Tribunal grants input service credit for machinery charges in favor of appellant.

The Tribunal allowed the appeal in favor of the appellant, granting them input service credit for erection and commissioning charges as necessary for machinery operation. The appellant was entitled to Cenvat credit under Rule 2(l) of the CENVAT Credit Rules, 2004. Additionally, the denial of exemption under Notification no. 22/2003 was overturned due to the revenue's failure to verify the re-warehousing certificate submission within the prescribed period. The demand was deemed time-barred, and the appellant succeeded in their appeal, benefiting from the exemption.

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Issues:
1. Denial of input service credit on erection and commissioning charges.
2. Denial of exemption under Notification no. 22/2003 due to lack of re-warehousing certificate.

Analysis:

Issue 1: Denial of input service credit on erection and commissioning charges:
The appellant, a machinery manufacturer, appealed against the denial of input service credit for charges related to the installation of machinery at customers' sites. Revenue contended that these charges were paid beyond the place of removal and not included in the assessable value. The appellant argued that the installation charges were part of their business activity and should be considered input services under Rule 2(l) of the CENVAT Credit Rules, 2004. The appellant cited the decision in CCE vs. Danke Products to support their claim. The Tribunal held that the appellant was entitled to the input service credit as the installation was necessary for the machinery to be operational, following the precedent set in Ultra Tech Cement Ltd. The Tribunal distinguished the case of Kilburn Engg. where the installation was arranged by the customer's contractor, which was not the situation in this case. Therefore, the appellant was allowed to take Cenvat credit for the input service charges.

Issue 2: Denial of exemption under Notification no. 22/2003:
The second issue pertained to the denial of exemption under Notification no. 22/2003 due to the appellant's failure to produce a re-warehousing certificate within 90 days of clearance to a 100% EOU. The appellant argued that they had cleared the goods with CT-3 certificates and had submitted the same to the department at the time of clearance. Despite the lapse in submitting the re-warehousing certificate, the revenue did not verify whether the certificate had been obtained. The Tribunal noted that the audit conducted in 2010 should have brought this issue to light, and the subsequent show-cause notice issued in 2012 was beyond the extended period of limitation without any allegations of suppression of facts or wilful misstatement. Therefore, the Tribunal ruled that the demand under this head was time-barred, and the appellant succeeded in their appeal, allowing them to benefit from the exemption under Notification no. 22/2003.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order in favor of the appellant on both issues.

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