By TIOL News Service

MUMBAI, MAY 15, 2014 : IN the matter of three SCNs CENVAT Credit of Rs.2,39,47,069/- has been denied to the appellant by Commissioner of Central Excise & Service Tax, LTU, Mumbaimainly on the ground that the appellant has not been able to establish the nexus between the services availed and the manufacturing operations undertaken by them. Further, interest on the amount has been confirmed apart from imposing penalties on the appellant.

The various services on which the service tax credit has been denied are as given below -

+ Insurance of employees stationed abroad

+ Summer trainees

+ Aircraft refueling liability policy

+ Comprehensive off shore package policy

+ Container policy

+ Enterprise Secure Package Policy

+ Fire and allied peril insurance of stock

+ Insurance of building of factory/township

+ Motor Vehicle Insurance

+ Insurance of public liability industrial risk

+ Refueller insurance policy

+ Standard fire and special perils insurance

+ Stock Insurance

+ Third party liability (offshore and onshore)

+ Aviation fleet/aircraft related insurance

+ Survey Fees/Professional fees/Chartered Engineer

+ Comprehensive petrol pump policy

In respect of insurance coverage to dependent parents of the employees, the appellant has already reversed credit taken along with interest, the amounts are Rs.95,151 along with interest of Rs.58,626/-& Rs.18,19,412 along with interest of Rs.7,70,517.

Aggrieved, the appellant is before the CESTAT.

It is submitted that that all these services availed relate to their manufacturing operations and bulk of the demands pertain to the period prior to 01/04/2011. Without availing these services, business operations of the appellant could not be carried out at all. It is further submitted that all these expenses incurred formed part of value of the products sold on which excise duty liability has been discharged and they have furnished before the adjudicating authority Cost Accountant's Certificates (for the period November 2008 to March 2012&April 2012 to February 2013) wherein it has been certified that the cost of production of the products manufactured by the appellant includes all these expenses and they have discharged duty liability on these final products, on a price inclusive of these costs. It is also submitted that the adjudicating authority has not considered these submissions made by the appellant nor given any findings but has simply brushed them aside by concluding that there is no nexus between the services availed and the manufacturing operations undertaken.

The Revenue representative did not add any to the findings of the adjudicating authority.

The Bench observed -

+ Prima facie, we find that the costs of various services availed forms part of the assessable value of the goods manufactured and sold by the appellant. Therefore, there is no reason to deny CENVAT Credit of the duty/taxes paid on the various inputs/input services availed by the appellant for undertaking their business operations.

+ The appellant has also furnished Cost Accountant's certificates certifying the above. For any reason, if the department does not want to place reliance on these certificates, under Section 14AA of the Central Excise Act, they can conduct special audit.

+ The department has not invoked these powers available to it.

Taking a view that the matter has to go back to the adjudicating authority either to consider the Cost Accountant's Certificates furnished by the appellant or to undertake special audit in terms of the powers of Section 14AA of the CEA, 1944 and satisfy himself as to the eligibility of the credit taken by the appellant on these various services, the case was remanded to the adjudicating authority for denovo consideration.

In passing : Here we go around the mulberry bush!

(See 2014-TIOL-768-CESTAT-MUM)