2016 (11) TMI 408 - AT - Central Excise

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

Tata Motors Ltd. Versus Commissioner of Central Excise, Pune I

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 ... Cenvat credit - Consulting Engineers Services - Rule 6(1) of Cenvat Credit Rules, 2004 - Held that: - the issue involved in this case is regarding the eligibility to avail cenvat credit on the input services which are used in ERC which manufactured/ developed prototype of cars - It is seen that any service used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products would be eligible for Cenvat credit. When a manufacturer receives “Consulting Engineer’s Service” for the design of the vehicle and utilised those services in the manufacture of prototypes, the usage is in relation to the manufacture of vehicles - Decided in favor of the assessee. 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.