Tribunal grants sugar manufacturer CENVAT credit for renting godowns for storing sugar

The Tribunal allowed the appeals, granting the appellant, a sugar manufacturer, eligibility for CENVAT credit on service tax paid for renting godowns outside the factory premises for storing duty-paid sugar. The Tribunal held that the rented godowns qualified as places of removal, entitling the appellant to the credit, based on precedents and the definition under the Central Excise Act. The decision overturned the earlier denials of credit by the lower authorities, emphasizing the interpretation of "place of removal" and supporting the appellant's claim for the credit.

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Issues:
- Eligibility for CENVAT credit on input service of renting immovable property for storage of goods beyond the place of removal.

Analysis:
The case involved two appeals concerning the eligibility of the appellant, a sugar manufacturer, for CENVAT credit on service tax paid for renting godowns outside the factory premises for storing duty-paid sugar. The issue was whether the godowns should be considered places of removal or not, impacting the entitlement to credit. The original authority and the first appellate authority had denied the credit, emphasizing the need for the input service to be integrally connected with the manufacturing process. The appellant argued that the definition of place of removal includes depots where goods are stored after clearance from the factory, thus justifying their entitlement to credit. The appellant cited precedents like DSCL Sugar and Thiru Arooran Sugars Ltd to support their claim.

The Departmental Representative contended that there should be a nexus with the manufacturing process for an input service to be eligible for credit, and since the duty was paid at the factory itself, the service tax on godowns rented after removal from the factory should not qualify as an input service. However, the Tribunal analyzed the arguments and found that the show cause notice only questioned the status of godowns as places of removal, not the nexus with manufacturing. The Tribunal concluded that the godowns fell under the definition of places of removal as per the Central Excise Act and cited precedents like DSCL Sugar and Thiru Arooran Sugar Ltd to support the appellant's entitlement to credit based on similar cases.

In the final judgment, the Tribunal allowed the appeals, setting aside the impugned orders. The Tribunal upheld the appellant's entitlement to CENVAT credit on the service tax paid for renting immovable property for storing goods beyond the place of removal, following the precedent set by previous decisions in similar cases. The judgment was pronounced on 28.08.2018 by Mr. P. Venkata Subba Rao, Member (Technical) of the Appellate Tribunal CESTAT Hyderabad.

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