2016 (10) TMI 450 - AT - Central Excise

Appellant wins input service credit dispute, except for Guest House Services. Tax liability imposed on disallowed credit.

The appellant successfully argued that various services availed were integrally connected with manufacturing activities and fell under the definition of ... Dis-allowance of CENVAT credit - input services, integrally connected with manufacturing activity - courier services - security services outside the factory - association membership services - information systems consultancy - banking services - rent for another plant or same manufacturer - software development - services received in R&D centre - royalty services - ISO Certification services - invoice not produced - Registration number of service provider not indicated in the invoice - Held that: - no manufacture can be carried out without the very essential services of insurance, hiring of space supported by rent payment, man-power and the like nature apart from other services as above, availed. When the records were examined there is no specific evidence to the contrary comes out to prove that those services were no way irrelevant or dispensable to carry out manufacturing activity - CENVAT credit allowed. The decision in the case of Ramala Sahkari Chini Mills Ltd., U.P. Vs Commissioner of Central Excise, Meerut-I [2016 (2) TMI 902 - SUPREME COURT] relied upon where it was held that the activity, which is integrally connected and contributory to the output as well as output services and inextricably linked, there cannot be denial of Cenvat credit. Guest House Services - service tax paid on rent paid - Held that: - Appellant is liable to discharge the tax liability with interest - CENVAT credit not allowed - equal amount of penalty of the tax liability imposed. Appeal disposed off - decided partly in favor of appellant. Issues:Disallowed Cenvat credit on various services availed in manufacturing activity.Analysis:The appellant contended that certain services availed, including Courier Services, Security Services, Association Membership, Information Systems consultancy, Banking Services, Rent for Guest House, Software Development, R&D Centre Services, Royalty Services, ISO Certification Services, and others, were integrally connected with manufacturing activity and fell under the inclusive definition of 'input service.' The authority below disallowed Cenvat credit without evidence or good reason.The Revenue argued that the disallowance was appropriate as the services were deemed irrelevant for the manufactured output. However, upon hearing both sides and examining the record, it was found that essential services like insurance, space rental, manpower, and others were crucial for manufacturing activities. The law, as established by the Larger Bench of the Supreme Court, states that if an activity is integrally connected and contributory to the output, Cenvat credit cannot be denied.Based on this legal principle, the appellant was deemed entitled to Cenvat credit on all the mentioned services except for Guest House Services, for which service tax was paid on the rent. The appellant was directed to discharge the tax liability on that specific service with interest. No penalty was imposed except for an equal amount of penalty on the tax liability related to the disallowed Guest House Services credit.Therefore, the appeal was allowed to the extent indicated above, and consequential relief was to follow as per the law. The judgment was dictated and pronounced in open court by Shri D.N. Panda, Judicial Member of the Appellate Tribunal CESTAT CHENNAI.