2011 (10) TMI 501 - AT - Service Tax

Whether the assessee-appellants/respondents are eligible to take credit of service tax paid on various services for the purpose of paying duty in respect of various goods manufactured by them - held that - order of the Hon ble Bombay High Court vide Commissioner of Central Excise Vs. Ultratech Cement Ltd. - (2010 (10) TMI 13 - BOMBAY HIGH COURT). was not before the authorities below when they decided the present cases - Appeals are allowed by way of remand

Summary

Issues:
Whether the assessee-appellants are eligible to take credit of service tax paid on various services for paying duty on manufactured goods.

Analysis:
The judgment dealt with 20 appeals, 14 by the Department and 6 by the assessee-appellants, all concerning the eligibility of the assessee-appellants to claim credit of service tax paid on various services for duty payment on manufactured goods. The services in question included outdoor catering, gardening, insurance, rent-a-cab, security, and manpower recruitment services. The Tribunal had conflicting orders on whether these services constituted input services.

In a previous batch of appeals, the Tribunal examined the statutory provisions under Section 37(2) of the Central Excise Act, 1944, and the definition of input service under the CENVAT Credit Rules, 2004, in light of a Supreme Court decision. It was held that input services must be integrally connected with the manufacture of final products, have a nexus with the manufacturing process, and be essential for the final product to emerge. For instance, outdoor catering services were deemed not to be input services as the food supplied by caterers was not considered inputs for final goods.

A similar matter was decided by the Nagpur Bench of the Bombay High Court, where it was held that all services used in relation to the business of manufacturing the final product are covered under the definition of input service. The High Court allowed credit for outdoor catering services, emphasizing the integral connection with the manufacturing business. The Department had appealed this decision, but no stay was obtained.

Considering the Bombay High Court's decision and the absence of contrary judgments, the Tribunal set aside the impugned orders in the 20 appeals and remanded the matter to the original authorities. The authorities were directed to apply the ratio laid down by the Bombay High Court in the Ultratech Cement case, extending credit for all services related to manufacturing. The appeals were allowed by way of remand, subject to the outcome of the Madras High Court decision on a related case. The parties were granted liberty to approach the Tribunal for further orders based on the Madras High Court's final decision.

The cross-objection filed by M/s. Sri Rama Vilas Services Ltd. was also disposed of in the judgment. The operative part of the order was pronounced in open court on 28.10.2011.