2010 (7) TMI 383 - AT - Central Excise

Cenvat credit input services Assessee availed Cenvat credit of service tax paid on recruitment of staff services, banking services, repair and labour charges of vehicle Revenue denied above credit on ground that such service could not directly or indirectly related to manufacture, accordingly, duty demanded - assessee received the said services and discharged the service tax paid on the services to their service provider credit allowed

Summary

Issues:
- Whether the services of recruitment of staff, banking, and repair and labor charges of vehicles qualify as 'input services' for availing Cenvat credit of service tax paid.

Analysis:

The appeals filed by the revenue concern the eligibility of availing Cenvat credit for service tax paid on recruitment of staff services, banking services, and repair and labor charges of vehicles. The Commissioner (Appeals) set aside the orders-in-original confirming the duty demand raised by show-cause notices. The central issue revolves around determining whether these services fall within the definition of 'input services' as per the Cenvat Credit Rules, 2004. The Commissioner emphasized that as long as the services are related to the manufacturer's business and are mentioned in the inclusive part of the input service definition, there should be no doubt about the eligibility for Cenvat credit, irrespective of direct use in manufacturing activities.

The revenue, represented by the JCDR, argued that the services in question do not meet the criteria of 'input services' under Rule 2(l)(ii) of the Cenvat Credit Rules, 2004. They contended that the services provided by recruitment agencies, banking services, and vehicle repair and maintenance do not have a direct or indirect connection to the manufacturing or clearance of final products. The JCDR highlighted the distinction between the basic and inclusive definitions of 'input services,' emphasizing that the services in question do not align with the common thread linking services specifically included in the extended definition.

The learned counsel referred to a judgment by the Hon'ble High Court of Mumbai in a related case, establishing principles for eligibility of service tax credit on input services. The High Court's ruling emphasized that service tax paid on expenses related to advertisements, sales promotion, and market research should be allowed as input stage credit if they form part of the price of the final product. The Court outlined five categories under the definition of input service, emphasizing that each limb of the definition can be considered independently for availing credit. The judgment highlighted that if an assessee satisfies any one category under the definition, credit for input services should be available, even if other categories are not met.

After considering the submissions and legal precedents, the Judge concluded that the issue at hand was squarely covered by the High Court's decision. Given that the assessee had received the services and paid the service tax, the Judge found no merit in the revenue's appeal. Consequently, all three appeals by the revenue were rejected, affirming the eligibility of the assessee for availing Cenvat credit on the disputed services.