THIRD MEMBER ON REFERENCE : SHRI M. VEERAIYAN, MEMBER (T) MAJORITY ORDER PER : S/SHRI P.G. CHACKO, MEMBER (J) AND B.S.V. MURTHY, MEMBER (T) TELCO CONSTRUCTION EQUIPMENT CO. LTD. Vs. C.C.E. & CUS., BELGAUM

JUDGEMENT

(1.) THIS is an appeal filed by M/s. Telco Construction Equipment Company Ltd. (TCECL for short), Dharwad impugning an order of the Commissioner of Central Excise & Customs, Belgaum vide which he disallowed and demanded an amount of Rs. 2,22,35,165/ - availed by the appellant as credit of Service Tax paid on various input services during the period October, 2006 to March, 2008 along with applicable interest and imposed penalties of Rs. 2,000/ - for each credit entry in the CENVAT Account under Rule 15(3) of the CENVAT Credit Rules, 2004 (CCR) in respect of each of the two show -cause notices decided.

(2.) THE facts of the case are that the appellant is an assessee engaged in the manufacture of construction equipments, excavators and cranes of Chapter 84 of the Central Excise Tariff. They availed CENVAT credit of duty paid on inputs, capital goods and Service Tax paid on input services. TCECL have their Corporate office at Bangalore registered with the Department as an Input Service Distributor under Rule 4A of the Service Tax Rules, 1994, for distributing the credit of Service Tax paid and accounted at their Corporate office to its manufacturing units, one of which is TCECL, Dharwad, the appellant. The impugned order disposed two show -cause notices, one dated 5 -11 -2007 and another dated 2 -9 -2008. Both the show -cause notices had proposed to disallow and recover credit of Service Tax taken by TCECL on various taxable services such as air travel agents service, management consultancy service, goods transport agents service, maintenance and repair service, car hiring (rent -a -cab) service, telephone and mobile service, courier service, recovery agents service, rail travel agents service, warranty handling service, authorized service station service, AMC of photocopier machines, club association services, insurance service, service tax paid on professional fees and packing expenses. It was proposed in the notices to disallow the credit to the assessee on the ground that the impugned services were not input services as defined in Rule 2(l) of the CENVAT Credit Rules, 2004 and the credit taken by the assessee as a manufacturer was irregular.

(3.) THE assessee contested the proposals. In response to the show -cause notices, the assessee argued that the services involved were inputs for its output service or were activities related to the business of the appellant. In cases like mandatory servicing (of assessees goods) falling under maintenance or repair services, the cost of the service formed part of the assessable value of the goods manufactured by the assessee. After considering the replies furnished by the assessee and after hearing their representatives, the Commissioner passed the impugned order.