10 June 2024


Customs, Excise and Service Tax Appellate Tribunal

Raymond UCO Denim Pvt. Ltd. Vs. Commissioner of Central Excise




Credit avail on Service Tax paid on 'Courier Serves' is eligible to Cenvat Credit

Present is an appeal against order-in-original of Commissioner of Central Excise, denying CENVAT credit of Rs. 94,16,769, having been availed on taxes paid for procurement of 'courier service' between April 2005 and September 2009 and of Rs. 3,93,971 on utilising services of 'job workers' for same period. The denial of CENVAT credit on the former was consequent on the finding that, the definition of 'input service' in Rule 2(l) of CENVAT Credit Rules, 2004 specifies various activities that are directly or indirectly connected with the manufacture of goods or rendering of services which does not extend to any activity beyond the place of removal.

With regard to tax levied on conversion fee charged by the job worker, as provider of 'business auxiliary service', the activity for which service tax has been levied, pertains to rendering capital goods workable at regular intervals of usage. The input services pertain to tax discharged on goods used in the manufacture or services utilised for such activity. The repair of machinery is undoubtedly entitled to be considered as a service that has a connection with the manufacturing process. However, it is the tax paid as recipient of 'business auxiliary service' that is claimed to be eligible. There is no evidence on record that, the service on which tax was incurred pertained to re-layering of machinery used in production. Such evidence is required as prima facie, re-layering does not readily lend itself to conformity with definition in Section 65(19) of Finance Act, 1994. There is no reason to consider the tax paid on 'business auxiliary service' to be one that confirms the definition of 'input service' in Rule 2(l) of Rules, 2004.

'Courier service' was undisputedly, utilised for shipment of samples. Admittedly, the samples themselves are not the finished product and the availment of 'courier service,' even if for dispatch of samples is an expenditure that goes into the value of the final product. Though 'courier services' are utilised for despatch of samples, 'transportation' is an entirely different taxable entry, and the transportation that is referred to in the said definition pertain to tax on transportation of goods by road. The disputed CENVAT credit is related to manufacture of the finished goods. Hence, on a plain reading of the provisions of Rule 2(l) of CENVAT Credit Rules, 2004 and the facts and circumstances of the present dispute, along with superfluity, of one to one correlation between 'input services' and 'output,' it would appear that, the availment is not incorrect in law.

The denial of CENVAT credit on availment of services of courier is not in accordance with law and must be set aside. However, in relation to the activity on which tax was discharged by the supplier of business auxiliary service, the coverage of business auxiliary service cannot be held to extend to such activity for the purpose of availment of CENVAT credit. Appellant has raised the plea of bar of limitation as the show cause notice has invoked the extended period. The fact that there had been regular audits does not anywhere hide the suppression of relevant information which could have been laid to crystallisation of tax liability. Audit can only unearth which is declared and which is on record. The activity of business auxiliary service not being entitled to CENVAT credit in the given circumstances would not be on record. Hence, the plea of limitation does not merit acceptance. Appeal allowed.

Tags : CENVAT Credit Denial Legality

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