Whether input service credit allowed when services rendered at the Corporate office and RDCs other than factory premises?

PJ/Case Laws/2012-13/1532

Case:-M/s Bata India Ltd. Vs. C.C.E., Chennai-III

Citation:- 2013-TIOL-626-CESTAT-MAD

Brief Facts:- The applicant is a manufacturer of footwear. They availed CENVAT credit on 'inputs' as well as 'input services', which included the 'service tax credit' based on the challans issued for distribution of service tax credit by their Corporate Office and their various Regional Distribution Centres (RDCs). The nature of services on which credit has been taken under the category of services viz., Transport, Courier, Car Hire, Telecom, Maintenance, Maintenance & Repair, C&F Agent, Warehousing, Advertising Agency etc. It has been alleged that the applicant is ineligible to avail credit under the definition of 'input services' under Rule 2(l) of CENVAT Credit Rules, 2004, as the services were rendered at the Corporate Office and RDCs other than factory premises and, therefore, not used by the manufacturer. In the impugned order, the learned Commissioner held that the service on which credit had been availed had no nexus with the manufacturing activity of appellant. Aggrieved by the order of lower appellate authority appellant filed an appeal before Tribunal.

Appellant’s Contention:-The applicants has drawn the attention to the Bench of the relevant portions of the impugned order. It appears from the impugned order that both corporate office and the RDCs rendered the services of telecom, maintenance & repair, security service, courier service, transport etc. According to him, the involvement on retail transportation would be around Rs.5 lakhs. He also contended that the definition of "input services" includes all the services received by the distribution centre and its corporate office. In this context, he relies on the decision of ECOF industries Pvt. Ltd Vs Commissioner of Central Excise, Bangalorereported in 2010 (17) S.T.R. 515 (Tri.- Bang.) = (2019-TIOL-2109-CESTAT-BANG).,which was upheld by the Hon'ble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore-I Vs ECOF industries Pvt. Ltd. reported in2011 (271) E.L.T. 58 (Kar.) = (2011-TIOL-770-HC-KAR-ST).

Respondent’s Contention:-The Revenue submits that the various services as reflected in the impugned order, has no nexus with the manufacturing activity of appellant’s factory. In this context, the revenue particularly referred to 'transport service', between the depot and retail outlets. The revenue also further submits that franchisee commission, life insurance policy on the employees, photograph, mediclaim etc., are not includible in the definition of "input services" under the said rules. The Revenue also reiterated the findings of the Commissioner.

Reasoning of Judgment:-The Tribunal heard both the parties and after hearing both sides and on perusal of the records, Tribunal find that the services were rendered at the applicant's Corporate Office as RDCs. The denial of credit on the ground that the services rendered in Corporate Office and RDCs had no nexus with the manufacturing activity, prima facie, cannot be acceptable. The Hon'ble Karnataka High Court in the case of ECOF India Pvt. Ltd. (supra) held as under :-

"9. In fact, the Board has issued a circular clarifying in this regard, which is extracted by the tribunal at para 7 which reads as under :-

"Para 7. Para 2.3 of the Master Circular referred to by the ld Advocate reads as under :-

"2.3 - An 'Input service distributor' is an office or establishment of a manufacturer of excisable goods or provider of taxable service. It receives tax paid invoices/bills of input services procured (on which Cenvat credits can be taken) and distributes such credits to its units providing taxable services or manufacturing excisable goods. The distribution of credit is subject to the conditions that - (a) the credit distributed against an eligible document shall not exceed the amount of service tax paid thereon, and (b) credit of service tax attributable to services used in a unit either exclusively manufacturing exempted goods or exclusively providing exempted services shall not be distributed. An input service distributor is required (under Section 69 of the Act, read with Notification No. 26/2005-S.T.) to take a separate registration."

Therefore, these are the only two limitations, which are imposed in Rule 7 preventing the manufacturer from utilizing the CENVAT credit, otherwise, he is entitled to the said credit. Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law."

The Tribunal also finds force in the submission of the Revenue insofar as, the ineligibility of credit on the input service credit on transportation from depot to retail outlets.

After considering the facts and circumstances of the case, Tribunal directed the applicant to deposit a sum of Rs.15 lakhs (Rupees Fifteen Lakhs only) within six weeks. Upon deposit of the same, the balance amount of dues shall remain waived and recovery thereof stayed the pendency of the appeal.

Decision:-Major part of Pre-deposit waived.

Comment:-It is concluded from this case that input service credit can be taken even if the services are rendered at the corporate office and not in the factory premises. Mere rendering of services at the corporate office cannot mean that the said service has no nexus with the manufacturing activity.

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PJ/Case Laws/2012-13/1532

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