2016 (12) TMI 1224 - AT - Central Excise

Appellant wins Cenvat credit appeal: Directors' expenses allowed, untraceable invoices accepted

The Tribunal allowed the appellant's appeal in a case concerning denial of Cenvat credit. It held that expenses incurred by the company, even if invoiced ... Cenvat credit admissibility - Input service - Proof of invoice and verification on remand - Banking services-relaxation regarding invoice requirement - Defect in invoice-non mention of service tax registration number not a ground to deny creditCenvat credit admissibility - Invoices in name of directors/employees - Cenvat credit where invoices were in the name of directors or employees but expenditure was incurred by and booked to the company - HELD THAT: - The Tribunal found that where expenditure was incurred for the company and the invoices, although not in the company's name, were in the names of directors or employees and the amounts were admitted and booked in the appellant's books, credit could not be denied on that ground. The factual acceptance that the services were received and accounted for by the appellant made the absence of the company name on the invoice a technical irregularity which did not defeat the claim for Cenvat credit. [Paras 6]Credit allowed despite invoices being in the names of directors/employees.Proof of invoice and verification on remand - Cenvat credit claimed in respect of invoices which were not available or traceable at adjudication - HELD THAT: - The Tribunal accepted the appellant's submission that most of the previously untraceable invoices had since been located and that for remaining invoices certificates from service providers had been obtained. Rather than decide the claim on the record as it stood, the Tribunal remanded the matter to the original adjudicating authority so that the appellant could produce the invoices/documents and the authority could verify them and pass a de novo adjudication in light of those proofs. The remand was directed for verification and fresh adjudication, not for allowance without verification. [Paras 6, 7]Matter remanded to the original adjudicating authority for verification of invoices and de novo adjudication.Input service - Cenvat credit admissibility - Whether specific services (construction of foundation, security cabin, scrap yard, shifting of machines, air fare of directors, cleaning services) qualify as input services and whether civil works at staff quarters and in HDFC colony qualify - HELD THAT: - The Tribunal held that services directly related to the manufacturing activity-construction of foundation in the factory, construction of security cabin, construction of scrap yard, and shifting of machines-fell within the inclusion part of the definition of input services and credit was admissible. Air fare and cleaning services were also held to relate to the business activity and allowable. Conversely, civil work at staff quarters and civil work in HDFC colony were found not to be related to the factory's manufacturing activity and therefore could not be treated as input services. [Paras 6]Credit allowed for services directly related to manufacturing and business activity; credit disallowed for civil works related to staff quarters/HDFC colony.Defect in invoice-non mention of service tax registration number not a ground to deny credit - Denial of Cenvat credit solely because service tax registration number was not mentioned on the invoice - HELD THAT: - The Tribunal observed that mere non mention of the service tax registration number on the invoice, when there was no dispute that the invoice was raised to the appellant and the services were received, did not justify denial of Cenvat credit. The technical omission of the registration number was not a substantive impediment to credit where the receipt and accounting of the service were otherwise established. [Paras 6]Credit cannot be denied solely for non mention of the service tax registration number on the invoice.Banking services-relaxation regarding invoice requirement - Denial of Cenvat credit for banking charges where bills/invoices were not available - HELD THAT: - Relying on the Cenvat Credit Rules which provide relaxation for banking services, the Tribunal held that absence of conventional invoices did not justify denial of credit. If bank documents (for example bank statements) establish the payment of service tax on banking charges, that is sufficient proof for allowing Cenvat credit in respect of banking services. [Paras 6]Credit allowed for banking charges even in the absence of conventional invoices, subject to proof from bank documents.Final Conclusion: Impugned order set aside and matter remanded to the original adjudicating authority for de novo adjudication and verification of invoices in accordance with the Tribunal's observations; otherwise credit allowed on the specified categories of services and invoice defects. Appeal disposed of by remand. Issues Involved:Denial of Cenvat credit on various grounds including invoices not in the name of the appellant, untraceable invoices, services not considered as input services, missing service tax registration numbers on invoices, and denial of credit on banking charges.Analysis:1. Invoices not in the name of the appellant:The appellant argued that even though certain invoices were not in the name of the company but in the name of directors or employees, the expenses were incurred by the company and accounted for in its books. The Tribunal agreed that as long as the expenses were legitimately incurred by the company, credit should be allowed irrespective of the name on the invoices.2. Untraceable Invoices:The appellant stated that most of the previously untraceable invoices were now available and could be produced for verification. The Tribunal decided to remand the matter so that the appellant could present the invoices for verification, and if found valid, the credit should be allowed.3. Services not considered as input services:The Tribunal differentiated between services directly related to the manufacturing unit, such as construction work within the factory premises, which were considered as input services eligible for credit. However, services related to staff quarters or other non-factory areas were not considered as input services. The Tribunal allowed credit for services directly linked to the business activity.4. Missing Service Tax Registration Numbers:The Tribunal held that the absence of a service tax registration number on certain invoices should not be a reason to deny Cenvat credit, especially when there is no dispute regarding the services received by the appellant. The Tribunal emphasized that credit should not be disallowed solely based on the absence of the registration number.5. Denial of Credit on Banking Charges:Regarding banking charges, the appellant argued that as per the Cenvat Credit Rules, even without invoices, proof of service tax payment through bank documents should suffice for allowing credit. The Tribunal agreed that the absence of invoices for banking charges should not lead to the denial of credit, as relaxation is provided in the rules for such cases.Conclusion:The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for a fresh decision, considering the observations made. The appellant was deemed prima facie entitled to the Cenvat credit that was previously disallowed, subject to verification of the invoices to be produced. The appeal was disposed of through remand for further adjudication.