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2015 (10) TMI 2524 - AT - Service TaxCenvat credit - service tax taken by the appellant on maintenance and repair work of their residential colony - service has no nexus with the manufacture of final product - Held that - it is found that the residential colony was constructed adjacent to the factory because of the reason that the factory manufacturing cement is located as a place which is away from the city. Unless the residential colony is constructed near the factory, the appellant will not be in a position to get the proper/ adequate manpower for running its plant activities. Therefore, in view of the decision of Hon ble Andhra Pradesh High Court in the case of CCE Hyderabad-III vs ICT Ltd. 2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT , construction of residential colony adjacent to the factory has the nexus with the ultimate manufacture of the goods. Hence, the cenvat credit of service tax paid on the taxable services used in the residential complex shall be available to the manufacturer. - Decided in favour of appellant
Issues: Denial of cenvat credit on service tax for maintenance and repair work of residential colony
Analysis: The appeal challenged the order denying cenvat credit of service tax on maintenance and repair work of a residential colony, contending that the colony's proximity to the factory in a remote area was essential for ensuring the availability of staff and labor for continuous manufacturing activities. The appellant argued that the residential colony's construction was directly related to the manufacture of the final product, citing the judgment of the Hon'ble Andhra Pradesh High Court in a similar case. On the contrary, the Revenue relied on the judgment of the Hon'ble Bombay High Court to support the denial of cenvat credit, emphasizing the necessity of a nexus between the input service and the final product's manufacture. The Tribunal noted that the residential colony's construction near the factory was crucial due to the factory's location away from the city, ensuring the availability of adequate manpower for plant activities. Referring to the legislative intent behind the cenvat scheme, the Tribunal highlighted the Andhra Pradesh High Court's judgment in ITC Ltd., which allowed cenvat credit for service tax paid on taxable services used in a residential complex. The Tribunal quoted a relevant paragraph from the judgment, emphasizing the intrinsic link between the staff colony and the manufacturing activity, thereby considering services like lawn mowing, garbage cleaning, and maintenance as 'input services' eligible for cenvat credit. The Tribunal distinguished the judgment cited by the Revenue, clarifying that the issue in the present case revolved around the nexus between the residential colony and the final product's manufacture. Since the Andhra Pradesh High Court had explicitly recognized the nexus in the ITC Ltd. case, the Tribunal found the cited judgment inapplicable to the current scenario. Consequently, the Tribunal set aside the impugned order of the Commissioner (Appeals) and allowed the appeal in favor of the appellant, emphasizing the direct connection between the residential colony and the manufacturing activities for granting cenvat credit on the disputed service.
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