2018 (3) TMI 493 - AT - Central Excise

Tribunal orders review on credit eligibility for input services; emphasizes nexus verification

The India Cements Ltd. Versus Commissioner of Central Excise, Chennai-I

The Tribunal allowed the appeal by remanding the matter for a fresh determination of credit eligibility on various input services disallowed by the ... CENVAT credit - various input services - denial on account of nexus - Held that: - the eligibility of credit in respect of most of the services have been decided in the case law relied upon by the appellant. However, it requires verification as to whether subject services are eligible for credit after going through the invoices. When invoices are proper and there is no dispute with regard to consumption of services and payment of service tax, the credit availed on ISD invoices are to be allowed if otherwise in order - the issue requires reconsideration - appeal allowed by way of remand. Issues: Disallowance of credit on various input services.Analysis:1. Disallowance of Credit on Various Input Services:The case involved the disallowance of credit on various input services by the appellant, who is engaged in manufacturing Ordinary Portland Cement and Portland Pozzolana Cement. The original authority confirmed a demand amount with interest and penalty but provided an option for a reduced penalty upon payment within a specified period. The appellant contested the disallowance and approached the Tribunal. The appellant's counsel cited several Tribunal judgments to support their claim that the issue was covered by precedents. The adjudicating authority had disallowed credit on services like Convention Services, Design Services, Event Management Services, and others, stating a lack of nexus with the manufacturing activity. Additionally, certain services were disallowed on the assumption that they were used by Input Service Distributor (ISD) units, hence not eligible for credit. The appellant argued that these disallowances were erroneous and that they were entitled to the credit. The respondent reiterated the findings of the impugned order, emphasizing the appellant's failure to establish the connection between the services and manufacturing activity.2. Tribunal's Decision and Remand:After hearing both parties and reviewing the submissions and records, the Tribunal acknowledged that most issues had been addressed in the case laws relied upon by the appellant. However, it noted the need for verification of the eligibility of credit concerning specific services based on the invoices. The Tribunal disagreed with the adjudicating authority's reasoning for disallowing credit on services billed to the ISD, emphasizing the purpose of input services distribution to facilitate credit for manufacturers with multiple units. The Tribunal directed a reconsideration of the eligibility of credit by the adjudicating authority, highlighting the importance of examining services falling under the exclusion part of the definition of 'input services' post an amendment in 2011. Consequently, the Tribunal set aside the impugned order and remanded the matter for a fresh determination of credit eligibility, leaving all issues open for reconsideration. The appeal was allowed by way of remand, indicating a favorable outcome for the appellant pending further review by the adjudicating authority.In conclusion, the judgment addressed the disallowance of credit on various input services, highlighting the importance of establishing a nexus between the services and manufacturing activity. The Tribunal's decision to remand the matter for reconsideration underscored the need for a thorough assessment of credit eligibility based on the specific services and invoices, ensuring compliance with the legal framework governing input services distribution and credit availment.