2010 (9) TMI 583 - AT - Service Tax

Demand - Cenvat Credit - Catering services and rent-a-cab services - Rule 2(l) of the CENVAT Credit Rules, 2004 - The credit could be availed of the tax paid on the input service, as long as the manufacturer could demonstrate that the advertisement services availed had an effect or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture of the final product - Decided in the favour of the assessee

Summary

Issues:
Denial of Cenvat Credit on service tax paid for catering and rent-a-cab services from May 2007 to December 2007.

Analysis:
1. The Original Authority demanded Rs. 1,07,983/- as inadmissible Cenvat Credit along with interest and imposed a penalty under Cenvat Credit Rules, 2004. The Commissioner (Appeals) found the services provided were welfare measures, not directly related to business activities. The Tribunal's decision in a related case was cited, highlighting the mandatory canteen facility for factories with over 250 workers, which did not apply in this case due to fewer workers.

2. The appellants relied on various case laws to support their claim for admissibility of Cenvat Credit for both catering and rent-a-cab services. They argued that these services were essential for their business operations, citing precedents where similar services were considered eligible for credit.

3. During the hearing, the Senior Manager of the assessee explained that providing transport and catering services were necessary due to the remote location of their manufacturing facility. They argued that these services were directly related to their business activities and fell under the definition of input services in Cenvat Credit Rules.

4. The Senior Departmental Representative (SDR) relied on different decisions to counter the appellants' arguments.

5. The definition of input service under Rule 2(l) of Cenvat Credit Rules was crucial in determining the eligibility for Cenvat Credit. The Tribunal referred to a Supreme Court judgment to interpret this definition, emphasizing the necessity of a nexus between the services and the manufacture of final products.

6. The Tribunal disagreed with the application of the Supreme Court judgment, stating that the inclusive part of the definition of input service widened its scope. Citing a High Court decision, they explained that activities related to business should be interpreted broadly, not limited to direct manufacturing activities.

7. The High Court's decision in a similar case involving advertising services clarified that services related to business activities could be considered input services if they impacted the manufacture of final products. The Tribunal applied this reasoning to the present case, concluding that the services in question did affect the cost of production and were eligible for Cenvat Credit.

8. Ultimately, the Tribunal allowed the appeal, stating that the services provided by the assessee, namely rent-a-cab and catering services, were integral to their business operations and therefore qualified as input services eligible for Cenvat Credit.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning behind allowing the appeal related to the denial of Cenvat Credit on catering and rent-a-cab services.