2011 (4) TMI 520 - AT - Service Tax

Cenvat credit - The learned counsel for the assessees has not established as to how gardening has a nexus with the activity of the business of the assessees, namely that of manufacture of motor vehicle parts - The gardening services have not been established to have any connection or nexus with the activity of the business of the assessees, who are manufacturers of motor vehicle parts Regarding penalty - since the period of demand ranges from April 2008 to July 2009 and since the assessees have clearly shown that they are availing CENVAT credit on gardener service from December 2008, penalty is reduced to Rs.20,000

Summary

Issues: Revenue's grievance over extension of credit of service tax for gardeners and helpers; Admissibility of credit for gardening services in relation to manufacturing activity of motor vehicle parts; Justification of penalty for non-disclosure of availing credit from ineligible service provider.

In this case, the Appellate Tribunal CESTAT, Chennai, addressed the Revenue's challenge regarding the extension of credit of service tax for gardeners and helpers utilized by the assessees, who are manufacturers of motor vehicle parts. The Tribunal noted that the assessees failed to establish a nexus between gardening services and their manufacturing business, as per the precedent set by the Hon'ble Bombay High Court in CCE, Nagpur Vs. Ultratech Cement Ltd. The Tribunal emphasized that to claim credit, services must be connected to the business activity. Consequently, the Tribunal found no established link between gardening services and the manufacturing operations of the assessees, leading to the disallowance of the credit for such services.

Regarding the penalty imposed on the assessees for non-disclosure of availing credit from an ineligible gardener service provider, the Revenue argued for the penalty's justification due to the lack of disclosure in the service tax credit/debit entry register. However, the Tribunal considered the period of demand and the assessees' subsequent disclosure of availing CENVAT credit on gardener services from December 2008 onwards. As a result, the penalty was reduced to Rs.20,000/- from the initial amount. The Tribunal partially allowed the Revenue's appeal in this regard.

Furthermore, the Tribunal dismissed the cross-objection filed by the assessees, deeming it as mere comments or replies to the Revenue's appeal without presenting any substantial grounds for consideration. The judgment was dictated and pronounced in open court, concluding the proceedings in this matter.