2016 (1) TMI 1154 - AT - Central Excise

Denial of CENVAT credit - air travel agents service - reliance placed in the decision of the case of Semco Electrical P. Ltd. 2009 (12) TMI 143 - CESTAT MUMBAI where it was held that the appellant was entitled to the Cenvat Credit availed on the services which were used in relation to the manufacture of final product or used in relation to the business activity and in the instant case the service used by the appellant were in relation to the business activity. Thus the appellant were entitled to refund of service tax - Held that - The above decision of the Tribunal applies to the facts of the case. In view of the above cited decision the impugned order is liable to be set aside - appeal allowed - credit allowed - decided in favor of appellant.

Summary

Issues:
Credit of service tax on air travel agents service, CENVAT Credit in the case of tour operator service.

Analysis:
The appeal challenged the denial of credit of service tax on air travel agents service and the allowance of CENVAT Credit in the case of tour operator service. The appellant, engaged in manufacturing excisable goods, availed various input services like Goods Operators Service, Tour operator services, Air Travel Agent services, BAS, and General Insurance Services. The revenue disputed the credit claiming that the services were not used in or in relation to manufacturing final products. The Asstt. Commissioner confirmed the recovery of credit on tour operator and air travel agent services but dropped the recovery on other services. The Commissioner (Appeals) upheld the credit recovery on air travel agent service citing lack of evidence linking the air journey to manufacturing. The appellant argued that air travel for business purposes qualifies as an input service under Rule 2(I) of CENVAT Credit Rules, 2004, supported by previous Tribunal decisions. The Tribunal referred to precedents emphasizing the definition of input services related to business activities and held that services provided by the Airport Authority of India for business activities are covered under the definition of input services. The Tribunal set aside the impugned order, allowing the appeal.

This judgment clarifies the eligibility of air travel services as input services for CENVAT Credit in manufacturing activities. It highlights the importance of demonstrating a direct link between the service and business activities to qualify for credit. The decision emphasizes the broad interpretation of the definition of input services, allowing for activities related to business beyond the listed examples. The Tribunal's analysis of previous case law and the specific circumstances of the appellant's business activities played a crucial role in determining the admissibility of the credit. The judgment provides valuable guidance on interpreting and applying the CENVAT Credit Rules in cases involving disputed service tax credits, particularly concerning air travel services and their relevance to manufacturing operations.