2017 (11) TMI 87 - AT - Central Excise

Tribunal Upholds Commissioner's Decision on CENVAT Credit, Emphasizing Compliance and Documentation

The Tribunal upheld the Commissioner (A)'s decision, emphasizing the interconnected nature of the units, compliance with regulatory requirements, and the ... CENVAT credit - input services availed at the job-work - job-work carried out at other unit of assessee - Held that: - the assessee has a centralized accounting system and the other units, where the job work is being carried out, is nothing but an extended unit of the main unit. The movements of the materials from the main unit to the job work unit were on the strength of Delivery Challan-cum-Material Gate Passes and job worked items were returned by the job work units under their own Material Gate Pass. Reliance placed in the case of Greaves Cotton Ltd. Versus Commissioner of Central Excise, Chennai-II & IV [2014 (8) TMI 654 - CESTAT CHENNAI], where it was held that in so far as both the units are under the same manufacturer and the input service credit is related to the advertisement charges, 'relating to business' of the same assessee, there is no reason to deny the input service credit to the appellants. CENVAT credit allowed - appeal dismissed - decided against Revenue. Issues:- Appeal against Order-in-Original allowing CENVAT credit on rent, manpower services, and security services.- Eligibility of CENVAT credit on input services availed at job work unit.- Interpretation of input services definition.- Centralized accounting system and extended units.- Compliance with delivery challans and material gate passes.- Intimation to department regarding job work units.- Reliance on case laws supporting assessee's position.Analysis:1. Appeal against Order-in-Original:The Revenue filed an appeal against the Order-in-Original allowing CENVAT credit on rent, manpower services, and security services. The Commissioner (A) set aside the original order, demanding recovery of wrongly taken CENVAT credit and imposing penalties. The respondent-assessee appealed, and the Commissioner (A) allowed the appeal based on Tribunal decisions, leading to the present appeal by the Revenue.2. Eligibility of CENVAT credit:The Revenue argued that service tax on input services at the job work unit is not eligible for CENVAT credit. The consultant for the assessee defended the order, highlighting the centralized accounting system and the extended nature of units carrying out job work activities. The movement of materials, reflected in returns, and common financial accounts support the assessee's position.3. Interpretation of input services:The Revenue contended that the Commissioner (A) wrongly extended the definition of input services. However, the consultant for the assessee emphasized the specific job activities assigned to units away from the main unit, supported by a centralized accounting system and historical acceptance by the department.4. Centralized accounting system and extended units:The Tribunal found that the job work units were extensions of the main unit, with movements of materials and financial transactions integrated under a centralized system. The presence of a common Profit and Loss account, Balance Sheet, and consolidated tax returns further reinforced the interconnected nature of the units.5. Compliance with delivery challans and material gate passes:The Tribunal noted that the movements of materials between the main unit and job work units were documented through Delivery Challan-cum-Material Gate Passes. This practice ensured transparency and accountability in the utilization of input services and materials.6. Intimation to department regarding job work units:The respondent had duly informed the department about the establishment of job work units away from the main unit, demonstrating transparency and compliance with regulatory requirements. Such proactive communication further supported the legitimacy of the CENVAT credit availed by the assessee.7. Reliance on case laws:The Tribunal considered various case laws cited by the respondent, such as CCE vs. Biocon Ltd., Apotex Research Pvt. Ltd. vs. CCE, and others, which favored the assessee's position. By applying the principles established in these judgments, the Tribunal upheld the impugned order, dismissing the Revenue's appeal.In conclusion, the Tribunal upheld the Commissioner (A)'s decision, emphasizing the interconnected nature of the units, compliance with regulatory requirements, and the historical acceptance of the credit availed. The judgment underscores the importance of a centralized accounting system and transparent documentation in supporting CENVAT credit claims.