2010 (11) TMI 143 - AT - Service Tax

Input service credit - Penalty - Bombay High Court in the case of Ultratech Cement Ltd. (2010 -TMI - 78203 - BOMBAY HIGH COURT ) has held that the assessees entitled to avail input service credit of the services availed by the assessee in their business activity of manufacturing i.e. if the assessees (manufacturer) is availing any service in the course of their business activity then the assessee is entitled for input service credit - Accordingly the appellants are entitled for availment of input service credit on garden maintenance service and house keeping service of the factory. Picnic services - this service do not have any nexus with the business activity of the appellants. - the input service credit on the picnic service denied. Jungle cutting service - to keep the environment without bacteria in the surroundings of their factory which amounts to availment of the said service for their business of manufacturing. - Input service credit allowed. Penalty - As the issue involved of interpretation of statute no penalties are warranted in this case - It is pertinent to mention here that the portion of services, on which the credit has been denied, the appellant shall pay interest on them as applicable rates.

Summary

Issues:
Denial of input service credit on various services - outdoor catering, garden maintenance, housekeeping at guest house and factory, picnic services, jungle cutting.

Analysis:

1. Outdoor Catering, Garden Maintenance, Housekeeping at Guest House and Factory:
The lower authorities denied input service credit on these services, citing a lack of nexus with the manufacturing activity of the appellant as per Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant argued that these services are related to their business activity of manufacturing excisable goods. The Tribunal referred to a decision of the Bombay High Court, stating that if services are availed in the course of business activity, the assessee is entitled to input service credit. The Tribunal allowed credit on outdoor catering, housekeeping at guest house and factory, except for the portion where the appellant recovered amounts. Garden maintenance and housekeeping services at the factory were also deemed eligible for credit.

2. Picnic Services:
The appellant claimed that picnic services for factory employees boost their effectiveness at work, justifying input service credit. However, the Tribunal found no nexus between picnic services and the business activity of the appellant. Consequently, input service credit for picnic services was denied.

3. Jungle Cutting Services:
The appellant argued that jungle cutting services were essential to maintain a bacteria-free environment around the factory, crucial for keeping finished products free of bacteria. The Tribunal acknowledged the necessity of this service for the manufacturing business and allowed input service credit on jungle cutting services.

4. Penalties and Interest:
As the issue revolved around the interpretation of the statute, no penalties were imposed. However, the appellant was directed to pay interest on the portion of services for which credit was denied. The Tribunal concluded the appeals by disposing of them based on the above analysis and observations.

In summary, the Tribunal allowed input service credit on outdoor catering, housekeeping at guest house and factory, garden maintenance, and jungle cutting services, while denying credit for picnic services. The decision was based on the nexus of these services with the manufacturing business of the appellant, as established through legal precedents and arguments presented during the proceedings.