Appellant granted cenvat credit for Engineering Services in R&D activities

The Tribunal ruled in favor of the appellant, holding them eligible for cenvat credit on Consulting Engineers Services used in R&D activities in the Engineering Research Centre for manufacturing prototypes. The Tribunal rejected the Revenue's argument that prototypes were exempt from duty, citing a previous judgment establishing eligibility for similar services. Consequently, the Tribunal set aside the order denying the credit and allowed the appeal.

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Issues involved:
Denial of cenvat credit on Consulting Engineers Services used in R&D activities in the Engineering Research Centre for manufacturing prototypes.

Analysis:
1. The appeal challenged the denial of cenvat credit on service tax paid for input services used in Engineering Research Centre (ERC) for manufacturing prototypes. The adjudicating authority held the appellant ineligible for the credit under Rule 6(1) of Cenvat Credit Rules, 2004.

2. The appellant's counsel argued that the prototypes manufactured in ERC were further used for vehicles on which excise duty was discharged. Referring to a previous favorable tribunal decision, the counsel contended that the services were essential for manufacturing vehicles, thus making the appellant eligible for cenvat credit.

3. The Revenue argued that prototypes were exempt from duty, hence cenvat credit was not applicable. Citing precedents and definitions, the Revenue contended that prototypes were not liable for duty, thus the appellant should not receive cenvat credit for the input services used in manufacturing prototypes.

4. The Tribunal analyzed the issue and referred to a previous judgment where it was held that services used in manufacturing prototypes were in relation to the manufacture of commercial vehicles, making the appellant eligible for cenvat credit. The Tribunal rejected the Revenue's argument based on the exemption of prototypes from duty and ruled in favor of the appellant.

5. The Tribunal concluded that since a previous decision had already established the eligibility of cenvat credit for similar services used by the appellant, the impugned order denying the credit was not sustainable. Consequently, the Tribunal set aside the order and allowed the appeal.

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