2015 (11) TMI 1616 - AT - Central Excise

Denial of CENVAT credit - service tax paid to consultant - manufacture of Lead and Zinc Ores - denial on the ground that said services cannot be considered as input service since there is no nexus between the services and the goods manufactured by the appellants - Held that - In the inclusive part of definition of input service it has been provided that activities relating to business should also be qualified as a service for the purpose of availment of cenvat credit. In interpreting the expression activities in relation to business the Hon ble Bombay High Court in the case of Ultratech Cement 2010 (10) TMI 13 - BOMBAY HIGH COURT have held that definition of input service postulate activities which are integrally connected with the business of the assessee; that if the activity is not integrally connected with the business of the manufacture of final products the service should not qualify to be an input service under Rule 2 (l) of the Cenvat Credit Rules 2004 - In the present case it is an admitted fact that laying of railway lines between the factory and the nearest railway siding is a necessity of the business of the appellants. Without laying the railway lines/track material the goods cannot smoothly be transported to their Smelter Division. Further the expenditure incurred for both the category of consultancy services have been taken into consideration as part of the manufacturing cost of the finished goods for the purpose of determination of the assessable value. Therefore in view of the principle decided by the Hon ble Bombay High Court in the case of Ultratech Cement I am of the view that the service tax paid on the Consultancy services shall be eligible for cenvat benefit to the appellants. Appeal allowed - credit allowed - decided in favor of appellant-assessee.

Summary

Issues:
Cenvat credit eligibility for consultancy services related to railway siding establishment.

Analysis:
The case involved the appellants engaged in manufacturing Lead and Zinc Ores, utilizing a private Railway siding for transportation during an expansion project. The dispute arose when the Jurisdictional Central Excise Authorities denied cenvat credit for consultancy services related to the railway siding establishment, claiming no nexus between the services and manufactured goods. The ld. Commissioner (Appeals) upheld the denial, leading to the matter before the Tribunal.

The appellant argued that the disputed services qualified as 'input service' under the definition clause, crucial for their manufacturing business. Citing the Hon'ble Bombay High Court and a Tribunal decision, the appellant contended that the services were integrally connected with their business activities, thus eligible for cenvat credit. On the contrary, the Revenue representative reiterated the findings of the impugned order.

The Tribunal, after hearing both sides and examining the records, delved into the interpretation of 'activities relating to business' under the definition of input service. Referring to the Hon'ble Bombay High Court's ruling in a similar case, the Tribunal emphasized the necessity of laying railway lines for smooth transportation, integral to the appellants' business operations. It noted that the consultancy services' expenditure was part of the manufacturing cost, aligning with the principle established by the Hon'ble Court. Consequently, the Tribunal held that the service tax paid on the consultancy services was eligible for cenvat benefit.

Furthermore, the Tribunal applied the precedent set by the Hon'ble Bombay High Court, which emphasized the nexus or integral connection between services and the manufacture of final products for determining input service eligibility. Quoting the judgment, the Tribunal clarified that the definition of 'input service' was broader than 'input,' allowing services related to the business of manufacturing final products to qualify. Based on these legal interpretations, the Tribunal found no merit in the impugned order, setting it aside and ruling in favor of the appellants.

In conclusion, the Tribunal's detailed analysis of the legal principles surrounding input service eligibility for consultancy services related to railway siding establishment resulted in allowing the appeals filed by the appellants, emphasizing the integral connection between the services and the manufacturing business for cenvat credit eligibility.