Whether credit admissible for input services received in other units?

PJ/CASE LAW/2015-16/2814

Case:-EXPERT INDUSTRIES PVT. LTD. VERSUSCOMMR. OF C. EX., CUS. & S.T., BANGALORE-I

Citation:- 2015 (39) S.T.R. 465 (Tri. - Bang.)

Brief Facts:-The appellants are the manufacturers of Rotogravure Printing Machineries and Lamination Machineries falling under chapter 84 of the schedule to the Central Excise Tariff Act, 1985 and are operating under Cenvat Credit Rules, 2004. During audit of the records of the appellants by the Department, it was noticed that the appellants had availed credit of Service Tax paid on Security Service, Telephone Service and Manpower Service which were not used in the appellant’s manufacturing unit but were used in their other units viz., Unit II, Unit III and Unit V located at different places. Further it also appeared that the appellants had deliberately availed the said credit with an intention to utilize the same towards payment of duty for the reason that this aspect came to the notice of the Department only during the audit of the unit. Since it appeared that the said services do not fall under the purview of ‘‘input services’’ and in no way related to manufacturing activity, the original authority issued two show cause notices covering the periods from April, 2007 to February, 2010 and from March, 2010 to December, 2010 with a proposal to deny the credit of Rs. 54,882/- (Rupees fifty four thousand eight hundred and eighty-two only) and Rs. 15,125/- (Rupees fifteen thousand one hundred and twenty-five only), respectively and to recover the same along with interest and penalty. After due process, the lower authorities have confirmed the demand for Cenvat credit with interest and imposed penalty. Since the matter involved can be decided straightaway, the requirement of pre-deposit is waived and appeals are taken up for final decision. In both the appeals issue involved is common.

Appellants Contention:-The appellants have taken Cenvat credit of Service Tax paid on Security Service, Telephone and Manpower Supply Service provided to different units located in Bommasandra in different places in the main unit. The learned counsel submits that the credit was taken in the main unit since the bill was raised by the service providers on the main unit and further all the goods wherever manufactured finally come to the main unit and clearance of payment of duty takes place from the main unit only. Therefore the credit is admissible.

Respondents Contention:-Learned AR would submit that the units are located in different places and services are attributable to the concerned units and since those units do not pay duty, credit is not admissible.

Reasoning Of Judgement:-The tribunal have considered the submissions. According to proviso to Rule 3, a manufacturer or purchaser of final product can take credit of duty paid on any inputservice received by him. Unlike in the case of inputs where credit can be taken only when it is received in the factory, in respect of input service there is no such restriction. Under the circumstances, the credit is admissible to the appellant so long as he is a manufacturer or purchaser of final products and such final products are liable to duty and cleared on payment of duty. Further it can also be said that such input services have been used in or in relation to a manufacture of final product. Therefore credit is admissible. In view of the above discussion, the appeals are allowed with consequential relief, if any, to the appellants.

Decision:- Appeal allowed.

Comment:- The crux of the case is that according to Rule 3 of Cenvat Credit Rules,2004 the credit of input services can be taken by a manufacturer or purchaser of final product on any input service received by him and used in the manufacture of final product. There is no restriction in case of input services unlike inputs wherein credit is available for inputs received and used in the factory of production only. Accordingly, it was held that the cenvat credit of input services is admissible as far as they were used in relation to manufacture of final products. However, in the present scenario, the concept of input service distributor has been introduced and so it is required to distribute cenvat credit pertaining to particular unit also. Hence, this case has less relevance now.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2814

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