cascading effect the benefit of cenvat credit on input stage goods and services must be ordinarily allowed as long as a connection between the input stage goods and services is established. Conceptually as well as a matter of policy any input service that forms a part of the value of the final product should be eligible for the benefit of Cenvat Credit. The services of ASC and DSC availed by the appellant definitely go to enrich the value of the output goods cleared by them by creating a brand image for the appellant. Hence in terms of the Rule 2(l) of Cenvat Credit Rules exists between the said services and the goods being cleared by the appellant. There are no merits in the order denying the Cenvat credit in respect of these services. As the demand is being set aside penalties imposed and demand for interest is also set aside. Conclusion - i) The services provided by call centres qualify as input services under Rule 2(l) of the Cenvat Credit Rules 2004 as they are related to sales promotion and brand building which are integral to the manufacturing process. ii) There are no evidence of fraud or suppression by the appellant and thus penalties and interest were not justified. The impugned order cannot be sustained - appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Qualification of Call Centre Services as 'Input Services' The relevant legal framework involves Rule 2(l) of the Cenvat Credit Rules, 2004, which defines 'input service'. The Court noted that the definition includes two parts: the 'means' clause and the 'inclusive' clause. The services in question must either be directly or indirectly related to the manufacture of final products or fall within the inclusive definition, which covers services related to sales promotion. The Court's interpretation emphasized that the services provided by call centres contribute to the brand image and marketability of the appellant's products, thus indirectly relating to the manufacturing process. The appellant argued that these services are integrally connected to the manufacturing activity as they enhance the brand image and facilitate sales, which is the ultimate goal of manufacturing. Key evidence included agreements between the appellant and call centres, indicating that these services are used to connect customers with service centres, thereby promoting sales and enhancing customer satisfaction. The Court concluded that the call centre services qualify as input services under the 'inclusive' clause of Rule 2(l), as they are linked to sales promotion and brand building, which are integral to the manufacturing process. 2. Denial of Cenvat Credit on Grounds of Post-Manufacturing Services The Court examined whether the categorization of call centre services as post-manufacturing services justified the denial of Cenvat credit. The appellant contended that the services were used in relation to sales promotion and were not merely post-manufacturing activities. The Court found that the adjudicating authority had focused solely on the 'means' clause of the definition, neglecting the 'inclusive' clause. The Court emphasized the need for a harmonious reading of the statute, considering both parts of the definition. The Court noted that sales promotion is an activity that influences manufacturing by boosting sales, thus having a direct nexus with the manufacturing process. Consequently, the credit in question was deemed admissible. 3. Allegations of Suppression or Fraud The issue of whether there was any fraud or suppression of facts by the appellant was also considered. The Court observed that the demand arose from an audit of the appellant's records, with no evidence of any positive act of fraud or suppression with intent to evade duty. The Court referred to precedents indicating that interpretational issues involving complex legal provisions cannot be construed as cases of wilful misstatement or suppression. The Court concluded that there was no basis for imposing penalties or interest, as the appellant had not contravened any legal provisions. SIGNIFICANT HOLDINGS The Court held that the services provided by call centres qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004, as they are related to sales promotion and brand building, which are integral to the manufacturing process. The Court emphasized the principle that all parts of a statute must be read harmoniously, and the inclusive clause of the definition of input service must be considered alongside the means clause. The Court found no evidence of fraud or suppression by the appellant, and thus, penalties and interest were not justified. The final determination was that the impugned order could not be sustained, and the appeal filed by the appellant was allowed with consequential relief as per law.
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