2024 (2) TMI 816 - AT - Central Excise

Tribunal Overturns Decision, Grants Credit for Security Services Used in Manufacturing and Trading Activities.

The Tribunal set aside the order of the First Appellate Authority (FAA), allowing the appeal. The FAA had disallowed credit for security services, arguing ... Disallowance of credit availed by the appellant on security services - security services provided for the factory premises as well as trading premises is covered under Rule 6(5) of the CENVAT Credit Rules, 2004 or not - non-maintenance of separate books of account for the common input services - HELD THAT:- The First Appellate Authority (FAA) has analysed the scope of Rule (3) of CENVAT Credit Rules vis-à-vis, the activities carried on by the appellant. The First Appellate Authority (FAA) has observed that with regard to the credit of goods, the appellant was neither a manufacturer/producer nor a provider of taxable output service, since at the material time trading was neither taxable nor exempted. Moreover, according to the First Appellate Authority (FAA) exempted goods would refer only to the goods manufactured by the appellant, on which no duty was payable, but here the appellant had only bought and sold goods instead of those which were manufactured by it. In view of the above discussions, the First Appellate Authority (FAA) has concluded that the appellant was not entitled to credit attributable to credit of goods by virtue of Rule 3 which restricts and allow credit only to the manufacturer of goods or to the provider of output services. It is not the case of the revenue that ‘security service’ was used exclusively in the manufacturing unit or used exclusively in the trading unit of the appellant, but the appellant has all along claimed that the said service was used as a common service in both the units. The amendment to Rule 2(e) was not applicable since the period under dispute is from June 2007 to January 2009 and hence, it is difficult to construe trading activity as an exempted service and that the service in question cannot be held to have been used in the provision of exempted service alone. The impugned order of the First Appellate Authority is unsustainable in law - appeal allowed. Issues involved: The appeal challenges the modification of the Original Order-in-Original (OIO) disallowing credit availed on security services. The main issue is whether the First Appellate Authority (FAA) was correct in disallowing the credit.Details of the judgment:1. The Original authority initially raised concerns about the appellant availing ineligible input service credit, but after adjudication, it was concluded that the security services for the factory and trading premises were directly connected with the business, and the appellant was allowed the credit for these services.2. The scope of doubt and adjudication was limited to whether the service was connected with the appellant's business, which was answered in favor of the appellant.3. The department filed an appeal challenging the finding of the OIO, raising the issue of non-maintenance of separate books of accounts for common input services, which was not addressed in the Show Cause Notice or the OIO.4. The FAA analyzed Rule 3 of CENVAT Credit Rules in relation to the activities of the appellant. It was observed that the appellant was not entitled to credit for goods as they were not a manufacturer/producer or provider of taxable output services, and trading was neither taxable nor exempted.5. The appellant argued that the impugned services were used for both manufacturing and trading activities, not exclusively for exempted goods or services. The appellant claimed that the service was used as a common service in both units, and the amendment to Rule 2(e) regarding exempted services was not applicable to the disputed period.6. The Tribunal found that the impugned order of the FAA was unsustainable in law and set it aside, allowing the appeal.Separate Judgment: No separate judgment was delivered by the judges.