2013 (12) TMI 382 - AT - Service Tax

Tribunal allows Tata Motors' Cenvat credit appeal, remands service tax credit issue for further review.

DY GENERAL MANAGER TATA MOTORS LTD Versus COMMISSIONER OF CENTRAL EXCISE

DY GENERAL MANAGER TATA MOTORS LTD Versus COMMISSIONER OF CENTRAL EXCISE - 2015 (40) S.T.R. 269 (Tri. - Mumbai) Issues Involved:1. Eligibility for Cenvat credit on service tax paid for consulting engineer's services.2. Applicability of Rule 6(5) of the Cenvat Credit Rules, 2004.3. Exemption status of prototypes under Notification No. 167/71-CE.4. Validity of the adjudicating authority's decision to drop the demand for service tax credit amounting to Rs. 36 crores.Detailed Analysis:Issue 1: Eligibility for Cenvat credit on service tax paid for consulting engineer's servicesThe appellant, M/s Tata Motors Ltd., contended that the consulting engineer's services received for the development of prototypes qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004. They argued that these services are used in relation to the manufacture of commercial vehicles, on which they discharge excise duty liability. The Tribunal agreed, noting that the definition of 'input service' includes any service used directly or indirectly in the manufacture of final products. The Tribunal referenced the Bombay High Court's decision in Deepak Fertilizers and Petrochemicals Corporation Ltd., which emphasized the broad scope of 'input service,' covering services used directly or indirectly in manufacturing.Issue 2: Applicability of Rule 6(5) of the Cenvat Credit Rules, 2004The appellant argued that since the prototypes are not fully exempt from excise duty, Rule 6(5) should apply, allowing them to avail Cenvat credit. The Tribunal accepted this argument, stating that the consulting engineer's services are used in the manufacture of both dutiable and exempted goods. Therefore, under Rule 6(5), the appellant is entitled to the credit.Issue 3: Exemption status of prototypes under Notification No. 167/71-CEThe Revenue contended that the prototypes are unconditionally exempt under Notification No. 167/71-CE and that the appellant cannot opt to pay duty on these goods. The Tribunal rejected this argument, referencing a 1973 CBEC order that stated the exemption applies only when prototypes are destroyed during testing. Since the appellant has been clearing prototypes on payment of duty, they are not unconditionally exempt. This supports the appellant's eligibility for Cenvat credit under Rule 6(5).Issue 4: Validity of the adjudicating authority's decision to drop the demand for service tax credit amounting to Rs. 36 croresThe Revenue appealed against the adjudicating authority's decision to drop the demand for service tax credit amounting to Rs. 36 crores, arguing that the authority accepted the appellant's claim without proper verification. The Tribunal agreed with the Revenue, noting that the adjudicating authority failed to examine whether the services in question were used in the manufacture of vehicles. The Tribunal remanded this issue back to the adjudicating authority for fresh consideration, allowing the appellant to submit additional evidence.Conclusion:The Tribunal allowed the appeal filed by M/s Tata Motors Ltd., recognizing their eligibility for Cenvat credit on consulting engineer's services. The Tribunal also allowed the Revenue's appeal by way of remand, directing the adjudicating authority to re-examine the eligibility for service tax credit amounting to Rs. 36 crores.