2016 (8) TMI 1258 - AT - Service Tax

CENVAT credit - input services - civil construction service - security service - Held that - construction of RCC wall installation of tube-well and construction of approach road to the mines are related to the business of the appellant and as such confirms to the definition of input service for the purpose of taking Cenvat credit - credit allowed. Security service - Held that - Since the appellant has not produced any documents to show that the security guards have been deployed in the factory area I have no option but to accept the contention of the adjudicating authority that such service has been utilized by the appellant for providing the security guard at the residence of Sr. Executives which are in the nature of welfare activities - reliance placed in the case of CCE Versus MANIKGARH CEMENT 2010 (10) TMI 10 - BOMBAY HIGH COURT where it was held that rendering taxable services at the residential colony established by the assessee for the benefit of the employees is not an activity integrally connected with the business of the assessee - credit disallowed. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat credit on service tax paid for civil construction service and security service.
- Whether the construction services and security services availed by the appellant qualify as input services for Cenvat credit.

Analysis:
The appellant, engaged in the manufacture of lead/zinc/Bulk Concentrate, Sulphuric Acid, availed Cenvat credit of Service tax on civil construction service and security service. The Cenvat credit was disallowed as the services were deemed not to conform to the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004.

The appellant's advocate argued that the construction services, including the construction of RCC wall in underground mines, installation of tube wells, and construction of approach road, were directly related to the business activities. The RCC wall was constructed to protect mined ores, tube wells were used to wash ore, and the approach road was essential for ore transportation. Thus, it was contended that these services qualified as input services for Cenvat credit. On the other hand, the Revenue representative argued that the construction services lacked nexus with the manufacturing activity and therefore could not be considered as input services for Cenvat credit.

Regarding the security service, it was highlighted that the security guards were deployed in various places, including the residence-cum-office of senior executives. The Revenue representative contended that providing security for the Chief Executive's residence was a welfare activity, not eligible for Cenvat credit. This argument was supported by a judgment of the Hon’ble Bombay High Court.

After hearing both sides, the Tribunal found that the construction services were indeed related to the appellant's business activities and thus qualified as input services for Cenvat credit. However, regarding the security service, since the appellant failed to provide evidence that the security guards were deployed in the factory area, the Cenvat credit was denied based on the judgment of the Hon’ble Bombay High Court. Consequently, the appeal was partly allowed for the construction service but dismissed for the security service. The decision was made in line with the above analysis and legal considerations.