Eligibility of cenvat credit on Packaging, Security & Chartered Accountants services.

PJ/CASE LAW/2015-16/2828

Case:-GUJARAT TEA DEPOT CO. VERSUSCOMMISSIONER OF SERVICE TAX, AHMEDABAD

Citation:- 2015 (39) S.T.R. 629 (Tri. - Ahmd.)

Brief Facts:-This appeal has been filed by the appellant with respect to OIA No. AHM-SVTAX-000-APP-355 to 356-13-14, dated 20-2-2014 passed by Commissioner (Appeals-IV), Ahmedabad. Issue involved in this case is whether appellant will be eligible to avail the benefit of Cenvat credit under the Cenvat Credit Rules, 2004 on Packaging Services, Security Services, Telephone Services & Chartered Accountants Services.

Appellants Contention:-Shri S.J. Vyas (Advocate) appearing on behalf of the appellant argued that appellant firm is holding the brand name of ‘Wagh Bakri’ tea. They are letting their brand name to others and are paying Service Tax on such royalty charged received under ‘Intellectual Property Right Services’. That as per the legal advice dated 15-10-2010 from Y.J. Trivedi & Co. Patents & Trade Marks Attorney & Advocate, Ahmedabad appellant is also required to use the trade mark directly if it wants to retain right on the trade mark. That if the appellant does not use the trade mark but only grants permission to others than appellant may lose the ownership right of trade mark and may also be exposed to litigation. It was thus argued by the learned Advocate that appellant also get the tea packed on its own account and avail the services of packers etc. for which credit has been disallowed. It was his case that these Services had to be availed in order to protect on Brand Name/Trade Mark which is their output service as ‘Intellectual Property Right’. That other input services like Telephone Services & Chartered Accountants Services & Security Services are availed both with respect to providing ‘Intellectual Property Right Services’ as well as the activity of sales of their products got packed by the appellant and that such credit is admissible to them as per following case laws :-
(i) CCE, Vadodara-IIv. Siemens Healthcare Diagnostics Ltd. [2014 (36)S.T.R.192 (Tri - Ahmd.)].
(ii) Castrol India Ltd. v. CCE, Vapi [2013 (30)S.T.R.214 (Tri - Ahmd.) = 2013 (291)E.L.T.469 (Tri. - Ahmd.)].
Learned Advocate also argued that as per Rule 6(5) of the Cenvat Credit Rules, 2004 Cenvat credit on Security Services was admissible in full if the services fall in the services specified in this Rule. That during the relevant time services failing under Section 65(105)(w) of Finance Act, 1994 to Security Services were covered under Rule 6(5) and full credit was admissible even if Security Services were partly used for packing activities. That as the issue was contentious one appellant is also eligible for Section 80 benefit.

Respondents Contention:-Shri J. Nair (AR) appearing on behalf of the Revenue argued that Packaging Services & Security Services are not in relation to providing of Intellectual Property Right Services, either directly or indirectly. Learned AR made the Bench go through paras 10.3 & 10.4 of the order dated 20-2-2014 passed by the first appellate authority to argue that no provision of the Trade Marks Act, 1999 have been quoted by the Patents & Trade Marks Attorney, whose opinion is taken by appellant, under which it is obligatory that appellant should himself use the brand name by getting the impugned product manufactured/packed on his own account. That credit with respect to other Services is not admissible as the same are not used exclusively for providing output services i.e. ‘Intellectual Property Right Services’.

Reasoning of Judgement:-Heard both sides and perused the case records. So far as admissible of Service tax credit on ‘Packaging Services’ availed by the appellant is concerned it is observed that the activity is done with respect to packing of ‘Wagh Bakri’ tea. Appellant is of the argument that such activity has to be undertaken to protect their ownership right over the Trade Mark. For this aspect they have produced a copy of opinion dated 15-10-2010 from Y.J. Trivedi & Co. Patents & Trade Marks Attorney & Advocate, Ahmedabad. It is observed that this opinion is obtained on 15-10-2010 by the appellant after the issue of show cause notice dated 7-10-2010. In this certificate/opinion also no provisions of the Trade Marks Act or any Rules made thereunder are mentioned under which it is obligatory on the part of the appellant to compulsorily use the Trade Mark himself. Lending its trade mark, getting royalty and paying Service Tax on the part of appellant should be sufficient to establish that his Trade Mark has been used. Under the present factual matrix it cannot be held that packaging Services are availed by the appellant directly for protecting their Trade Mark/Brand Name. Therefore, the packaging Services availed by the appellant has to be considered to have been utilized for making of tea bags and cannot be considered to be availed directly or indirectly in maintaining/protection of appellant’s Trade Mark.
So far as admissible of Service Tax credit on Security Services is concerned, it is observed that as per Rule 6(5) of the Cenvat Credit Rules, 2004 full credit of Security Services credit is permissible if, the credit of such services is not exclusively used in relation to exempted goods or providing exempted services. Accordingly credit of Service Tax on security services is correctly availed by the appellant.
So far as credit of Chartered Accountants Services & Telephone Services is concerned the same are availed both for undertaking trading activity and for providing ‘Intellectual Property Right Services’. As no separate figures are available for such services it will be appropriate that appellant only takes proportionate value wise credit on such services used commonly in providing trading activity and providing ‘Intellectual Property Right Services’ and pay the remaining amounts with interest.
So far as invocation of extended period is concerned it is observed that improper credit taken which was detected by the departmental officers only. At no stage of appellant approached the department for any guidance that there was any confusion in admissibility of credit on the impugned services. Therefore, extended period will be applicable. However, Cenvat credit with respect to security services and partly with respect to two other services has been held to be admissible under this order. Appellant thus had a reasonable case to hold a view that Cenvat credit was admissible. Appellant’s case is thus covered by the provisions of Section 80 of the Finance Act, 1994 and accordingly penalties imposed upon the appellant are set aside. Appeal filed by the appellant is partly allowed as per the observations made herein above.

Decision:-Appeal partly allowed.

Comment:- The analogy in the case is that the input service credit is admissible to service provider if the said service is used directly or indirectly in provision of taxable output service. In the present case, the packaging services availed by the assessee rendering intellectual property right services was not found in relation to provision of such service. Accordingly, the cenvat credit on packaging services was denied. Furthermore, as full credit of Security Services was permissible during the relevant period of time under Rule 6(5) of the Cenvat Credit Rules, if the credit of security services was not exclusively used in relation to exempted goods or providing exempted services, the same was allowed. So far as credit of Chartered Accountants Services & Telephone Services was concerned the same was allowed proportionately as they were availed both for undertaking trading activity and for providing ‘Intellectual Property Right Services’.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2828

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