2014 (1) TMI 1549 - AT - Service Tax

Cenvat credit availed - Services of manpower supply used for development and maintenance of the green belt Waiver of Pre-deposit Held that - The permission given to the appellant by the Ministry of Environment for expansion of their production capacity is subject to condition that the appellant unit maintains 33% of the plant area as green belt - Since this is the statutory requirement and without fulfilling the same, the appellant unit would not be allowed to carry out manufacturing activity, the services of manpower supply used for the maintenance of the green belt have nexus with the manufacture of the final product thus, they would be eligible for Cenvat credit - Following Millipore India Ltd. v. CCE, Bangalore-II 2008 (11) TMI 97 - CESTAT, BANGALORE and Kirloskar Oil Engines Ltd. v. CCE, Aurangabad 2010 (6) TMI 210 - CESTAT, MUMBAI the order for denial of the Cenvat credit and imposing penalty on the appellant, is set aside Decided in favour of Assessee.

Summary

Issues:
1. Eligibility of Cenvat credit for services used in the development and maintenance of green belt as per Ministry of Environment and Forests' conditions.

Analysis:
The appellant, a manufacturer of chemicals, availed Cenvat credit for services used in developing and maintaining a green belt as per the Ministry of Environment and Forests' conditions. The department issued a show cause notice for recovery of the Cenvat credit, stating that the services had no nexus with the manufacture of the final product. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the appeal.

The appellant argued that maintaining the green belt was a requirement imposed by the Ministry of Environment and Forests for expanding their distillery unit. They contended that without complying with this condition, the manufacturing activity would not be permitted. Therefore, they asserted that the services for green belt maintenance should be considered as used in or in relation to the manufacture of the final product, making them eligible for Cenvat credit.

On the other hand, the Departmental Representative supported the impugned order, emphasizing the lack of nexus between the service and the final product's manufacture. After hearing both sides and examining the records, the judge found that the statutory requirement of maintaining a green belt as per the Ministry of Environment's conditions was crucial for allowing the manufacturing activity. The judge referenced previous Tribunal cases to support the decision that services related to such statutory requirements are eligible for Cenvat credit.

Therefore, the judge set aside the impugned order denying the Cenvat credit for the services used in green belt maintenance and imposed penalties. The appeal was allowed in favor of the appellant, highlighting the essential nexus between the statutory requirements for green belt maintenance and the manufacturing activity, making the services eligible for Cenvat credit.