2011 (2) TMI 656 - AT - Service Tax

Demand - Cenvat credit - show-cause notice alleged that the credit has been taken on services, which cannot be considered as relatable to manufacturing activity directly or indirectly and that there was no nexus with the manufacturing activities - Held that Commissioner (Appeals) has appreciated the fact that the respondents who are manufacturer of paper and paper boards are handling huge quantity of waste paper and the activities relating to upkeep of the waste yard, which included laying down roads, levelling, filling up etc. are part and parcel of activities having nexus to manufacture of excisable goods - held that the draining and maintenance of drain and swimming pool are related to maintenance of effluent plant - Decided in favor of the assessee

Summary

Issues:
Department's appeal against Commissioner (Appeals) order denying credit of service tax paid on various activities related to manufacturing.

Analysis:
The case involved an appeal by the department against the order of the Commissioner (Appeals) denying credit of Rs. 78,124/- after confirming the demand and imposing a penalty. The respondents, manufacturers of paper and paper boards, had taken credit of service tax paid on activities like yard cleaning, levelling, waste yard work, and more. The original authority denied the credit, but the Commissioner (Appeals) set aside this decision.

The department argued that the activities were not directly related to manufacturing or business activities covered by the inclusive definition. They sought to restore the original authority's order. On the other hand, the respondents contended that the activities were essential for raw material handling, factory expansion, and maintaining cleanliness within the factory premises. They argued that these activities were integral to the manufacturing process and business operations.

After considering submissions from both sides and reviewing the records, the Tribunal observed that the activities in question, such as waste yard maintenance, road laying, and draining, were crucial for handling raw materials and maintaining factory operations. The Commissioner (Appeals) had correctly identified the nexus between these activities and the manufacturing process. The Tribunal noted that the department failed to provide evidence contradicting the factual findings supporting the credit taken by the respondents. Therefore, the Tribunal upheld the Commissioner (Appeals) decision to treat these services as input services eligible for credit.

In conclusion, the Tribunal rejected the department's appeal, emphasizing that the activities in question were directly related to manufacturing and business operations, warranting the allowance of the credit. The decision was made after careful consideration of the factual findings and the purpose of the activities undertaken by the respondents.