2010 (8) TMI 229 - AT - Service Tax

Cenvat credit of service tax Garden Service and maintenance submission that garden services are not linked either directly or indirectly in or in relation to the manufacture of final products - co-ordinate Bench has taken a view that garden service has no direct or indirect link with manufacture and clearance of excisable goods - remands the matter back to the Adjudicating Authority order set aside

Issues Involved:
1. Eligibility of Cenvat Credit on Service Tax paid for Garden Maintenance Services.
2. Interpretation of Rule 2(l) of Cenvat Credit Rules, 2004.
3. Compliance with Pollution Control Board directives.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Service Tax paid for Garden Maintenance Services
The core issue is whether the assessee can avail Cenvat Credit for the service tax paid on garden maintenance services. The lower authorities initially deemed such credits as ineligible, leading to show cause notices and subsequent penalties. However, the Commissioner (Appeals) remanded the matter back to the adjudicating authority to determine if the garden maintenance was a legal requirement under the Pollution Control Board's directives.

2. Interpretation of Rule 2(l) of Cenvat Credit Rules, 2004
The Revenue argued that garden maintenance services do not directly or indirectly relate to the manufacture of final products, thus falling outside the purview of Rule 2(l) of the Cenvat Credit Rules, 2004. The Revenue cited precedents from Kirloskar Oil Engines Ltd. and GKN Sinter Metals Ltd., where garden services were not linked to the manufacture or clearance of excisable goods.

3. Compliance with Pollution Control Board Directives
The respondent countered that garden maintenance services were mandated by the Pollution Control Board as a condition for granting consent to operate. The Pollution Control Board's directive required the development of a green belt around the factory, making the service essential for compliance. The respondent cited cases like Semco Electrical Pvt. Ltd. and ISMT Ltd., where similar services were deemed eligible for Cenvat Credit due to statutory requirements.

Judgment Analysis:
Upon reviewing the records, it was found that the Pollution Control Board had mandated the maintenance of a green belt as a condition for the assessee's operational consent. This directive was detailed in the consent order, which required the development of a green belt around the factory premises.

The Tribunal noted that the Commissioner (Appeals) had a narrow interpretation by suggesting that the extent of the green belt development should determine the eligibility for Cenvat Credit. The Tribunal disagreed, stating that as long as the garden maintenance was a statutory requirement, the service tax paid on such services should be eligible for Cenvat Credit.

The Tribunal referenced a prior decision (Final Order No. 38/2010) where it was held that services used to comply with statutory requirements, such as maintaining a garden to treat effluents, were eligible for Cenvat Credit. The Tribunal emphasized that the statutory requirement to maintain a garden, as per the Pollution Control Board's directives, justified the credit.

The Tribunal also distinguished the current case from the precedents cited by the Revenue, noting that those cases did not involve a statutory requirement to maintain a garden.

Conclusion:
The Tribunal concluded that the assessee is eligible to avail Cenvat Credit for the service tax paid on garden maintenance services, as these services were mandated by the Pollution Control Board. The remand order by the Commissioner (Appeals) was set aside, and the appeals filed by the Revenue were rejected. The cross-objection filed by the assessee was also disposed of accordingly.

Final Order:
The Tribunal pronounced that the assessee is entitled to the Cenvat Credit for the garden maintenance services, and the Revenue's appeals were dismissed. The decision was pronounced in court on 27-8-2010.

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