2026 (2) TMI 1336 - AT - Central Excise

Input service nexus determines Cenvat credit; courier and record keeping qualify, GTA/freight remanded for factual review.

Cenvat credit is allowable where services bear a sufficient nexus to manufacture or clearance up to the place of removal: courier and record keeping ... Wrongly availed the Cenvat credit of service tax paid on various input services - Interest and penalty on three input services namely, ‘courier, goods transport agency (GTA) / freight services and record keeping services’ - services in relation to the manufacture of the final products and clearance of final products upto the place of removal - failure to examine documentary evidence in denial of GTA credit - definition of the input services as provided under Rule 2(l) - Denial of Cenvat credit on input services, namely, courier and record keeping services - HELD TAHT:- These two services have been consistently held by various Benches of the Tribunal as input services. In the appellant’s own case this Tribunal has also allowed the Cenvat credit on the courier services for the period December 2013 to November 2014 i.e., post 01.04.2011, to the appellant in the case [2016 (7) TMI 632 - CESTAT CHANDIGARH] and for pre 01.04.2011 vide Final Order 60035/2024 dated 30.01.2024 by holding that the courier services are used in relation to manufacturing activity. - Ld. Commissioner has also allowed the credit to the appellant on the courier services vide the Order-in-Original dated 14.05.2013 for the period 2004 to 2011 and Order-in-Original dated 30.06.2014 for the period January 2012 to November 2012 by holding that the courier services are used in relation to the manufacturing process. Cenvat credit availed on courier services is allowable; demand in respect of courier services set aside. Record keeping Services - These services are availed to store data and records in exchange for rent and these records are essential for accounting and auditing and for appellant to be a tax compliant entity. Therefore, the record keeping services are intrinsically related to accounting and auditing services. Tribunal has also allowed the Cenvat credit on record keeping charges for the period December 2013 to November 2014 i.e., post 01.04.2011, to the appellant in the case [2016 (7) TMI 632 - CESTAT CHANDIGARH] and further the Ld. Commissioner also allowed the credit to the appellant for record keeping services vide the Order-in-Original dated 14.05.2013 involving the period post 01.11.2011 and Order-in-Original dated 30.06.2014 for the period January 2012 to November 2012 on the basis that the record keeping services are used in the manufacturing process. Cenvat credit availed on record keeping services is allowable; demand in respect of record keeping services set aside. Failure to examine documentary evidence in denial of GTA credit - cenvat credit on GTA (freight) services - eligibility for Cenvat credit in respect of goods transport agency (GTA) freight services - HELD THAT: - The Commissioner denied credit on GTA services on the ground that the appellant failed to prove that such services were received up to the place of removal. The appellant placed invoices and other documents on record before the Commissioner and additionally filed documents with the Tribunal; however, the Commissioner did not examine or make findings on those documents. Because the factual determination whether the services were received up to the place of removal requires examination of the documentary evidence, the Tribunal declined to decide the issue itself and remanded the matter to the Commissioner to consider the documents and give a reasoned finding. Matter remanded to the Commissioner for fresh consideration of eligibility of Cenvat credit on GTA (freight) services after examination of the documentary evidence. Final Conclusion: The appeal is partly allowed. - demand of interest penalty is not sustainable because the demand itself is not sustainable. Issues: (i) Whether Cenvat credit availed on courier services is allowable as input service under Rule 2(l) of the Cenvat Credit Rules, 2004; (ii) Whether Cenvat credit availed on record keeping services is allowable as input service under Rule 2(l) of the Cenvat Credit Rules, 2004; (iii) Whether Cenvat credit availed on goods transport agency (GTA) / freight services is allowable where receipt of services up to the place of removal is disputed.Issue (i): Whether courier services qualify as input services for claiming Cenvat credit under Rule 2(l) of the Cenvat Credit Rules, 2004.Analysis: The Tribunal examined precedent and the appellant's use of courier services for delivery of documents and business correspondence in relation to manufacture and clearance of final products up to the place of removal. The Tribunal noted prior holdings by various benches and earlier orders in the appellant's own matters treating courier services as input services and applying the definition in Rule 2(l) of the Cenvat Credit Rules, 2004.Conclusion: The denial of Cenvat credit on courier services is set aside and the appellant is entitled to Cenvat credit on courier services (in favour of the assessee).Issue (ii): Whether record keeping services qualify as input services for claiming Cenvat credit under Rule 2(l) of the Cenvat Credit Rules, 2004.Analysis: The Tribunal considered authorities and facts showing record keeping services are used for storing data and records necessary for accounting, auditing and tax compliance, and found consistent judicial and departmental determinations treating such services as input services under Rule 2(l) of the Cenvat Credit Rules, 2004.Conclusion: The denial of Cenvat credit on record keeping services is set aside and the appellant is entitled to Cenvat credit on record keeping services (in favour of the assessee).Issue (iii): Whether Cenvat credit on GTA/freight services is allowable where the Commissioner held the appellant failed to prove receipt of services up to the place of removal.Analysis: The Tribunal found that documentary evidence relating to receipt of GTA services up to the place of removal was placed before the Commissioner but was not examined and no finding recorded. Given the factual nature of the determination (receipt up to place of removal) and applicable principles concerning place of removal, the Tribunal concluded that the matter requires fresh examination by the Commissioner rather than a factual finding by the Tribunal on the record before it.Conclusion: The issue regarding entitlement to Cenvat credit on GTA/freight services is remanded to the Commissioner for fresh adjudication after examining the documentary evidence (neutral as to favour until decided).Final Conclusion: The appeal is partly allowed: Cenvat credit on courier and record keeping services is upheld for the appellant while the question of Cenvat credit on GTA/freight services is remanded to the Commissioner for fresh decision after consideration of the documentary evidence.Ratio Decidendi: Where services are shown to have a sufficient nexus with manufacture or clearance up to the place of removal, they qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004; factual disputes about receipt of services up to the place of removal must be examined and decided on evidence by the adjudicating authority and cannot be conclusively determined by the Tribunal without such examination.