2017 (1) TMI 646 - AT - Central Excise

Appeal partially allowed, input services accepted under Cenvat Credit Rules. Remand for transport charges. Penalty set aside.

Hinduja Foundries Ltd. Versus Commissioner of Central Excise, Chennai

The tribunal partially allowed the appeal, deeming certain input services availed by the appellant as eligible under Rule 2(l) of the Cenvat Credit Rules, ... CENVAT credit - various input services - Rule 2(l) of Cenvat Credit Rules, 2004 - AMC for Attendance Monitoring machine - Factory Inspection building stability certificate - PF Audit Fees - Annual Listing fee - Professional services - AMC charges for weighing machine - Renewal of Audit Quality Management System - AMC charges for Photo copier - Depository Service - Held that: - the services availed are definitely in or in relation to the business or manufacturing activity of the appellant or otherwise required to be availed of in view of statutory reasons - These input services are not also disbarred by any of the clauses (A), (B), (BA) or (C) of the Explanation to Rule 2(l) ibid - all these services are very much eligible 'input services' - credit allowed. Construction of Overhead tank - Capital Civil Sundry Work - Labour charges for fabrication and erection of DSL system - Held that: - I find that they are in the nature of services relating to construction or execution of works contract or civil structure or part thereof or laying foundation of making of structures for setting up of capital goods which are specifically disbarred by (A) to the Explanation to Rule 2 (l) ibid - the services would not qualify as an eligible input service for the purpose of Rule 2(l) - credit disallowed. Transport & Loading Charges - Held that: - I find that these services relate not only to transportation and loading charges incurred with respect to raw material but also semi-processed as well as final products. There is no individual break up of the categories available and accordingly only for the limited purpose of determining the eligibility of each of the individual services, and also amounts involved in each case, the matter is required to be remanded to the original authority for de novo consideration - matter on remand. With regard to penalty, considering that the entire dispute has emanated on account of interpretational issues, penalty imposed under Rule 15 (1) of the Cenvat Credit Rules, 2004 is set aside. Appeal allowed - part of matter on remand - decided partly in favor of appellant. Issues:1. Eligibility of input services availed by the appellant during June 2011.Detailed Analysis:1. The issue in appeal concerns the eligibility of certain input services availed by the appellant in June 2011. The lower authority allowed cenvat credit for security services but denied credit for other input services based on Rule 2(l) of Cenvat Credit Rules, 2004. The Commissioner (Appeals) partially allowed further credit for certain input services but denied the remaining disputed credits. The appellant appealed to the forum seeking a resolution.2. During the hearing, the appellant's counsel argued for the eligibility of various input services. These services included construction of an overhead tank, AMC for attendance monitoring machine, factory inspection building stability certificate, PF audit fees, annual listing fee, capital civil sundry work, transport and loading charges, labor charges for fabrication and erection of DSL system, professional services charges for tax benefits, AMC charges for weighing machine, renewal of audit quality management system, AMC charges for photocopier, and depository service. The counsel contended that these services were essential for the business and should not be denied credit.3. The opposing party's counsel argued against the appeal, stating that the Commissioner (Appeals) had thoroughly analyzed the eligibility of the input services in question.4. After hearing both sides and reviewing the facts, the tribunal noted that the disputed input services were availed after April 1, 2011, when the definition of 'input services' under Rule 2(l) of CCR 2004 was amended. The tribunal found that most of the services, except for a few, were related to the business or manufacturing activities of the appellant and were not excluded by the clauses in the Explanation to Rule 2(l). Therefore, the tribunal allowed the appeal for these services as eligible input services.5. However, for services related to construction, execution of works contract, civil structures, or laying foundations for capital goods, which were specifically excluded under the Explanation to Rule 2(l), the tribunal rejected the appeal as these did not qualify as eligible input services.6. Regarding transport and loading charges, the tribunal found that further clarification was needed on the individual breakdown of these charges. The matter was remanded to the original authority for a detailed reconsideration based on statutory provisions, circulars, and legal precedents.7. The tribunal set aside the penalty imposed under Rule 15(1) of the Cenvat Credit Rules, considering the interpretational nature of the dispute.8. In conclusion, the appeal was partly allowed, with certain input services deemed eligible while others were rejected based on the specific provisions of Rule 2(l) of the Cenvat Credit Rules, 2004.