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TMI Blog2025 (2) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... lants are eligible to avail CENVAT credit of duties and taxes paid on inputs, capital goods and input services received by them for manufacture of final products in terms of CENVAT Credit Rules, 2004 (CCR). During the course of audit of accounts of the appellants, the departmental authorities have noticed that the CENVAT credit availed during the period 2016-2017 and 2017-2018 (upto June, 2017) in respect of 'Bank Guarantee Commission', in relation to VAT refund from the State VAT authority, treating the same as input services, are not eligible as per the provisions of Rule 2(l) ibid. The department had initiated show cause proceedings for demand of CENVAT credit by issue of Show Cause Notice (SCN) dated 02.12.2016 for recovery of wrongly availed and utilized CENVAT credit under Section 11A(1) of the Central Excise Act, 1944 read with Rule 14 of the CENVAT Credit Rules, 2004 along with applicable interest and for imposition of penalty under Rule 15(1) ibid. The said SCN dated 02.12.2016, was adjudicated upon by the original authority in passing an Order-in-Original dated 22.07.2019, wherein he had disallowed/denied the CENVAT credit amounting to Rs.28,83,253/- availed during the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r stated that CENVAT Credit availed in respect of the above services is not excluded under rule 2(l) of CCR, 2004. Thus, he claimed that the impugned order is not sustainable. 4. Learned Authorised Representative (AR) appearing for the department, on the other hand, submitted that the input credit availed in respect of banking commission paid for obtaining bank guarantee with respect of export related VAT refunds, is no way related to the manufacture operation of final product of the appellants. Hence, he claimed that there is no merit in the appeal filed by the appellants and the same is liable to be dismissed. 5. Heard both sides and perused the records of the case. I have examined the submissions advanced by the learned Advocate appearing for the appellants and the learned Authorized Representative of the Department. Further, I have also perused the additional written submissions in the form of paper books submitted in this case. 6. The issue involved in this appeal is to decide about the eligibility to avail the CENVAT Credit on the input service viz., banking charges/commission paid in relation to obtaining bank guarantee for claiming VAT refund in respect of purchase of ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd eligible on account of raw materials having been used for manufacture of final products had arisen, and this does not bring any new ground for making the input service tax as ineligible for taking CENVAT credit. 8.1 In order to address the above issue of eligibility to avail the CENVAT Credit on disputed input services, I also would like to refer the relevant legal provisions contained in CENVAT Credit Rules, 2004 as it existed during the disputed period in respect of the taxable service under dispute. "Definitions. 2. In these rules, unless the context otherwise requires,- (l) 'input service' means any service,-- (i) used by a provider of output service for providing an output service; or (ii) 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, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, (3) '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. 8.3 In order to examine whether a particular service is covered as 'input service', either it could be covered under category (1) or (2) and should not fall under the exclusion category under (3) above. In respect of bank guarantee services, I find that the adjudicating authority in the original order had observed in the findings portion that 'obtaining refund from VAT or recovery of own money does not fall under the ambit of the word "Financing"... Further, I find that getting refund of VAT amount is a post manufacturing and post clearance activity. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l products, and only upon such final products having been exported, the VAT setoff was given, and therefore the bank commission/charges for obtaining bank guarantee is with respect to such usage of raw materials in the final products and not per se directly relating to its exports. In view of the above, I am of the considered view that the grounds on which the input service credit was disallowed in the original order, which was upheld by the impugned order, have no legal basis and accordingly the impugned order is liable to be dismissed as being not legally sustainable. 8.6 As I have disposed the appeal on merits and factual matrix of the case, I am not recording any findings on other submissions made by both sides, in respect of invocation of extended period and imposition of penalty. Further, as rightly held in a number of decisions by the higher judicial forum, in respect of issues concerning interpretation of law, extended period of limitation cannot be invoked and penalty for evasion or for violation of law cannot be imposed. Therefore, in the present case, the adjudged demands having been held as not sustainable on merits, the imposition of penalty against the appellants by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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