Tribunal allows Cenvat credit on services related to manufacturing business

The Tribunal rejected the denial of Cenvat credit on various services, citing that services related to the manufacturing business entitle credit, even if availed outside the unit. The demand for service tax was overturned as discrepancies were found in the notices, and certain activities were not considered Business Auxiliary Service. No penalties were imposed as no credit denial or service tax demand was upheld. Therefore, the impugned orders were set aside, and the appeals were allowed.

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Issues:
- Denial of Cenvat credit on various services
- Demand of service tax

Denial of Cenvat credit on various services:
The appellant filed appeals against orders denying credit and demanding service tax. The audit team found the appellant wrongly availed Cenvat credit and did not pay service tax under Business Auxiliary Service. The issues were adjudicated, and demands were confirmed with penalties. The appellant argued that services availed were related to their manufacturing business, entitling them to credit. The Tribunal cited a Bombay High Court decision, stating any service availed during manufacturing allows credit. It was noted that services availed outside the unit are permissible if related to the manufacturing business. The appellant had reversed some credit, which was not discussed. Therefore, the credit denial was rejected.

Demand of service tax:
The demand was confirmed based on commissions received from insurance and banking companies under Business Auxiliary Service. The Tribunal found discrepancies in the show cause notices and noted the demand was beyond the scope. Additionally, the demand for the period was time-barred. Regarding commissions from banks, the appellant's activities were deemed not Business Auxiliary Service, following a precedent. The demand on warranty charges was deemed unsustainable, citing a circular. The demand on spare parts/consumables was rejected based on a High Court ruling and a CBEC circular. The incentive received for excess vehicle sales was not considered Business Auxiliary Service, as the appellant was acting as a dealer, not a promoter. The demand was deemed unsustainable, and the extended limitation period was not applicable. As no credit denial or service tax demand was upheld, no penalties were imposed. Consequently, the impugned orders were set aside, and the appeals were allowed.

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