2010 (10) TMI 357 - AT - Service Tax

Inputs service credit - The Commissioner (Appeals) has denied the inputs service credit as these services are not covered under Rule 2(l) of the Cenvat Credit Rules, 2004 and no relation their either with manufacturing activity or business of the appellants - Telephone services, medical insurance services and group maintenance service - All these services has already been allowed by the Tribunal, which order has not been challenged by the Department - Allow the inputs services credit on these services. Group accident insurance - The same has been taken for the safety of the employees who are engaged in the manufacturing activity, hence, the same is covered by the definition of Rule 2(l) of the Cenvat Credit Rules, 2004. Hence, inputs service credit on these services is allowed. As per the decision of GTC Industries Ltd., inputs services on outdoor catering services is also allowed. Services for repair and maintenance of street light within the factory premises - This is integral part of the factory and same is to be engaged in the manufacturing activity and the clearance of their final product from their factory, hence the inputs services credit on repairs and maintenance on street light is also allowed. The impugned order is set aside. Appeal is allowed.

Summary

Issues:
- Denial of input service credit by Commissioner (Appeals) on various services.
- Nexus of services with manufacturing activity or business of the appellants.
- Applicability of Rule 2(l) of the Cenvat Credit Rules, 2004.
- Precedents allowing input service credit on similar services.
- Interpretation of the definition of input services under the Cenvat Credit Rules, 2004.

Analysis:
The appeal challenged the denial of input service credit by the lower appellate authority on services such as group accident insurance, group medical insurance, group maintenance service, plant and machinery service, landline telephone at executives' residences, and repairs and maintenance of street lights within the factory premises. The Commissioner (Appeals) had held that these services lacked a connection with the manufacturing activity or business of the appellants, as per Rule 2(l) of the Cenvat Credit Rules, 2004.

In response, the appellants cited a previous Tribunal decision where input service credit was allowed on similar services like telephone installation, garden maintenance, and group personal insurance. They argued that group accident insurance was essential for employees involved in manufacturing activities to mitigate liability risks. Referring to a precedent involving catering services, they contended that street light maintenance was integral to factory operations and should qualify for input service credit.

The Department, however, supported the lower authority's decision, citing a Supreme Court ruling that emphasized the necessity of a nexus between services and the manufacture of the final product to claim input service credit.

After hearing both sides, the Tribunal noted that in a previous case involving the appellants, input service credit on certain services had been allowed and remained unchallenged. Consequently, the Tribunal upheld the appellants' arguments and allowed input service credit on all contested services. It reasoned that group accident insurance was linked to employee safety in manufacturing, making it eligible under Rule 2(l). Moreover, citing the precedent involving catering services, the Tribunal approved input service credit for street light repairs as integral to factory operations.

Therefore, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the importance of the nexus between services and manufacturing activities while interpreting the definition of input services under the Cenvat Credit Rules, 2004.