2016 (3) TMI 1041 - AT - Central Excise

Tribunal allows Cenvat credit for excise duty payment on industrial furniture

The tribunal overturned the decision disallowing Cenvat credit on industrial construction service for excise duty payment on industrial furniture. It held ... Admissibility of Cenvat credit on industrial construction service as the said service had no nexus with manufacture and clearance of excisable goods - Held that:- It has been admitted that the said input service is used for providing output services. Therefore, the objection is on utilization of such credit as available on input service for payment of Central Excise duty on industrial furniture. Thus find the reasoning by the lower Authorities is devoid of any legal merit. The eligibility of credit on the input service has not been contested. Once the credit is availed, the use of such credit is governed by Rule 3 of the Cenvat Credit Rules, 2004. Sub-Rule (4) of the said Rule stipulates that Cenvat credit may be utilized for payment of any duty of excise on any final product. Here there is no one to one co-relation or condition that credit on input services can be utilized only for discharging tax on output services or Excise Duty on final products cannot be paid using Cenvat credit availed on input services. Hence, the order of the lower Authority disallowing the Cenvat credit on input service is not legally sustainable. It is seen that the impugned order (para 11) examines the scope of 'input service'. The learned Commissioner (Appeals) observed that credit of service tax on input service is admissible only on those services which have connection or nexus with the manufacture and clearance of goods and includes services used in relation to activities relating to business. He proceed to deny the credit on commercial construction on the ground that the same is not connected to manufacture of industrial furniture. The impugned order has not examined whether the input service is eligible for credit as it has got nexus with taxable output service provided by the manufacturer. Thus, the discussion and findings were mis-directed resulting in the unsustainable conclusion. - Decided in favour of assessee Issues:1. Admissibility of Cenvat credit on industrial construction service for payment of excise duty on industrial furniture.Analysis:The case involved an appeal against an order disallowing a Cenvat credit on industrial construction service used for payment of excise duty on industrial furniture. The appellants were engaged in manufacturing industrial furniture and providing taxable services. The Department initiated proceedings due to doubts regarding the admissibility of the credit. The Original Authority disallowed the credit and imposed a penalty, which was upheld by the Commissioner (Appeals). The appellant contended that the credit was related to providing taxable output services and was rightfully taken. They argued that Rule 3(4) of the Cenvat Credit Rules allows the utilization of such credit for excise duty payment. The lower authorities were criticized for misapplying facts and reaching erroneous conclusions. The appellant, being both a manufacturer and service provider, maintained that the credit was used for providing output services, making it eligible for excise duty payment.The learned AR supported the lower authorities' findings, stating that the credit on commercial construction service was not available for manufacturing industrial furniture. However, upon examination, the appellate tribunal found that the credit was not denied based on the Cenvat Credit Rules but on the utilization of the credit for excise duty payment. The tribunal concluded that the lower authorities' reasoning lacked legal merit as there was no requirement for a direct correlation between credit availed on input services and its utilization. Rule 3(4) of the Cenvat Credit Rules allows for the utilization of credit for any excise duty on final products without such restrictions. The tribunal criticized the impugned order for incorrectly interpreting the scope of 'input service' and denying credit based on a lack of connection to the manufacture of industrial furniture. The tribunal held that the denial of Cenvat credit on input service for excise duty payment was not legally sustainable, ultimately setting aside the impugned order and allowing the appeal.