Kernex Microsystems (India) Lt D vs Commissioner Of Customs ,Central ...

[Arising out of Order-in-Appeal No. 7-2010 dated 20/04/2010 passed by CC,CE&ST(Appeals-II), Hyderabad]

For approval and signature:

HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

KERNEX MICROSYSTEMS (INDIA) LT D THRUSHNA, PLOT NO.7,SOFTWARE UNITS LAYOUT, INFOCITY MADHAPUR, HYDERABAD. Appellant(s)

Versus

Commissioner of Customs ,Central Excise and Service Tax HYDERABAD-IV NULL POSNETT BHAWAN, TILAK ROAD, RAMKOTI, HYDERABAD, - 500001 ANDHRA PRADESH Respondent(s)

Appearance:

Shri B.V. Kumar, Advocate For the Appellant

Shri N. Jagdish, Superintendent(AR) For the Respondent

Date of Hearing: 02/03/2015

Date of Decision: 02/03/2015

CORAM:

HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER

Final Order No. 20466 / 2015

Per : B.S.V.MURTHY

CENVAT credit of Rs.28,12,555/- availed by the appellant during the period from May 2005 to March 2006 has been denied and demanded with interest and penalty has been imposed under Rule 15(4), equal to the CENVAT credit availed. CENVAT credit has been denied on the ground that the appellant is not eligible for the CENVAT credit on the services availed by them since the services rendered have no nexus to the appellants manufacturing activity and therefore fall outside the scope and ambit of input service as defined in Rule 2(l)(2) of the CENVAT Credit Rules, 2004.

2. Heard both the sides.

3. The issue involved in the present appeal is whether the appellants have satisfied the definition of input service for availing the CENVAT credit and whether the demand is barred by limitation.

4. According to the definition of input service as defined under Rule 2(l) of CENVAT Credit Rules (i)used by a provider of taxable service for providing an output service or (ii) used by the 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 setting up, modernization, 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 up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, . .

5. After going through the records and after hearing the learned counsel, I find that the services were received by the appellant from BOB Capital Markets Ltd. relating to professional fee for preparing a business plan appraising the same and work relating to public issue, the services received from Allianze Securities Ltd. relating to filing of public issue offer document, Sameer Financial Services Pvt. Ltd. for professional charges in relation to IPO and for preparing the complete study of commercial and financial aspects of anti-collusion devices in Sri Lanka and South Africa and services received from Shriyam Broking Intermediary Ltd. as fee for acting as co-Managers of public issue. All the services received relate to financing and planning of the business operations and clearly covered by the definition reproduced by me above.

6. I also notice that the Commissioner(Appeals) after taking note of the definition had observed It is seen from the above rule that the input service on which credit availed should have a direct nexus in providing output service. In other words, if the receipt or non-receipt of those services is not going to make any difference to the production of final products, then such services cannot be considered as input services.

7. For coming to this conclusion, he has relied upon the decision of the Tribunal in the case of CCE, Nagpur Vs. Manikgarh Cement Works [2009-TIOL-CESTAT-MUM]. However, I find that in Manikgarh Cement case, the issue involved was eligibility of CENVAT credit on services received in respect of security services etc. provided to the residential colony and not to the factory or the premise of the appellant. In this case, the services are cleared covered by inclusive part of the definition which covers financing as one of the headings under which services are eligible. As already observed by me, the services received were received for mobilization of finance by IPO and for conducting study of the business plan and study done in relation to anti-collusion devices proposed to be manufactured by the appellants. All these activities, in my opinion, are clearly covered by the inclusive part of the definition.

8. I also find that the claim of the learned counsel that paragraph 31 of the decision of the Honble High Court of Bombay in the case of CCE, Nagpur Vs. Ultratech Cement Ltd. [2010(20) STR 577 (Bom.)] is applicable to the facts of the present case is correct and the same is reproduced below for better appreciation.

31. In our opinion, the ratio laid down by the apex court in the case of Maruti Suzuki Ltd. (supra) in the context of the definition of input in Rule 2(k) of 2004 Rules would equally apply while interpreting the expression activities relating to business in Rule 2(l) of 2004 Rules. No doubt that the inclusive part of the definition of input is restricted to the inputs used in or in relation to the manufacture of final products, whereas the inclusive part of the definition of input service extends to services used prior to/during the course of/after the manufacture of the final products. The fact that the definition of input service is wider than the definition of input would make no difference in applying the ratio laid down in the case of Maruti Suzuki Ltd. (supra) while interpreting the scope of input service. Accordingly, in the light of the judgment of the apex court in the case of Maruti Suzuki Ltd. (supra), we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(l) of 2004 Rules.

9. In view of the above, I find that the appellant is eligible for the benefit of refund of CENVAT credit taken by them and therefore the impugned order has no merits and has to be set aside. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief, if any, to the appellant.

(Order pronounced and dictated in open court)

B.S.V.MURTHY TECHNICAL MEMBER

Raja.

5