2010 (6) TMI 336 - AT - Service Tax

Interest and penalty - Assesses availed credit of service tax paid on services - such as insurance for public and product liabilities, building and machinery, maintenance of water coolers, manpower agency, consultancy services, clearing and forwarding services, banking commission - Notices were issued proposing denial of ineligible credit - assessees submission is that the services in dispute have formed part of the cost of production as per CAS-4 which is the cost accounting principle for determination of the cost of production - Held that - set aside the impugned order in so far it relates to denial of credit on services availed by the assessees and remit the case for fresh decision to the adjudicating authority after accepting their contention that insurance for public and product liabilities is a service in relation to manufacturing activity in the light of Tribunal s decision in CCE, Guntur v. CCL Products - accepting the claim that consultancy services are essential inputs in relation to the manufacturing activity as such services have been availed in obtaining ISO certification of the assessees products - As regards the Revenue s appeal, services such as maintenance of water coolers within factory premises and house keeping of the area within the factory premises have already been held to be input services eligible to credit

Summary

Issues:
1. Denial of credit on various services under service tax paid by manufacturers.
2. Appeal by manufacturers against denial of credit.
3. Appeal by Revenue against allowing credit on certain services.
4. Interpretation of cost of production under CAS-4.
5. Determination of eligibility of different services as input services.

Analysis:
1. The assessees, manufacturers of Electrical Manual Value Actuators, availed service tax credit on various services such as insurance, maintenance, consultancy, clearing, and forwarding services. The adjudicating authority disallowed credit on certain services, leading to appeals by both the assessees and the Revenue against the order.

2. The Commissioner (Appeals) allowed credit on services related to business activities like insurance for building and machinery, maintenance of water coolers within factory premises, and housekeeping within the factory premises. However, credit was disallowed on services such as insurance for public and product liabilities, consultancy services, clearing and forwarding services, banking commission, insurance for laptop computer, annual maintenance contract for computer, printer maintenance contract, and mediclaim insurance.

3. The Tribunal, after hearing both sides, considered the services availed by the assessees as falling under the cost of production as defined in CAS-4. The Tribunal accepted the assessees' contention that certain services were essential inputs in relation to manufacturing activities based on previous decisions. The appeal of the assessees was allowed by remand for fresh decision by the adjudicating authority.

4. Regarding the Revenue's appeal, services like maintenance of water coolers within factory premises and housekeeping within the factory premises were held to be eligible input services in the assessees' own case. The Tribunal upheld the impugned order in relation to these services based on previous decisions and rejected the Revenue's appeal.

5. The Tribunal's decision highlighted the eligibility of various services as input services based on their nexus with manufacturing activities and previous judicial pronouncements. The judgment emphasized the importance of considering the cost of production and the essential nature of certain services in relation to manufacturing activities for determining the eligibility of service tax credit.