2013 (8) TMI 854 - AT - Service Tax

Cenvat Credit - Input services - Nexus Between Input Services and Manufacturing Activity - Online journal subscription - Outdoor Catering Service - The appeal was on the ground that the lower appellate authority had not discussed the nexus between the input services and the manufacturing activity of drugs undertaken by the assesse - Held that - the payment of service tax for electronic subscription of research journals, periodicals, etc., on which service tax had been paid under the category of online information and data base retrieval service was definitely an input service as defined in Rule 2(l) of the CENVAT Credit Rules - the nexus between the two can be reasonably established - The service was an input service and CENVAT credit of service tax paid can be taken except on the portion relating to the cost recovered by the manufacturer from the workers in respect of such service. CCE, Nagpur Versus Ultratech Cement Ltd., 2010 (10) TMI 13 - BOMBAY HIGH COURT - The invoices clearly indicated the category of service supplied as a category of online information and data base retrieval services - The assesse being a drug manufacturing company had subscribed to international research journals - The research activity in drug manufacturing industry was well known and without research, no new drug can be developed and such research activity was inherent and integral to the manufacturing activity - The credit entitlement was limited to the amount borne by the assesse -company and service tax on that portion of service charges recovered from the employees was not permissible - If the respondent had availed any such impermissible credit, the same should be reversed forthwith along with interest. Rent-a-Cab Service - Maintenance and Repair Service - Held that - Service tax paid on Rent-a-Cab Service can be allowed as CENVAT credit in respect of cab rented for transportation of employees - Commissioner of Central Excise, Bangalore-III v. Stanzen Toyotetsu India (P) Ltd. 2011 (4) TMI 201 - KARNATAKA HIGH COURT - it was seen that the service tax credit had been availed in respect of Annual Maintenance Contract for the Xerox machine installed in the factory premises - So long as service tax has been paid under the said category of service, the respondent can rightly avail the CENVAT credit Decided against Revenue.

Summary

Issues: Appeal against allowing CENVAT credit on various input services without discussing nexus to manufacturing activity.

Analysis:
1. Outdoor Catering Service: The appeal challenges the allowance of CENVAT credit for this service. The judgment cites the High Court decision in Commissioner of Central Excise v. Ultratech Cement Ltd., where it was held that such services are 'input services' eligible for credit, except for the portion recovered from workers. The Tribunal upholds the credit for this service.

2. Rent-a-Cab Service: The Tribunal refers to the High Court ruling in Commissioner of Central Excise v. Stanzen Toyotetsu India, stating that service tax on Rent-a-Cab Service can be claimed as CENVAT credit when used for employee transportation. The credit for this service is upheld.

3. Maintenance and Repair Service: The Tribunal addresses the objection raised by Revenue regarding the Annual Maintenance Contract for a Xerox machine. It rules that the objection is not valid as the contract covers repair, maintenance, replacement of parts, and supply of consumables, making it eligible for CENVAT credit. The credit for this service is upheld.

4. Supply of Journals and Periodicals: The Tribunal dismisses Revenue's objection to service tax credit on research journals, stating that research is integral to drug manufacturing. It deems the payment for online information services as an 'input service' under CENVAT Credit Rules, allowing the credit for this service.

5. Nexus to Manufacturing Activity: The Tribunal notes that while the adjudicating authority questioned the nexus between input services and manufacturing activity, the lower appellate authority found a connection. Citing past Tribunal decisions, the judgment supports the lower authority's stance, emphasizing the established nexus between the services and manufacturing activity.

6. Overall Decision: The Tribunal finds the Revenue's appeal lacking merit and dismisses it. It limits the credit for outdoor catering service as per the Ultratech Cement Ltd. case and directs reversal of impermissible credits. The appeal is disposed of accordingly.