2025 (7) TMI 1335 - AT - Central Excise

Eligibility to avail CENVAT credit - various input services which were utilized by the appellants during the course of manufacture of dutiable finished products in their factory at Amdoshi/Wangani village - HELD THAT - There is no dispute that the appellants are eligible to avail CENVAT credit. It can be seen from the factual matrix of the case that all the said services were utilized by the appellants during the course of manufacture of finished products. On careful reading of the definition of input service under Rule 2 (l) of CCR 2004 it is found that it provides for three categories of services out of which the first category viz. (i) means part of the definition generally cover services which are used directly or indirectly in or in relation to manufacture of final goods or for providing of output services; the second category viz. (ii) inclusion part of the definition specifically state certain services used in relation to various activities which is used in relation to the manufacture of final products or provision of output services both of which are covered under the scope of input services . Further the third category viz. (iii) exclusion part of the definition provided under Clauses (A) (B) (BA) and (C) specifically provide for certain services or portion of such services which are not included in the above definition of input service . However there are certain exceptions to this exclusion which are also given in the form of except for provision of certain services except when used by certain category of persons when such services are not primarily used for specified use etc. - in order to come to the conclusion that a particular service is covered as input service either it could be covered under category (i) or (ii) of the definition of input service as explained above and such input service should not fall under the exclusion clauses mentioned in the third category. The Hon ble Supreme Court in the case of Boving Fouress Limited Vs. Commissioner of Central Excise Chennai 2006 (8) TMI 189 - SUPREME COURT have held that the department cannot have pick and choose method; and having accepted the earlier order on the same issue the department is not permitted to press the same against the previously accepted stand. However as the input services viz. (i) air ticket agent service; (ii) foreign exchange service; (iii) health service; and (iv) outdoor catering service has been found to be not eligible for taking CENVAT credit in the Order-in-Appeal dated 31.05.2018 since these are used for personal consumption and not for the purpose of business/manufacturing products. Therefore CENVAT credit on such services are not eligible is input service in terms of the definition provided in Rule 2(l) of CCR of 2004. The appeal filed by the appellants is disposed of.

Summary

ISSUES:

Whether CENVAT credit on service tax paid for various input services is eligible under Rule 2(l) of the CENVAT Credit Rules, 2004, when such services are used directly or indirectly in or in relation to manufacture and clearance of final products.Whether denial of CENVAT credit on specific services such as air ticket agent service, foreign exchange service, health service, and outdoor catering service is justified on the ground that they are used primarily for personal consumption and not related to manufacturing activities.Whether the department can take a contrary stand before the Tribunal after having accepted and not appealed against an earlier Commissioner (Appeals) order allowing CENVAT credit on identical services for the same appellants.Whether penalties imposed for availing CENVAT credit on disputed input services are sustainable.

RULINGS / HOLDINGS:

The Court held that the appellants are eligible to avail CENVAT credit on input services which are "used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal," as defined under Rule 2(l) of the CENVAT Credit Rules, 2004.CENVAT credit was rightly denied on services such as air ticket agent service, foreign exchange service, health service, and outdoor catering service, as these services are "used primarily for personal use or consumption of any employee" and thus fall under the exclusion clause (C) of Rule 2(l) ibid.The department is estopped from taking a different stand before the Tribunal after having accepted and not appealed against the Commissioner (Appeals) order dated 31.05.2018 allowing CENVAT credit on eighteen input services for the same appellants, based on the principle that "the department cannot have pick and choose method" and "having accepted the earlier order on the same issue, the department is not permitted to press the same against the previously accepted stand."The impugned order is set aside partly to the extent it denied CENVAT credit on eligible input services amounting to Rs. 94,34,934/-, and upheld to the extent it denied credit on the four specified ineligible services amounting to Rs. 2,21,751/-.Penalties imposed in respect of the disallowed CENVAT credit are accordingly modified in line with the above findings.

RATIONALE:

The Court applied the statutory definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, which includes services "used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products," while excluding certain services primarily for personal consumption or specified exclusions.The Court relied on the principle established by the Supreme Court in Boving Fouress Limited v. Commissioner of Central Excise, Chennai, that the revenue cannot adopt contradictory positions in identical matters involving the same parties, preventing "pick and choose" tactics and ensuring consistency in tax administration.The Court noted the acceptance of the Commissioner (Appeals) order dated 31.05.2018 by the department in review, which had allowed CENVAT credit on eighteen input services after detailed examination, thereby binding the department to that position.The exclusion of services primarily for personal use such as air ticket agent service, foreign exchange service, health service, and outdoor catering service was upheld as per the exclusion clause (C) in Rule 2(l) of CCR, 2004.The Court recognized the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 as a mechanism for resolution of legacy disputes but noted no explanation for partial availing of the scheme by the appellants for earlier periods, which did not affect the substantive legal determination of eligibility of credit.