Lupin Ltd. Vs Pr. Commissioner of Central Tax (CESTAT Hyderabad)
Summary: CESTAT Hyderabad partly allowed Lupin Ltd.’s appeal against demands of Central Excise duty/CENVAT credit, interest and penalties arising from a show cause notice dated 06.03.2019. The principal dispute concerned CENVAT credit of ₹2,34,58,942 on input services used for setting up the manufacturing facility before commercial production commenced. The Tribunal held that deletion of the expression “setting up” from the inclusive portion of Rule 2(l) of the Cenvat Credit Rules, 2004 with effect from 01.04.2011 did not automatically exclude every service connected with establishment of a manufacturing facility. Services having a direct and demonstrable nexus with creation or installation of the manufacturing facility remained capable of falling within the substantive part of the definition covering services used directly or indirectly in or in relation to manufacture.
The Tribunal accordingly set aside this demand, relying upon Pepsico India Holdings Pvt Ltd., Vs Commissioner of Central Tax, GST-Commissionerate, Tirupati and Mangalam Cement Ltd., Vs Commissioner of Central Goods, Excise and Service Tax, Udaipur. The demand of ₹8,40,735 relating to maintenance of common roads, street lights, drainage and allied infrastructure was also set aside, the Tribunal holding that location outside the physical factory boundary was not by itself determinative where the services had the requisite nexus with manufacturing operations. Credit of ₹14,55,256 on SS stools, buckets, containers, drum racks, HDGI cable tray ladders, fire extinguishers, glass fittings and similar goods was allowed because eligibility was required to be independently examined under the definition of “inputs” and the Department had neither disputed their receipt and use within the factory nor established that they fell within a specific exclusion. On differential duty of ₹2,66,731 relating to CAS-4 valuation, the Tribunal remanded only the question whether the liability had already been discharged through the supplementary invoice dated 29.03.2019 under the transitional mechanism contemplated by Section 142(2)(a) of the CGST Act. The alleged unappropriated amount of ₹6,48,171 out of total reversal of ₹15,01,222 was likewise remanded for reconciliation of TRAN-1, GSTR-3B, CENVAT records and the electronic credit ledger. Interest was confined to credit actually utilised as permissible under Rule 14.
