Commissioner Of Central Excise vs M/S.Lotte India Corporation Ltd

Sulekha Beevi C.S., Member (J)

Brief facts are that the respondents are engaged in manufacture of Sugar Confectionaries not containing cocoa and bubble-gum and are registered with the Central Excise department. They were availing Cenvat credit of duty paid on inputs, capital goods and input services in terms of Cenvat Credit Rules, 2004. It was noticed by the Department that the respondent for the period from January 2009 to December 2001 had availed input service credit of Rs.71,90,220/- based on I.S.D challans issued by their Regional Office and input service credit of Rs.1,06,06,094/- based on I.S.D challan issued by their Corporate Office. The Department was of the view that the credit availed on the input services distributed were not eligible as they had no nexus with the manufacturing activity. The show cause notice dt. 05.03.2013 was issued proposing to disallow the credit and also to recover the same along with interest and for imposing penalties. After due process of law, the original authority dropped the proceedings in favour of the assessee. Aggrieved by such order, the department is now before the Tribunal.

Ld. A.R Ms.Anandalakshmi Ganeshram appeared and vehemently argued that the order passed by the original authority is erroneous as various inputs services do not have any nexus with the manufacturing activity of the appellant. Ld. A.R referred to the impugned order and submitted that the credit has been availed on services in the nature of transportation, telephone and mobiles, insurance, AMC for copiers etc. which are not connected with the activity of the manufacturing. The original authority has held that the respondent is eligible for credit as these services are related to the activity of business of manufacture of the respondent. Further, the services viz. Advertising Agency, Maintenance and Repair, Artwork charges, Business Auxiliary Service, Chartered Accountant’s Company Secretary’s , Courier charges, Custodian Services, Housekeeping services, Lease line charges, Manpower Consultancy, Market Research, Online Information, Sales Promotion, Sea Freight, Secretarial Services, Security Services, Telecommunication, Telephone Services and Transportation Clearing and Forwarding Agent Services, Sales Commission, Agency Commission, Remuneration for C&F etc. do not qualify as input services as per the definition under Rule 2 (l) of CCR 2004. The credit not being eligible the original authority ought not to have allowed the same.

Ld. A.R also submitted that the credit distributed by the Regional Office as well as the Corporate Office of the respondent on the ISD challans / invoices is not eligible as these invoices do not show the nexus with the input services availed with the manufacturing activity. The decision in the case of Maruti Suzuki Ltd. Ltd. Vs Commissioner of Central Excise, Delhi-III – 2009 (240) ELT 641 (SC) was relied by the Ld. A.R to argue that the original authority has erred in holding that the credit is eligible and for dropping the proceedings. Ld. A.R prayed that the appeal may be allowed.

Ld. Counsel Shri M.N. Bharathi appeared and argued for the respondent assessee. It is submitted by the learned counsel that the major period is prior to 01.04.2011 and a small period falls from 01.04.2011 till December 2011. During the period prior to 01.04.2011 the definition of “input services” had a wide ambit as it included the words ‘activities relating to business’. The respondent has availed credit on the alleged services as they have nexus with the manufacturing activity. The department has not alleged in the SCN the reasons as to why credit has been denied and further has not explained as to how these services have no nexus with the manufacturing activity which are in the nature of sales promotion, transportation etc. and are essential for the manufacturing activity. The credit availed is legal and eligible.

It is argued by the learned counsel for the respondent that the reliance placed by the Department on the decision in the case of Maruti Suzuki Ltd. (supra) is misplaced for the reason that the\ said decision rendered by the Hon’ble Apex Court is in relation to inputs and not “input services”. The definition of inputs states that inputs have to be received and used within the factory premises. There is no such restriction for the availment of input services. The services like Chartered Accountant services, Company Secretary services, courier services etc. cannot be availed within the factory premises. Such services are eligible for credit. The Larger Bench decision in the case of Reliance Industries Ltd. Vs CCE & ST (LTU) Mumbai – 2022 (60) G.S.T.L. 442 (Tri.-LB) was relied by the learned counsel to argue that the credit availed on inputs services would be eligible even if they are not availed within the factory premises. The Larger Bench has distinguished the Hon’ble Apex Court decision of Maruti Suzuki Ltd. (supra) relied upon by the Ld. A.R.

Ld. Counsel pointed out that though it is alleged by the department that the credit distributed through ISD invoices / challans is ineligible they have not stated the reason how the credit is ineligible. It is merely stated that the input services are ineligible services and there is no allegation that the manner of distribution is incorrect. For this reason, the grounds put forth by the Department is not tenable.

We have heard both sides and perused the records carefully. The issue is with regard to eligibility of input service credit. In the show cause notice, it is stated by the department that various inputs services are not eligible for credit as they have no nexus with the manufacturing activity. The original authority has analyzed the definition of “input services” prior to 01.04.2011 and after and held that the credit is eligible. It is also appreciated by the original authority that these services have been used for the manufacturing activity of the respondent. The credit distributed by the Regional office and the corporate office on the ISD invoices / challans has been held to be eligible by the original authority observing that there is no allegation in the SCN that the credit has been distributed against the provisions of Rule 7 of CCR 2004. It is merely stated that credit distributed is not eligible.

We find that the department has relied upon the decision in the case of Maruti Suzuki Ltd. Ltd. Vs Commissioner of Central Excise, Delhi-III – 2009 (240) ELT 641 (SC) to put forward grounds that the credit is not eligible. The said case was rendered in a situation of analyzing the eligibility of credit on inputs and not “input services”. The decision in the case of Reliance Industries Ltd. Vs CCE & ST (LTU) Mumbai – 2022 (60) G.S.T.L. 442 (Tri.-LB) has categorically held that various services which come within the main part of the definition as well as the inclusive part of the definition of “input services” would be eligible for credit, even if availed outside the factory premises. We find that the department has not been able to show with evidence as to how these services have no nexus with the manufacturing activity.

From the discussions above, we find that the appeal filed by the department is without merits. The same is dismissed. Cross objection filed by the respondent/assessee is disposed of.