2015 (9) TMI 1462 - AT - Central Excise

Tribunal overturns denial of cenvat credit on immovable property rent due to lack of nexus

M/s. Max India Ltd. Versus CCE & ST, Chandigarh-II

The Tribunal set aside the Commissioner (Appeals) decision disallowing cenvat credit on renting immovable property for lack of nexus between input service ... Cenvat credit - service tax on rent for its corporate /head office at Delhi - nexus with the manufacture of the finished goods - Held that:- the show cause notice has been issued seeking denial of cenvat benefit on the sole ground that there is no nexus between the input service and the finished goods manufactured by the appellant. Since the said allegation levelled in the show cause notice was dropped by the Commissioner (Appeals) by holding that there is nexus between the input service and the finished goods manufacture by the appellant, the demand cannot be sustained. Since the demand has been confirmed by the lower authorities on a ground which is beyond the show cause notice, the demand cannot be fastened against the appellant. Therefore, the impugned order is set aside. - Decided in favour of appellant Issues:- Disallowance of cenvat credit on renting of immovable property upheld by Commissioner (Appeals).- Allegations of lack of nexus between input service and finished goods.- Dispute regarding the entity that took the premises on rent.- Appeal against the impugned order before the Tribunal.Analysis:The appellant, engaged in manufacturing BOPP Film and Leather Finishing Foil Transfer, had taken cenvat credit on service tax paid for renting its corporate/head office in Delhi. The Central Excise Department initiated proceedings alleging no nexus between the input service and finished goods. The adjudication order confirmed these allegations, also noting that the appellant was not the entity renting the premises. In appeal, the Commissioner (Appeals) disagreed on the nexus issue but upheld the non-renter aspect. The appellant contended that the show cause notice did not mention the non-renter issue, and since the nexus issue was decided in their favor by the Commissioner (Appeals) without contest, the denial of cenvat credit on new grounds was against the law.The Revenue reiterated the findings of the impugned order, leading to a hearing where both sides presented arguments. The Tribunal noted that the show cause notice focused on the lack of nexus between the input service and finished goods. As the Commissioner (Appeals) ruled in favor of the appellant on this issue, the demand based on the dropped allegation could not be upheld. Since the lower authorities confirmed the demand on grounds beyond the show cause notice, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.