2013 (1) TMI 519 - AT - Service Tax

Wrongly availed CENVAT credit - Maintenance or repair services - Erection commissioning and installation service - Rule 2 (C) of CCR 2002 - Rule 4(1) of CCR 2002 - Credit availed for input services of travel agent custom house agent tour operation telephone insurance courier testing services - Revenue argued that Services for which service tax credit availed and utilised have not been utilised in relation to rendering the output services Held that - The services are mainly in relation to water treatment plants manufactured by them. Custom house agent service was obtained in relation to importation of components/equipments for manufacture of water treatment plants. Since the appellants are engaged in manufacture of water treatment plants and installation erection thereof the service obtained in relation to parts and equipments can be said to be in relation to output service also. After all without importing parts and equipments neither manufacture nor erection or installation would be possible. Similarly in telephone service and surface area sample testing area services advertisement charges also can be definitely considered as utilised in relation to providing the output service The words used are in relation to rendering of output service . Therefore what is required to be seen is whether the services have been used directly or indirectly in relation to the output service. Under these circumstances CENVAT credit has been used correctly and appeal has to be allowed. In favour of assessee

Summary

Issues:
1. Availing and utilization of service tax credit on various input services.
2. Interpretation of provisions regarding input services and output services under the Service Tax Rules.
3. Dispute over the eligibility of service tax credit on specific services during a certain period.
4. Application of Rule 3 of Service Tax Rules and Notification No.5/2003-ST.
5. Determination of whether the input services were used in relation to rendering the output services.

Analysis:

1. The case involved the appellants who were engaged in manufacturing water treatment plants, chemicals, and providing taxable services under maintenance, repair, erection, commissioning, and installation categories. They availed service tax credit on various input services like travel agent, custom house agent, tour operation, telephone, insurance, courier, and testing services. However, a show cause notice was issued for the recovery of wrongly availed cenvat credit, leading to a demand confirmation with interest and penalty under the Finance Act, 1994.

2. The dispute primarily revolved around the interpretation of Rule 3 of Service Tax Rules and the definition of input and output services. The relevant provisions required that input services should have been received and consumed in relation to rendering output services. The appellant argued that services like custom house agent for importation of components, telephone services, sample testing area services, and advertisement charges were indirectly related to providing output services, specifically in manufacturing water treatment plants and their installation.

3. The legal analysis focused on the requirements for availing service tax credit, emphasizing that the invoice or bill should have been issued after a specified date and that input services must be linked to the provision of output services. The Tribunal considered the broader interpretation of "in relation to rendering of output service," highlighting that direct use was not the only criterion, and indirect utilization of services could also qualify for credit.

4. Referring to the specific period and notifications, the Tribunal examined whether the services in question met the criteria for credit eligibility. It was concluded that the services availed and utilized by the appellants were indeed in relation to the output services they provided, including manufacturing, installation, and maintenance of water treatment plants. Consequently, the Tribunal allowed the appeal, finding that the credit had been correctly utilized, and granted consequential relief to the appellant.

5. In the final judgment pronounced on 16.10.2012, the Tribunal upheld the appellant's argument regarding the utilization of input services in relation to output services, emphasizing the broader interpretation of the connection between the services provided and the credit availed. The decision highlighted the importance of considering the indirect use of services in the context of rendering output services, ultimately leading to the allowance of the appeal and relief granted to the appellant.