2013 (7) TMI 395 - AT - Service Tax

CENVAT credit input service - assessee is into the activity of manufacturing of water treatment plant - whether assessee was eligible to CENVAT credit on service tax paid Held that - Appellants are engaged in manufacture of water treatment plants and installation, erection thereof, the service obtained in relation to parts and equipments should be treated as output service also - main requirements for claiming credit is that the invoice/bill/challan should have been issued after 14.05.03 and input services should have been received and consumed in relation to rendering of output service appeal decided in the favour of the assessee.

Issues:
1. Availment of service tax credit on input services
2. Interpretation of Rule 2(C) of CCR 2002
3. Show cause notice for recovery of wrongly availed cenvat credit
4. Entitlement of credit of service tax on input services
5. Fulfillment of requirements by the service provider
6. Consideration of services in relation to output service
7. Direct vs. indirect use of services in relation to output service

Analysis:

1. The case involved the appellants availing service tax credit during a specific period on various input services like travel agent, custom house agent, tour operation, telephone, insurance, courier, and testing services. The issue arose when it was observed that the services for which the credit was availed and utilized were not directly related to rendering the output services, leading to a show cause notice for the recovery of wrongly availed cenvat credit.

2. The interpretation of Rule 2(C) of CCR 2002 was crucial in determining the eligibility of service tax credit on input services. The rule defines input service as any taxable service received and consumed by a service provider in relation to rendering output services. This interpretation played a significant role in the decision-making process regarding the validity of the availed credit.

3. Following the issuance of a show cause notice, proceedings were initiated to recover the wrongly availed cenvat credit, leading to the confirmation of the demand along with interest and penalty under relevant sections of the Finance Act, 1994. The case was heard, and both sides presented their arguments before the tribunal.

4. The dispute primarily revolved around the entitlement of credit of service tax paid on input services such as travel agent service, custom house agent, tour operation, telephone, insurance, courier, and testing services during a specific period. The tribunal analyzed the relevant provisions of the Service Tax Rules to determine the eligibility criteria for availing such credits.

5. The tribunal examined the requirements that needed to be fulfilled by the service provider to claim service tax credit on input services. This included the issuance of invoices after specific dates and the consumption of input services in relation to the rendering of output services. The tribunal considered these requirements in detail to make an informed decision.

6. In assessing the case, the tribunal evaluated whether the services obtained by the appellants were genuinely utilized in relation to providing the output services. The analysis included services like custom house agent service for importation of components/equipments, telephone service, sample testing area services, and advertisement charges. The tribunal scrutinized the direct and indirect use of these services in relation to the output service.

7. The tribunal emphasized that the services need not be directly used but could also be indirectly related to the output service. It highlighted that the crucial factor was whether the services were utilized in relation to the output service, regardless of direct or indirect use. Based on this interpretation, the tribunal concluded that the credit had been correctly utilized, leading to the allowance of the appeal with consequential relief to the appellant.

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