Kellogs India Pvt Ltd Vs Commissioner of Central Tax (CESTAT Hyderabad)
The appeal challenged Order-in-Appeal No. TTD-EXCUS-000-APP-131-18-19 dated 17.01.2019, which had upheld the adjudication order denying CENVAT credit to the appellant.
The appellant manufactures prepared foods by swelling or roasting cereal or cereal products and is registered under central excise and service tax. Based on intelligence gathered by the anti-evasion officers, the department investigated the appellant’s availment of CENVAT credit on certain input services. The investigation revealed that the appellant had entered into a development agreement and a lease deed with M/s Sri City (P) Ltd., the developer and manager of the industrial estate where the appellant established its factory. Under these agreements, the appellant paid charges, along with service tax, under the category of “Renting of Immovable Property Service.” The disputed CENVAT credit related to service tax paid on infrastructure development charges and the lease arrangements with M/s Sri City (P) Ltd.
The department’s case was that these services were used for setting up the manufacturing plant. According to the department, the expression “setting up” had been deleted from the definition of “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004 with effect from 01.04.2011 by Notification No. 3/2011-CE(NT) dated 01.03.2011. On this basis, a show cause notice was issued, culminating in an adjudication order disallowing CENVAT credit of Rs. 1,39,52,380/-, ordering its recovery under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A, and imposing penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The first appellate authority upheld the adjudication order, leading to the present appeal.
