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TMI Blog2025 (2) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute are banking commission/charges. Prima facie, when the service tax has been duly paid on the input services which are in relation to the VAT setoff on raw materials used for manufacture of final products, then taking of CENVAT Credit cannot be objected to inasmuch as Rule 3 of CENVAT Credit Rules, 2004 specifically state that a provider of output service to avail such credit of tax paid on input service. The setoff of VAT arising on account of final products being exported does not nullify that the raw materials have been used in manufacture of final products. When these raw materials have been used as inputs, the attendant services of obtaining bank guarantee for claiming VAT refund eligible on account of raw materials having been used for manufacture of final products had arisen, and this does not bring any new ground for making the input service tax as ineligible for taking CENVAT credit. The bank charges/commission paid for obtaining bank guarantee is in connection with raw materials purchased which are used for manufacture of final products. Thus, to this extent, such input services availed by the appellants satisfies the first 'means' part of the definition of 'inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess, such as those facilitating VAT refunds on raw materials, qualify as 'input services' under the CENVAT Credit Rules.
The impugned order dated 03.12.2020 is set aside - Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... de Order-in-Appeal dated 14.01.2020 had allowed the appeal by holding that the input services received from the bank would fall within the meaning of the term 'financing' under Rule 2 (l) of the CENVAT Credit Rules, 2004, and set aside the order of the lower authority. The said order has also been accepted by the Department inasmuch as no appeal has been preferred against it, and the issue inter partes has reached finality. The present dispute relates to the SCN issued on the same issue for the subsequent period. Therefore, learned advocate stated that the Commissioner (Appeals) is not permitted to take a different stand than the settled position. 3.2 In this regard, Learned Advocate he relied upon the decisions in the following cases: (i) Aditya Birla Nuvo Ltd. Vs. Commissioner of Central Excise, Bhavnagar - 2009 (14) S.T.R. 304 (Tri. - Ahmd.) (ii) Panjumal Hassomal Advani Vs. Harpal Singh Abanshi Singh - 1974 SCC Online Bom. 84 (iii) Bajaj Auto Limited Vs. Additional Commissioner, Pune-I Commissionerate, Pune -Order-in-Appeal No. PUN-EXCUS-001-APP- 172/ 2019-20 dated 14.01.2020 He further stated that CENVAT Credit availed in respect of the above services is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of VAT setoff on purchase of raw materials used for manufacture of final products. In other words, if the appellants did not purchase these raw material, then they may not be able to manufacture the final products. However, since some of these final products for having been exported, enabled the appellants to claim setoff of VAT tax liability on such raw materials, it does not mean that those raw materials are not used in the manufacture of final product. Thus, prima facie, when the service tax has been duly paid on the input services which are in relation to the VAT setoff on raw materials used for manufacture of final products, then taking of CENVAT Credit cannot be objected to inasmuch as Rule 3 of CENVAT Credit Rules, 2004 specifically state that a provider of output service to avail such credit of tax paid on input service. The setoff of VAT arising on account of final products being exported does not nullify that the raw materials have been used in manufacture of final products. When these raw materials have been used as inputs, the attendant services of obtaining bank guarantee for claiming VAT refund eligible on account of raw materials having been used for manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsured or reinsured by such person; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee. Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis." 8.2 On careful reading of the definition of 'input service' under Rule 2 (l) of CCR, 2004 as above, I find that it provides for three categories of services, out of which first category refers to (1) 'means' part of the definition, generally cover services which are used directly or indirectly, in or in relation to manufacture of final goods or for providing of output services; and second category refers to (2) 'inclusion' part of the definition, specifically state certain services used in relation to various activities, which is used in relation to the manufacture of final products or provision of output services, both of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices which are under dispute i.e., banking commissioner/charges for bank guarantee services have not been covered under the third part of 'exclusion' list. Even here, services used for personal consumption or those specific exclusion categories of services, alone are ineligible for availing CENVAT Credit as input service. Inasmuch as the disputed input services as above are covered under the 'means' and 'inclusion' part of the definition of 'input service' under Rule 2(l) ibid and are not covered by 'exclusion' part of the definition, I find that there is no legal basis for denial of CENVAT Credit on these services. 8.5 I find that the grounds for rejection of CENVAT Credit on input services in the order of the adjudicating authority which was upheld by the learned Commissioner (Appeals) is that the input services have not been specifically used by the appellants in or in relation to the manufacture of final products. From the facts of the present case, it clearly transpires that all services that are having a relation with raw materials have been used, either directly or indirectly in manufacture of final products, and only upon such final products having been exported, the VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s extracted and given below: "4. I have considered the submissions made by the both sides. The definition of input service has been expanded by using the words "and includes" basically for the reason that the services which are enumerated after the words "and includes" are those services which may not be considered as directly or indirectly relatable to manufacture but yet the intention is to provide the benefit of credit of service tax paid on such services as CENVAT credit. Therefore what is required to be examined is whether the services on which credit has been denied can be covered by the categories of services listed in the definition. I am satisfied that the services on which credit was denied by the revenue such as merger, issuing of NOC, share registry and maintenance of fax machine are all covered by the categories of services enumerated in the definition as explained by the consultant and accordingly allow the appeal filed by the appellants with consequential relief." 10. In view of the foregoing, I hold that the impugned order is liable to be set aside to the extent it had denied CENVAT Credit in respect of Banking Commission/service charges for a total amount of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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