Admissibility of Cenvat Credit on Photography Service & Outward Transit Insurance service

PJ/Case Laws/2011-12/1194

Case: M/s Pyramid Filters Pvt Ltd v/s Commissioner (Appeals) Central Excise, Pune-I

Citation: 2011-TIOL-679-CESTAT-MUM

Issue:- ‘Photography service’ and ‘Outward Transit insurance service’ – prima facie relating to business of manufacture of the assessee – pre-deposit waived and stay granted.

Brief Facts:- Department is denying credit to the appellant for the period from February 2007 to August 2009 for 2 services viz. ‘Photography service’ and ‘Outward Transit insurance service’. The Lower Authorities held that these services were not shown to be input services and it was not established that these was link between these services and the business of manufacture of the assessee. Demand of duty was confirmed and penalty imposed.

Hence, assessee is before the Tribunal. Application for waiver of pre-deposit and stay is filed.

Appellants Contention:- Assessee submitted that all activities relating to business would qualify to be ‘input services’ under Rule 2 (1) of CCR, 2004. Reliance was placed on judgments given in Coca Cola India Pvt Ltd v/s Commissioner of C. Ex., Pune-III [2009 (15) STR 657 (Bom)] and Commissioner of C. Ex. Nagpur v/s Ultratech Cement Ltd [2010 (20) STR 577 (Bom)].

In respect of Insurance service reliance was placed on Stanzen Toyotetsu India Pvt Ltd [2009 (14) STR 316 (Tri-Bang)] and in respect to Photography service, reliance was placed on Commissioner of Central Excise, Jaipur-II v/s J. K. Cement Works [2009-TIOL-411-CESTAT-DEL]. A copy of Chartered Accountant Certificate was also produced stating that the expenses of photography service, outward transit insurance service etc are considered in accounts and from part of price of final product on which excise duty is paid. The inclusion of such expenses in the assessable value of the final product is a relevant factor in deciding the question whether the expenses were incurred for ‘input services’.

Reasoning of Judgment:- The Tribunal held that prima facie case was made out in favour of the assessee. It was held that it was prima facie established that any service connected with the business of the assessee would qualify to be input service under Rule 2 (l) of CCR, 2004.

Decision:- Waiver of pre-depotit and stay granted.

Comment:- The credit has been allowed following the CocoCola and Ultratech cement cases. But the definition of “input service” has been changed from this budget and words “relating to business” has been specifically deleted. Thus, all the expenditure relating to business will not be allowed from 1.4.2011. But the exclusion clause says that the credit on services for personal use of employees will not be allowed. The reverse side of the same says that the services relating to business will be allowed. Hence the credit will be allowed on services which are not for personal use of employees but for business of the manufacturer or output service provider. But this interpretation will be subject to judicial pronouncement. Let us wait and watch till the matter reaches High Court or Apex court and it attains finality. By this time either the definition will be changed or the Board will change it seeing the decision. Then there will be next round of litigation. It will go on and on……

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PJ/Case Laws/2011-12/1194

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