Case Law Details
M/s Honda Motorcycle & Scooter Vs CCE & ST (CESTAT Delhi)
Conclusion: Cenvat credit is allowable on service tax paid on rent of infrastructural facilities as common facilities availed by assessee on rent basis were in ‘relation to the manufacture of goods’ and an integral part of the overall activity of manufacturing. .
Held: In the present case, Revenue denied the benefit of cenvat credit to assessee in respect of service tax paid by them on renting of infrastructural facilities from M/s H Pvt. Ltd. It was held common facilities such as road, water supply facility, boundary wall infrastructure for supply of electricity etc. were absolutely essential for making the manufacturing facility to work. For example without „road‟ inside their factory premises, it was absolutely unthinkable to as to how the raw material, manpower and finished goods were going to have movement. Hence, common facilities availed by assessee on rent basis were in “relation to the manufacture of goods” and an integral part of the overall activity of manufacturing. Since the charges of rent/license fee paid by assessee must have been included in the cost of the finished product manufactured by assessee as per the provisions of Cenvat Credit Rules they were entitled to credit of service tax paid by them as the facilities were in relation to manufacturing of their finished product.
FULL TEXT OF THE CESTAT JUDGMENT
The brief facts of the matter are that the appellant/ assessee is engaged in manufacture of motorcycles and scooters falling under Central Excise Tariff Heading 87 of 1st Schedule to the Central Excise Tariff Act, 1985. The appellants have been availing facility of Cenvat credit on inputs, capital goods and input services under Cenvat Credit Rules, 2004. During the period from June 2011 to March 2016, the appellant have been availing input service credits on the services, such as (I) commission paid to agents of print media; (II) services of authorized service stations provided by the appointed dealers of the appellant to the buyers of vehicles under free after sale service and warranty period services ; (III) service tax paid on the rent for common civil infrastructure services availed by the appellant from M/s Honda Siel Car India Ltd. The Department had entertained a view that the appellant have wrongly availed input service credit on the above-mentioned services and a show cause notice demanding reversal of Cenvat credit amounting to Rs.9,85,38,215/- was demanded vide show cause notice dated 06/07/2016 which has been adjudicated by the learned Commissioner vide his order dated 09/02/2017, wherein the above-mentioned amount of the Cenvat credits have been confirmed under Rule 14 of Cenvat Credit Rules, a penalty of equal amount have also been imposed under Section 11AC (i) (c) of the Central Excise Act, 1944, personal penalty of Rs. 5,00,000/- and Rs. 10,00,000/- has also been imposed on Shri Sunil Kumar Gupta, Manager (Taxation) and Shri Naveen Kumar, Division Head (Finance and Account) of the appellant, respectively. The appellants are before us against the above-mentioned order-in-original. The learned Advocate appearing on behalf of the appellant has contended that repair and maintenance services received by the appellant from his authorized service stations cannot be denied to them as the scope of input service as mentioned under Rule 3 of the Cenvat Credit Rules and defined under Rule 2 (l) of the Cenvat Credit Rules has a specific mention that the appellant are entitled for credit on all input services used directly or indirectly, in or in relation to manufacture or clearance of final product. It can be seen from the scope of the definition of input service that it not only covers any services used directly or indirectly in relation to manufacture or clearance of the manufactured product, since the free after sale service coupons provided by them to the buyer of two wheelers have already formed part of the assessable value of the two wheelers manufactured and cleared by them and therefore the appellant is entitled for availment of Cenvat credit of input services used by them in this regard.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
