2018 (10) TMI 1547 - AT - Central Excise

Tribunal ruling on service tax for ADM maintenance & warehouse construction, credit denied for lack of nexus.

M/s Akzo Noble (India) Ltd. Versus Commissioner of Customs, Central Excise & Service Tax, Hyderabad – IV

The Tribunal upheld the demand for recovery of service tax on Automatic Dispensing Machine (ADM) maintenance at dealer premises, denying CENVAT credit due ... CENVAT Credit - input services - construction of warehouse within the factory premises - repair and maintenance of Automatic Dispensing Machines (ADM) installed at the dealer’s premises - It is the case of Revenue that the maintenance of these machines which are beyond the stage of manufacture and place of removal does not entitle the appellant to credit of service tax paid on maintenance of these machines - time limitation. Construction of warehouse - Held that:- In this case the warehouse in question was built within the factory premises and I do not find any force in the argument of the Revenue that simply because the warehouse is not meant for manufacture the appellant is not entitled to the credit of service tax. The warehouse being prior to the place of removal, the service tax paid on construction of the same is available to the appellant the demand on this count therefore needs to be set aside - credit allowed. Maintenance of ADMs - Held that:- These are used in relation to the business by the dealers of the appellant and not by the appellant himself. The manufacture and clearance of their products is complete the moment of the goods leave the factory or other place of removal. What happens thereafter is not part of the manufacture although it may be part of the business of the appellant - appellant is not entitled to the credit of service tax or the maintenance of ADMs at their dealers premises which are beyond the place of removal. Time limitation - Held that:- The nexus between irregularly availed CENVAT credit on such input services and their intention to evade Central Excise duty is apparent from the face of the record - the extended period of limitation is invokable in this case. Appeal allowed in part. Issues:1. Denial of CENVAT credit on service tax paid for construction of warehouse within factory premises.2. Denial of CENVAT credit on service tax paid for repair and maintenance of Automatic Dispensing Machines (ADM) at dealer premises.3. Question of limitation regarding the credit availed on these services.Analysis:Issue 1: Denial of CENVAT credit on warehouse constructionThe appellant, a paint manufacturer, claimed CENVAT credit on the service tax paid for constructing a warehouse within the factory premises. The Revenue argued that the warehouse had no nexus to the manufacturing process, thus denying the credit. The Tribunal analyzed that the credit of service tax on the warehouse construction is available as it was within the factory premises, and the service tax paid on its construction is admissible as it is prior to the place of removal. Therefore, the demand to deny credit on this count was set aside.Issue 2: Denial of CENVAT credit on ADM maintenanceRegarding the denial of CENVAT credit on service tax paid for the repair and maintenance of ADMs at dealer premises, the Tribunal found that these machines were used by the dealers, not the appellant, after the products were manufactured and cleared. The maintenance of ADMs beyond the place of removal does not entitle the appellant to credit, as it is not part of the manufacturing process. Thus, the appellant was not entitled to the credit of service tax on ADM maintenance at dealer premises.Issue 3: Question of limitationThe appellant contested the demand on the grounds of limitation, stating that they had disclosed all credits in their returns and had not suppressed any facts. The Tribunal held that the appellant had wrongly availed CENVAT credit beyond the place of removal, leading to the evasion of Central Excise duty. The extended period of limitation was deemed applicable due to the apparent nexus between irregularly availed credit and the intention to evade duty. Consequently, the demand for recovery of service tax on ADM maintenance was upheld, while the demand for service tax on warehouse construction was set aside, with a reduction in interest and penalty proportionately.In conclusion, the Tribunal disposed of the appeal by upholding the demand for recovery of service tax on ADM maintenance at dealer premises and setting aside the demand for service tax on warehouse construction within the factory premises.