By TIOL News Service

MUMBAI, JAN 29, 2013: THEY say the word Ingenuity should be synonymous to a Central Excise officer. He takes interpretation to great lengths and his imagination runs riot when coming out with something original!

No, we are not castigating or branding the entire clan but only those who invent objections which none would have ever dreamt of even in their wildest dreams.

It is a common objection when it comes to proposing denial of CENVAT credit on "Inputs"short received and more often than not it is sustained by the appellate authorities.

But have you ever heard of "Input Services"short received?

Probably no, but Mahanagar Gas Ltd. has a different story to tell.

The Commissioner, Central Excise, Mumbai-V has this case booked against the above gas company. And to say the least, the objection was full of GAS.

The Central Excise officers, while scrutinizing the records, observed that the Balance-sheet and Annual Report of the applicant show the shortage of the stock of natural gas. The department was of the view that the applicants are NOT entitled for CENVAT credit of "inputs services"on the quantum of goods found short as per Balance Sheet/Annual Report of the financial year 2009-10.

Accordingly, a show-cause notice was issued for recovery of CENVAT credit of Rs.2,26,424/- and confirmed by the lower adjudicating authority along with equal penalty. The Commissioner(A) found merit in the gaseous objection and upheld the order.

So, the appellant is before the CESTAT with a stay application.

The appellant submitted that they are purchasing the natural gas from Gas Authority of India Ltd. (GAIL) at City Gate station located at Sion and from there gas is supplied to different stations through pipeline and they are paying the Service Tax on transportation and availing the CENVAT credit of the same. He submits that in the balance-sheet it is the quantity of the gas which is found short but the dispute involved is not in respect of the inputs but in respect of input services. Therefore, CENVAT credit cannot be denied to them on account of shortage found in the balance sheet.

The Revenue representative argued in vacuum but said that the demand is rightly confirmed.

The Bench observed -

"5. After hearing both sides, I find that as per the CENVAT Credit Rules, 2004 in ‘input service' means any service used by a 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. There is no doubt that the input services has been used in the factory and merely on the ground of shortage as per the balance-sheet will not prima facie disentitle them to avail the CENVAT credit. Accordingly, the pre-deposit is waived and the stay is granted till disposal of the appeal."

Deficiency in Service: Welcome to the new era of objections!

(See 2013-TIOL-172-CESTAT-MUM)