2013 (7) TMI 674 - AT - Central Excise

Tribunal Denies CENVAT Credit for Non-Essential Services, Emphasizes Manufacturing Nexus

CCE Vadodara Versus M/s Diamines & Chemicals Ltd.

The Tribunal upheld the decision disallowing the appellant's availing of CENVAT Credit on gardening, housekeeping, and construction services, emphasizing ... Cenvat Credit on Input Services to be used in for the manufacturing of goods – Service provided of gardening, housekeeping and construction of compound wall and availed the CENVAT Credit – Alleged that all the services on which credit is allowed, is not required for the purpose of manufacturing activity of the respondent-assessee – Held that:- Relying upon the decision in the cases of CCE Pune Vs Raymond Zambaiti Pvt. Ltd. [2010 (3) TMI 402 - CESTAT, MUMBAI] ; CCE Hyderabad Vs Voith Turbo Pvt. Ltd. [2010 (8) TMI 229 - CESTAT, BANGALORE ] held that housekeeping, gardening services and construction of compound wall are the services which are required in furtherance of business activity and manufacturing of final product. I find that there is no dispute that the appellant is manufacturer of a final product and the services were rendered in respect of such unit – Cenvat Credit allowed – Decided against the Revenue. Issues:1. Availment of CENVAT Credit on gardening, housekeeping, and construction services.2. Dispute over the nexus of services with manufacturing activity.3. Interpretation of Rule 2(l) of CENVAT Credit Rules, 2004.4. Applicability of judicial precedents on similar cases.Issue 1: Availment of CENVAT Credit on gardening, housekeeping, and construction services:The case involves the appellant, engaged in manufacturing goods under Chapter 29 of the Central Excise Tariff Act, 1985, availing CENVAT Credit on services like gardening, housekeeping, and construction of compound wall. The Central Excise Audit officers objected to this credit claiming a lack of nexus with manufacturing activities. A show cause notice was issued demanding the recovery of Service Tax wrongly availed during specific financial years.Issue 2: Dispute over the nexus of services with manufacturing activity:The dispute primarily revolves around the question of whether the gardening, housekeeping, and construction services are essential for the manufacturing process. The first appellate authority allowed the credit on the grounds that these services were necessary for business activities. However, the Revenue challenged this decision based on the provisions of Rule 2(l) of CENVAT Credit Rules, 2004.Issue 3: Interpretation of Rule 2(l) of CENVAT Credit Rules, 2004:The authorized representative argued that not all services for which credit was allowed were required for manufacturing activities. The dispute highlighted the interpretation and application of Rule 2(l) in determining the eligibility of CENVAT Credit on specific services related to business operations.Issue 4: Applicability of judicial precedents on similar cases:The appellant and respondent presented conflicting views, citing different judicial precedents to support their arguments. The appellant relied on decisions by various Tribunal benches, emphasizing the necessity of the services for business activity and manufacturing the final product. The Tribunal, after considering the submissions and precedents, concluded that the impugned order was correct and aligned with established judicial pronouncements, ultimately rejecting the appeal.Overall, the judgment focused on reconciling the conflicting interpretations of Rule 2(l) and determining the eligibility of CENVAT Credit on services like gardening, housekeeping, and construction in the context of manufacturing activities, emphasizing the necessity of these services for business operations based on established legal precedents.