Appellant granted credit on input services for rented premises, Tribunal emphasizes manufacturing process nexus

The Tribunal ruled in favor of the appellant, a 100% EOU, allowing credit on input services for rented premises at Unit-II and Unit-III. The Tribunal emphasized the necessity of the rented premises for the manufacturing process, noting the interconnectedness of the units in the production chain. It found a direct nexus between renting immovable property services and the manufacturing of goods at Unit-I, setting aside the previous denial of credit and granting the appeal with consequential relief, if any.

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Issues:
1. Eligibility of availing credit on input services for rented premises at Unit-II and Unit-III by a 100% EOU.
2. Interpretation of Rule 2(1) of the Cenvat Credit Rules, 2004 regarding input services.
3. Nexus between renting of immovable property services and the manufacturing process at different units of the same legal entity.

Analysis:

Issue 1:
The appellant, a 100% EOU, rented new premises for Unit-II and Unit-III due to space shortage. The appellant claimed credit on input services for these premises, arguing they were part of the manufacturing process. The Commissioner (Appeals) and adjudicating authority denied the credit, leading to the appeal. The appellant contended that the rented premises were essential for manufacturing goods at Unit-I, citing relevant case laws.

Issue 2:
The Ld. AR for the Revenue argued that the services for Unit-II and Unit-III were not used for manufacturing final products at Unit-I, emphasizing the necessity of a nexus between the service and the manufacturing process. The appellant, on the other hand, relied on Rule 2(1) of the Cenvat Credit Rules, 2004, which defines input services, to support their claim for credit on renting of immovable property services.

Issue 3:
The Tribunal considered the interconnectedness of Unit I, Unit-II, and Unit-III, noting that raw materials were processed at the latter units before being sent to Unit-I for final product manufacturing. The Tribunal found a direct nexus between the renting of immovable property services and the manufacture of goods at Unit-I, emphasizing that without processing at Unit-II and Unit-III, final products could not be manufactured at Unit-I. The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief, if any.

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