2011 (6) TMI 309 - AT - Service Tax

Cenvat credit - Whether cenvat credit of service tax paid on tour operator service utilized by them for the purpose of transporting their employees from city to the factory is admissible or not - The transport facilities provided to the appellants is only to the factory and not to their office - This shows that there is a clear nexus between the manufacturing activity and the transport provided to the employees - Held that - in this case the appellant is eligible for the benefit of service tax paid on the tour operator service for transportation of employees to their factor from the city - No evidence has been produced before Commissioner(Appeals) that the appellants have incurred the transport cost and have not collected from the workers he matter is required to be remanded to the original adjudicating authority for verification of this aspect only - Appeal is allowed by way of remand.

Summary

Issues:
Admissibility of cenvat credit for service tax paid on tour operator service utilized for transporting employees from city to factory.

Analysis:

Issue 1: Admissibility of Cenvat Credit
The Appellant appealed against the lower authority's decision that cenvat credit for service tax paid on tour operator service used to transport employees to the factory is not admissible. The Appellant argued that the transport facility provided is essential due to the factory's remote location and is not merely a welfare measure. Reference was made to the exclusion of cenvat credit for service tax on employees' welfare measures in the Budget of 2011. The Respondent cited legal precedents to argue that cenvat credit cannot be extended for activities considered welfare measures unless mandated by statute and raised concerns about the collection of transportation costs from employees.

Issue 2: Legal Precedents and Interpretation
The Tribunal analyzed the legal precedents cited, particularly the decision of the Hon'ble High Court of Bombay in the case of Ultratech Cement Ltd. The Tribunal clarified that the High Court's decision did not establish a legal proposition but emphasized the nexus between services and the business of manufacturing final products. The Tribunal highlighted that all services related to the manufacturing process are covered under the definition of input service, as discussed in the Ultratech Cement Ltd. case. It was emphasized that the transport provided to the factory, not the office, showed a clear nexus to the manufacturing activity, making the Appellant eligible for cenvat credit. The Tribunal concluded that the Appellant is entitled to the benefit of service tax paid on the tour operator service for transporting employees, subject to verification of transportation cost collection.

Judgment
The Tribunal allowed the appeal by remanding the matter to the original adjudicating authority for verification of whether transportation charges were collected from employees. If the charges were not collected, the Appellant is eligible for the benefit of service tax as cenvat credit. The decision highlighted the importance of the nexus between the service provided and the business activity, emphasizing that all services related to manufacturing are covered under the definition of input service.