2010 (9) TMI 958 - AT - Service Tax

CENVAT credit - Rule 15(3) of CCR, 2004 - various input services - denial on account that services do not fall within definition of input services - denial also on the ground of nexus - demand alongwith interest.

Issues Involved:
1. Jurisdiction of the Commissioner to adjudicate the impugned show-cause notices.
2. Admissibility of CENVAT credit on various input services.
3. Requirement to establish integral connection between the service and the business of manufacturing final products.

Detailed Analysis:

1. Jurisdiction of the Commissioner:
The appellant argued that the Commissioner of Central Excise and Service Tax, Belgaum, did not have jurisdiction to adjudicate the show-cause notices as the credit was distributed by the Head Office in Bangalore, registered as an Input Service Distributor. The Tribunal ordered the Commissioner to address this jurisdictional question in the remand proceedings.

2. Admissibility of CENVAT Credit on Various Input Services:
The Tribunal examined the admissibility of CENVAT credit on numerous input services claimed by the appellant, including:

a. Air Travel Agent's Service:
The appellant claimed credit for service tax paid on air travel for sales promotion. The Tribunal remanded the issue to the Commissioner to allow the appellant to establish entitlement with necessary evidence.

b. Rail Travel Agent's Service:
Similar to the air travel agent's service, the Tribunal remanded for the appellant to provide evidence that the service was used for sales promotion.

c. Car Hiring/Rent-a-Cab Service:
The appellant claimed these services were used for marketing and sales activities. The Tribunal remanded the issue for fresh consideration by the Commissioner.

d. Authorized Service Station Service:
The appellant claimed the service was for maintaining vehicles used for sales promotion. The Tribunal remanded the issue for the appellant to provide evidence supporting this claim.

e. Management Consultancy Service:
The appellant argued that services from consultants like Watson Wyatt and India Life Capital Pvt. Ltd. were related to business activities. The Tribunal held that the credit is available if the services are activities related to business, remanding for further examination.

f. Maintenance or Repair Service:
The appellant claimed credit for services during the warranty and post-warranty periods. The Tribunal held that services during the warranty period are similar to those in the Danke Products case and are eligible for credit. For post-warranty services, the Tribunal found they were activities related to business and eligible for credit, subject to further verification.

g. Recovery Agent's Service:
The appellant used recovery agents to collect dues from customers. The Tribunal remanded for the Commissioner to verify if these services qualify as activities related to business.

h. Insurance and Courier Service:
The appellant claimed credit for insuring business premises, stock, and employees, and for courier services used in business operations. The Tribunal held these services qualify as activities related to business and remanded for further verification.

i. Professional Fee Service:
The Tribunal remanded the issue for the appellant to establish that the professional fees were for services listed as input services under Rule 2(1) of the CENVAT Credit Rules.

j. Annual Maintenance Contract of Photocopier Machines:
The Tribunal held that tax paid on AMC for photocopiers used in business operations is an input service and allowed the credit.

k. Club Association Service:
The Tribunal upheld the Commissioner's decision to disallow credit for corporate membership in Bangalore Club, as it was not related to business activities.

l. Courier Service:
The Tribunal found that courier services for transporting spares for maintenance or repair qualify as activities related to business and remanded for verification.

m. Goods Transport Agency (GTA) Service:
The Tribunal allowed credit for transportation from factory to depot but remanded the issue of transportation to customer's premises for verification of conditions specified in the CBEC Circular.

n. Packing Expenses:
The Tribunal remanded the issue for verification of whether the packing services were related to business activities.

3. Requirement to Establish Integral Connection:
The Tribunal discussed the necessity of establishing an integral connection between the service and the business of manufacturing final products. The Tribunal referenced the judgments in the cases of Coca Cola India Pvt. Ltd. and Ultratech Cement Ltd., concluding that services must be integrally connected with the business of manufacturing to qualify as input services. The Tribunal remanded the issues for the Commissioner to verify this integral connection.

Conclusion:
The Tribunal remanded several issues to the Commissioner for further examination and verification, emphasizing the need to establish an integral connection between the services and the business of manufacturing final products. The penalties imposed were set aside, and the Commissioner was directed to address the jurisdictional question and reassess the admissibility of CENVAT credit on various input services in light of the relevant legal standards and evidence provided by the appellant.

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