whether Cenvat credit of service tax paid on services of Automotive Tyre Manufacturing Association to a tyre manufacturing concern admissible ?

PJ/Case Law/2016-17/3353

Case:-BIRLA TYRES Versus COMMISSIONER OF C. EX., CUS. & S.T., BBSR-I

Citation:- 2016 (342) E.L.T. 246 (Tri. - Kolkata)

Brief Facts- The appeal were filed by the appellant against Order-in-Appeal No. 23/CE/BBSR-I/2011, dated 15-3-2011 passed by the Commissioner (Appeals), Bhubaneswar.
None appeared on behalf of the appellant and adjournment request was received from the Advocate of the appellant. During last three dates of hearing fixed on 20-11-2015, 22-1-2016 and 1-4-2016 also appellant requested for adjournment. As the matter cannot be adjourned indefinitely, therefore, request of the appellant was not allowed and the case was taken up for disposal.

Respondent’s Contention- Sri A. Roy, Suptd. (AR) appearing on behalf of the Revenue submitted that the issue involved was regarding taking of Cenvat credit on services provided by Automotive Tyre Manufacturing Association (ATMA) availed by the appellant during 2007-2008 and 2008-2009. Ld. AR made the bench go through Paragraph 10.7 of OIA dated 15-3-2011 passed by the First Appellate Authority and argued that the services of ATMA availed by the appellant were not at all related to the manufacturing activity of the appellant. Ld. AR further strongly defended the order passed by the First Appellate Authority.

Reasoning of Judgement- The issue involved in the present proceedings was whether Cenvat credit of service tax paid by the ATMA was admissible to the appellant. It was observed from Paragraph 10.5 of OIA dated 15-3-2011 passed by the First Appellate Authority that following service were provided by the ATMA to the appellant.
“10.5 service tax paid on the service provided by The ATMA would be available to the respondents in this case or not, it has to be seen the nexus or integral connection of such service with the business of manufacture of final product; so as to treat it as an ‘input service’ as given in Rule 2(l) of the Cenvat Credit Rules, 2004. As per the Web site Of ATMA www.atmaindia.org, the primary function of the association is as follows.
“The primary function of the Association is to be a conduit between Government Departments and the tyre companies in having two way communications. The Association projects the views of the industry on various subjects to respective Government departments. Conversely, the expectations of the Government from tyre industry are conveyed to tyre companies. Further, the Association briefs its members of the changes in Government Policy on issues related to India economy and industry in general and tyre industry in particular. Frequent meetings are held with the Government to sort out problems being faced by the industry”.
From the above activities carried out by ATMA forthe appellant, it was observed that the Association acts as a conduit between Government Department and the tyre companies. The Association also briefed its members of the changes in Government Policy on issues related to Indian economy and industry in general and tyre industry in particular. Frequent meetings were also held by the Associations with Government Department to sort out problems being faced by the tyre industry. The findings given by the First Appellate Authority that services availed have no relation to the manufacturing activities of the appellant was not the correct appreciation of law and the scheme of Cenvat credit and was required to be set aside.

Decision- Appeal allowed.

Comment:- The substance of the case is that as the services provided by Automotive Tyre Manufacturing Association were in relation to manufacturing activity of assessee the credit was admissible. This Association was acting as a conduit between Government Department and tyre companies helping them to sort out business problems faced by tyre industry and therefore was having proper nexus with the goods manufactured. Therefore As per Rule 2(l) of Cenvat Credit Rules, 2004 it was covered under definition of input service and credit was rightfully claimed.

Prepared by- Akshit Bhandari

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PJ/Case Law/2016-17/3353

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