2013 (4) TMI 381 - AT - Central Excise

Appeal dismissed: Cenvat credit denied for services on non-manufacturing inputs for exports.

The appeal challenging the admissibility of cenvat credit on services related to non-manufacturing inputs for exported goods was dismissed. The court ... Admissibility of CENVAT credit on input services - Services used in trading activities not in the stream of manufacture - Interpretation of CBEC circular dated 13.12.96 regarding export of inputs under bond - Application of Rule 4 of the Cenvat Credit RulesAdmissibility of CENVAT credit on input services - Services used in trading activities not in the stream of manufacture - Interpretation of CBEC circular dated 13.12.96 regarding export of inputs under bond - Application of Rule 4 of the Cenvat Credit Rules - Whether CENVAT credit is admissible on services in relation to goods received as bought-out items which are exported as such and are not used in the manufacture of excisable goods - HELD THAT: - The tribunal examined the applicability of the CBEC circular dated 13.12.96 and the decision in Flat Products Equipments (I) Ltd., noting that those authorities concerned inputs or bought-out items that were used in the manufacture of excisable goods (and sometimes exported under bond), so that credit was permissible. In the present case the bought-out items are not used in the stream of manufacture but are exported as such; therefore the circular and the Flat Products decision are distinguishable. The tribunal relied on the reasoning in Ford India Pvt. Ltd. v. CCE Chennai which held that where services or components are employed solely in trading activity (and not in manufacture), CENVAT credit under Rule 4 is not available. Applying that principle, services attributable only to the trading/export of items that do not enter the manufacture of excisable goods do not qualify for CENVAT credit.Appeal dismissed; CENVAT credit on services relating solely to traded items not used in the stream of manufacture is not admissible.Final Conclusion: The appeal is dismissed; services used only in relation to trading/export of bought-out items which do not enter the manufacture of excisable goods are not eligible for CENVAT credit under the Cenvat Credit Rules. Issues:Admissibility of cenvat credit on services related to non-manufacturing inputs for exported goods.Analysis:The appeal in question was filed against an order upholding the credit taken on services for certain trading goods by the Commissioner (Appeals). The appellant argued that CBEC circular No.283/117/96-CX allows credit on services related to traded goods. Additionally, they cited a judgment from CESTAT Mumbai to support their claim. However, during the hearing, the appellant did not appear but submitted written arguments referencing a news service reporting a favorable decision by CESTAT Mumbai Bench.The respondent, represented by the ld. A.R., relied on judgments to argue that services related to trading activities are not eligible for cenvat credit under Rule 4 of the Cenvat Credit Rules.The central issue in this case is the admissibility of cenvat credit on services linked to inputs not used in manufacturing goods that are exported directly. The appellant exported inputs without using them in manufacturing, raising the question of credit eligibility. The appellant's reliance on a CESTAT Mumbai judgment and a CBEC circular was examined. The Mumbai judgment involved bought-out items used in manufacturing, which is not the case for the appellant. The Chennai CESTAT bench's decision in Ford India Pvt. Ltd. Vs. CCE Chennai was cited, emphasizing that no credit is available for services used solely in trading activities. Following this reasoning, the appeal was dismissed as services used for traded items not involved in manufacturing are not eligible for cenvat credit.In conclusion, the appeal challenging the admissibility of cenvat credit on services related to non-manufacturing inputs for exported goods was dismissed based on the precedent set by the Chennai CESTAT bench and the lack of usage of traded items in the manufacturing process.