Cenvat Credit permissible on Renting Premises outside Manufacturing Factory Unit: CESTAT [Read Order]

The Customs Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai held that Cenvat Credit permissible on renting of premises outside the manufacturing factory unit.

The appellant is a manufacturer of “piston ring” having its factory at Satpur Industrial Estate, Nasik. It had availed Cenvat Credit on tax paid for renting of immovable property at Delhi and Mumbai Branch offices.

During the period March 2010 to March 2013 Cenvat Credit amounting to Rs. 33,21,270/- was held, in the EA 2000 audit, to be inadmissible. Appellant was put to show cause notice, was demanded such duty along with interest and equivalent penalty and adjudication order confirm the same with 50% penalty u/s Rule 15(2) of CCR 2004 read with section 11 AC(1)(b) of the Central Excise Act with reduced penalty option by 25% u/s 11 AC(1)(c) in case payment of penalty was made within 30 days and reversal of Rs. 14,55,273/- of Cenvat Credit was also adjusted against total demand as well as appropriated.

Appellant’s unsuccessful attempt before the Commissioner (Appeals) has brought the dispute to this Forum.

The appellate tribunal includes Judicial Member, Suvendu Kumar Pati pronounced the order based on an appeal filed by Anand I Power Ltd.

The Appellant’s contented that he was using the rented premises for “marketing” purposes which are in conformity to Rule 2(l) of Cenvat Credit Rules that clearly covers “advertisement or sales promotion” within the definition of input services.

It was observed by the tribunal that the Commissioner (Appeals) had rejected the appellant’s appeal on the ground that sale of goods that had taken place from the immovable property taken on the rent was situated away from the place of removal.

The Judicial Member further observed that the appellant had acknowledged having registered as an ISD and availing total credit on renting services in the factory was not convincing as the rented premises were used for marketing and sale of goods manufactured in both the units of appellant’s factory.

The Tribunal further noted that the appellant had not disclosed about availing of such Cenvat Credit on renting services in its ER-1 Returns and ultimately he endorsed the findings of the adjudicating authority in confirming the demand, interest, and penalty.