Eligibility of credit of various input services.

PJ/Case law/2014-15/2249

Case:- GOLDEN TOBACCO LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I

Citation:- 2013 (30) S.T.R. 594 (Tri. - Mumbai)

Brief facts:-The appellant M/s. Golden Tobacco Ltd. are manufacturers of cigarette and availed CENVAT credit of service tax paid on various services under 64 invoices and credit availed is in respect of 14 categories of services. The services are certification of the factory work, payment made to advocates for legal services related to manufacturing activities, repair and maintenance of the factory, audit and accounting of the factory, packaging services for export purposes, advertisement expenses, quality upgradation and so on. The department was of the view that the appellant is not entitled for CENVAT credit on the service tax paid on the services and issued a show-cause notice dated 6-4-2011 in respect of CENVAT credit of Rs. 1,51,611/- availed in March, 2010. The only allegation in the show is that the services on which credit has been availed are not “input service” as defined in CENVAT Credit Rules, 2004. The said show-cause notice was adjudicated by the original authority vide order dated 9-11-2011 but there is no discussion made in the said order as to how the services have no nexus with the manufacturing activity undertaken by the appellant. On the contrary, the appellant has categorized the services received and also explained the nexus between the service received and the manufacturing activity undertaken. There is no rebuttal of the claims of the appellant by the original authority. The original authority merely confirmed the demand mentioned in the show-cause notice along with interest thereon and also imposed a penalty of Rs. 2,000/-. The appellant preferred an appeal before the lower appellate authority who, without discussing the nature of the services and their nexus with the manufacturing activity undertaken by the appellant, mechanically dismissed the appeal and hence the appellant is before Tribunal.

Appellant’s contentions:-The learned Advocate appearing for the appellant submits that the Hon’ble High Court of Bombay, in the case of Ultratech Cement Ltd. - 2010 (260)E.L.T.369 (Bom.) = 2010 (20)S.T.R.577 (Bom.)has held that so long as there is a nexus with the business of manufacturing of final products, the service availed is an eligible for input service as defined in Rule 2(l) of the CENVAT Credit Rules, 2004. In their submission before the lower authorities, they have clearly explained the nature of services received and its nexus with the manufacturing activity. From these submissions, it is very clear that the services availed are integrally connected with the manufacturing activity and hence they are rightly entitled for the credit.

Respondent’s contentions:- The learned AR appearing for the Revenue reiterates the findings of the lower authorities.

Reasoning of judgment:- As the issue lies in a narrow compass, tribunal is of the view that the appeal itself can be disposed of at this stage itself. Therefore, after dispensing with the requirement of pre-deposit of the dues adjudged, they take up the appeal for consideration.
From the submissions made by the appellant, the services on which credit has been availed relate to audit and accounting services, repair and maintenance services, packaging service, legal services, etc. All these services have nexus and are integrally connected with the business of manufacturing and therefore, they are all eligible “input service” as defined in Rule 2(l) of the CENVAT Credit Rules, 2004. The decision of the Hon’ble High Court of Bombay in the case of Ultratech Cement Ltd. (supra) applies to the facts of this case.

In view of the above findings, the appeal filed by the assessee is allowed.

Decision:- Appeal allowed.

Comment:- The analogy of the case is that input services like Audit, Accounting and Legal service, Repair and Maintenance service, and Packaging services etc. are eligible for availment of cenvat credit because all these services have nexus and are integrally connected with business of manufacturing. Hence, these are as input services on which assessee is entitled to take credit of Service Tax paid by them.

Prepared by: Monika Tak.

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PJ/Case law/2014-15/2249

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