2022 (11) TMI 1145 - HC - Central Excise

Tribunal allows Cenvat Credit for taxable services on capital goods denying manufacturing of exempted goods.

Commissioner of Central Goods and Services Tax Versus M/s Chemex Oil Pvt. Ltd., Barotiwala

The Tribunal affirmed that the respondent was entitled to avail Cenvat Credit on capital goods as they were used for providing taxable services, not for ... CENVAT Credit - capital goods installed by the Respondent for manufacturing of exempted goods - dutiability of the final produce on the date of receipt of capital goods irrespective of whether the exempted goods have been manufactured or not - Business Support Service - time limitation - HELD THAT:- The facts in the present case are not in dispute. Admittedly, the respondent/assessee had initially filed a declaration on 04.08.2006 to avail benefit of Notification No.49-50/2003-CE, dated 10.06.2003, area based exemption for manufacture of goods. However, the respondent/ assessee then filed another declaration on 29.06.2007 to the effect that it had let out the premises on lease to Hindustan Liver Limited for manufacture of intended goods. Time limitation - HELD THAT:- The Show Cause Notice dated 13.07.2010, was issued with regard to the years 2006-2007, 2007-2008 & 2008-2009. Show cause notice could have been issued within one year from the last date of filing of ST-3 Returns, whereas, the show cause notice had been issued beyond the period of limitation on 13.07.2010. Learned counsel for the appellant/revenue has failed to point out any provision which required the respondent to intimate to the Department that he had availed the “CENVAT Credit” on the capital goods inputs or the input services, on which, it intended to take credit. It is not a case where the respondent had not maintained the records correctly or had filed incorrect returns. Respondent/assessee was required to disclose only those facts to the appellant/revenue as required under law. Hence, the Adjudicating Authority rightly came to the conclusion that the Show Cause Notice dated 13.07.2010 was barred by limitation. As per Rule 6(4) of the Cenvat Credit Rules, 2004, a manufacturer, who manufactures exempted goods, cannot take the benefit of “CENVAT Credit”. However, so far as the respondent/assessee is concerned, admittedly, it has not indulged in any manufacturing process - Since in the present case, the capital goods in question had never been used for any manufacturing activity, the learned Tribunal rightly held that the respondent/ assessee was entitled to avail “CENVAT Credit” on the goods in question. Since in the present case, the capital goods purchased by the respondent/assessee had never been used for manufacturing exempted goods by it, the learned Tribunal rightly came to the conclusion that the respondent/assessee was entitled to avail “CENVAT Credit” on the goods in question - the manufacturing aspect in relation to the plant and machinery had been taken over by Hindustan Liver Limited and the respondent/assessee had become a service provider and its activity relating to manufacture had ceased. No substantial question of law arises in this case, warranting interference - the appeal is dismissed. Issues Involved:1. Eligibility of Cenvat Credit for capital goods used in manufacturing exempted goods.2. Classification of services under 'Business Support Service' versus 'Renting of Immovable Property'.3. Limitation period for issuing Show Cause Notices.4. Entitlement of the respondent to avail Cenvat Credit on capital goods.Detailed Analysis:1. Eligibility of Cenvat Credit for Capital Goods Used in Manufacturing Exempted Goods:The appellant/revenue challenged the Tribunal's order allowing Cenvat Credit on capital goods installed for manufacturing exempted goods, arguing that eligibility should be determined based on the dutiability of the final product at the time of receipt of capital goods. The Tribunal, however, found that the respondent had not manufactured any exempted goods and had leased the premises to another company, thus becoming a service provider. The Tribunal held that the respondent was entitled to avail Cenvat Credit as the capital goods were used for providing taxable output services.2. Classification of Services under 'Business Support Service' versus 'Renting of Immovable Property':The appellant contended that the services provided by the respondent should be classified under 'Renting of Immovable Property' rather than 'Business Support Service'. The Tribunal, after examining the 'Wet Lease Agreement' between the respondent and the lessee, concluded that the service provided was composite and fell under 'Business Support Service', which is a taxable service. This classification allowed the respondent to avail Cenvat Credit on the capital goods used.3. Limitation Period for Issuing Show Cause Notices:The appellant argued that the Show Cause Notice issued for the recovery of wrongly availed Cenvat Credit was within the limitation period. The Tribunal, however, noted that the Show Cause Notice dated 13.07.2010, related to the years 2006-2007, 2007-2008, and 2008-2009, was issued beyond the permissible period of one year from the last date of filing ST-3 Returns. The Tribunal found no evidence of suppression of facts by the respondent and held that the notice was barred by limitation. Conversely, the Show Cause Notice dated 18.10.2010, for the year 2009-2010, was within the limitation period, and the respondent had already deposited the wrongly availed credit amount.4. Entitlement of the Respondent to Avail Cenvat Credit on Capital Goods:The Tribunal emphasized that the respondent had not engaged in any manufacturing activity using the capital goods. Instead, the respondent had leased the premises and machinery to another company and had become a service provider. Consequently, the Tribunal ruled that the respondent was entitled to avail Cenvat Credit on the capital goods as they were used for providing taxable output services. The Tribunal dismissed the appellant's reliance on the Surya Roshni case, noting that the facts differed significantly, as the respondent had not manufactured any exempted goods.Conclusion:The Tribunal concluded that no substantial question of law arose in this case. It affirmed that the respondent was entitled to Cenvat Credit on capital goods since they were used for providing taxable services and not for manufacturing exempted goods. The appeal was dismissed, and all pending miscellaneous applications were disposed of.