Tribunal Upholds CENVAT Credit for Warehousing Services as Integral to Business Operations

CESTAT Allahabad Bench Allows Dwarikesh Sugar Industries' Appeal, Citing Precedents on Input Service Definition

In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) at its Allahabad Regional Bench has overturned a previous order denying CENVAT Credit to M/s Dwarikesh Sugar Industries Ltd. for 'Storage and Warehousing services'. The Tribunal, led by Mr. P.K. Choudhary, Member (Judicial), found that these services are integral to the appellant's business operations and fall under the definition of "input service" as per Rule 2(l) of the CENVAT Credit Rules, 2004.

The case, which involved the denial of CENVAT Credit amounting to Rs.3,20,896/-, was challenged by the appellant after the Commissioner (Appeals) CGST & Central Excise, Meerut upheld the decision of the adjudicating authority. The core issue revolved around whether storage services availed outside the factory premises could be considered an "input service" eligible for CENVAT Credit.

M/s Dwarikesh Sugar Industries Ltd., represented by Advocate Shri Aalok Arora, argued that due to insufficient storage space within the factory, they had to rent additional space from Central Warehousing Corporation in Muzaffarnagar. The stored sugar, a duty-paid final product, was cleared from this location for customer distribution. The appellant contended that these warehousing services were essential to their business and thus qualified for CENVAT Credit.

The Tribunal's decision heavily relied on prior judgments, notably DSCL Sugar v. Commissioner of Central Excise, Lucknow and Thiru Arooran Sugars Ltd. v. Commissioner of Central Excise, Puducherry, which supported the inclusion of such services under "input service" when they are imperative to business operations.

The Tribunal criticized the Revenue's stance, emphasizing that the role of the Department should evolve from merely being a tax collector to a facilitator. It stressed that business decisions should be left to the discretion of enterprises and not dictated by tax authorities. The Tribunal's ruling not only reinstates the CENVAT Credit for Dwarikesh Sugar but also sets a precedent for similar cases, reinforcing the principle that services integral to business operations should be eligible for input credits.

The decision is expected to have a broader impact on businesses facing similar disputes over the definition of "input service" and the eligibility for CENVAT Credit.

Bottom Line:

CENVAT Credit - Denial of CENVAT Credit on 'Storage and Warehousing services' used for storage of duty-paid final products outside the factory premises is unjustified if the services are integral to business and covered under the definition of "input service" as per Rule 2(l) of the CENVAT Credit Rules, 2004.

Statutory provision(s): CENVAT Credit Rules, 2004 Rule 2(l), Rule 15 of the CENVAT Credit Rules, 2004, Section 11AC of the Central Excise Act, 1944

M/s Dwarikesh Sugar Industries Ltd. v. Commissioner, CGST & Central Excise, (CESTAT)(Allahabad Regional Bench) : Law Finder Doc Id # 2821405