2014 (11) TMI 963 - AT - Central Excise

Tribunal Denies Cenvat Credit for Services to Bottlers: Lack of Nexus with Business Activities

M/s COCA COLA INDIA PVT LTD. Versus COMMISSIONER OF CENTRAL EXCISE, PUNE

M/s COCA COLA INDIA PVT LTD. Versus COMMISSIONER OF CENTRAL EXCISE, PUNE - 2015 (37) S.T.R. 768 (Tri. - Mumbai) Issues Involved:- Admissibility of Cenvat Credit on various services provided to bottlers- Interpretation of 'input service' in relation to the appellant's business activities- Justification for availing Cenvat Credit on specific services- Relevance of previous legal judgments in determining admissibility of Cenvat Credit- Assessment of interest liability on Cenvat Credit utilization- Consideration of waiver of pre-deposit of duty, interest, and penaltyAdmissibility of Cenvat Credit on Various Services Provided to Bottlers:The appellants filed stay applications against the impugned orders that held Cenvat Credit of Service Tax inadmissible on various services availed during the period from July 2005 to March 2011. These services included QMS audit, testing of mango pulp, verification of sales generating assets, physical verification of inventories, maintenance of coffee vending machines, event production, security services, landscaping work, and catering. The main contention was that these services were essential for maintaining product quality at the bottlers' end, directly impacting the appellant's business as poor quality beverages would reduce demand for Concentrate. However, the impugned order denied the admissibility of Cenvat Credit on these services, stating a lack of nexus between the services rendered and the appellant's business activities.Interpretation of 'Input Service' in Relation to the Appellant's Business Activities:The definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules was crucial in determining the admissibility of Cenvat Credit. The tribunal analyzed whether the services availed by the appellants were used directly or indirectly in or in relation to the manufacture of their final products. It was emphasized that the services provided at the bottlers' premises did not meet the criteria of being used in the manufacture of the appellant's final products. The tribunal highlighted that the appellant and bottlers operated on a principal-to-principal basis, with separate business entities and Central Excise Registrations, leading to the denial of Cenvat Credit on activities performed at the bottlers' factories.Justification for Availing Cenvat Credit on Specific Services:The appellants provided detailed justifications for availing Cenvat Credit on specific services such as maintenance of coffee vending machines, event production, landscaping work, and security services. They argued that these services were necessary for their business activities and had a direct nexus to their operations. However, the tribunal scrutinized each service individually, considering factors like ownership of assets, location of services, and relevance to the manufacturing process. Ultimately, the admissibility of Cenvat Credit was determined based on the specific circumstances and applicability to the appellant's business.Relevance of Previous Legal Judgments in Determining Admissibility of Cenvat Credit:Both the appellants and the Commissioner relied on previous legal judgments to support their arguments regarding the admissibility of Cenvat Credit on the services in question. The tribunal examined these judgments, such as the case of VST Industries Ltd. Vs. CCE, Hyderabad, and Commissioner Vs. M/s Manikgarh Cement, to assess the applicability of Cenvat Credit rules in the current scenario. The tribunal's decision was influenced by the interpretations and precedents set by these legal judgments in similar cases.Assessment of Interest Liability on Cenvat Credit Utilization:The issue of interest liability on Cenvat Credit utilization was raised by the appellants, citing relevant legal precedents to support their argument that interest should not be demanded if the credit was not utilized. The tribunal considered these arguments along with the appellants' credit balance status to determine the justification for demanding interest. The decision regarding interest liability was crucial in assessing the financial implications for the appellants in relation to the Cenvat Credit availed.Consideration of Waiver of Pre-Deposit of Duty, Interest, and Penalty:In the final deliberation, the tribunal assessed the appellant's request for a waiver of pre-deposit of duty, interest, and penalty. After considering the merits of the case and the balance of convenience, the tribunal directed the appellants to make a pre-deposit of a specific amount within a stipulated timeframe. The decision regarding the pre-deposit and subsequent waiver of remaining dues was a significant outcome in the overall judgment.---