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CENVAT - appellant undertakes testing services abroad and pays ST - ST distributed by HO to Daman unit - notwithstanding fact that testing has been done for product yet to be manufactured, it does not disentitle appellant to credit - stay granted: CESTAT

By TIOL News Service

MUMBAI, NOV 05, 2013: THE appellantis a manufacturer of drugs and pharmaceuticals. They have several manufacturing units situated at Aurangabad, Daman, Chikhalthana, Ankleshwar&Nalagarh, HimachalPradesh. They have a research centre at Aurangabad. The appellant undertook certain technical testing and analyzing services abroad and discharged the service tax liability of Rs.12,83,884/- during May 2006 on reverse charge basis.

The said service tax was distributed by the appellant's Head Office at Mumbai to their unit at Daman.

Revenue objected to this distribution on the ground that testing and analyzing service has been availed in respect of a product yet to be manufactured by the appellant and it is not evident that the product is manufactured at Daman and, therefore, the distribution of credit to Daman unit was not in accordance with the law.

Accordingly, the credit was denied and sought to be recovered along with interest and also imposing penalties.

The Commissioner (A), Vapi sided with the adjudicating authority and hence the appellant is before the CESTAT.

It is submitted that testing and analyzing services undertaken by them is part of their manufacturing and business activity and, therefore, it is an eligible input service as defined in Rule 2(l) of the CCR, 2004. It is further submitted that notwithstanding the fact that testing has been done in respect of a product yet to be manufactured by the appellant, if does not disentitle them to the credit as held by Tribunal in the case of Cadila Healthcare Ltd., Vs. CCE, Ahmedabad - 2010-TIOL-59-CESTAT-AHM and affirmed by the Gujarat High Court 2013-TIOL-12-HC-AHM-ST; that distribution of entire credit on testing and analysingservice by the Head office to the Daman unit is also not precluded as per the provisions of Rule 7 of CCR, 2004 as it stood at the relevant time. Reliance is also placed on the Karnataka HC decision in the case of CCE, Bangalore Vs. ECOF Industries Pvt. Ltd. - 2011-TIOL-770-HC-KAR-ST.

The Bench adverted to the case laws cited by the appellant and observed that the appellant has made out a prima facie case in their favour for grant of say.

Accordingly, the CESTAT granted unconditional waiver from pre-deposit of dues adjudged against the appellant and stayed recovery.

(See 2013-TIOL-1642-CESTAT-MUM)


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