2014 (5) TMI 214 - AT - Service Tax

CENVAT Credit - construction service and housekeeping service - Nexus with manufacturing activity - Held that - Prima facie, the argument that renovation of factory has no nexus with the final product is not acceptable especially in view of the fact that such service is included in the definition of input services given in Cenvat Credit Rules. The word maintenance is not specially mentioned in the definition of input services but prima facie maintenance of a factory is required for carrying on manufacturing operation without interruption. Therefore, prima facie, there is nexus between the housekeeping service and the final products. Thus the Appellants have made a prima facie case in their favour. So, I consider it proper to grant waiver of pre-deposit of dues arising from the impugned order. Such waiver is granted. There shall be stay on collection of such amounts during pendency of the Appeal. - Stay granted.

Summary

Issues:
1. Availment of Cenvat credit for Service Tax paid on construction service and housekeeping service.
2. Allegation of lack of nexus between services and final product.
3. Invocation of extended period for demanding excess credit availed.
4. Confirmation of demand, imposition of penalty, and appeal to Tribunal.

Analysis:
1. The Appellants, manufacturers of auto parts paying Central Excise duty, availed Cenvat credit for Service Tax paid on construction and housekeeping services during 2005-2008. Revenue issued a Show Cause Notice in 2009 alleging lack of nexus between services and final product, demanding excess credit availed over five years. The Notice was adjudicated confirming a demand of Rs. 7,74,542/- with interest and a penalty under Rule 15 of Cenvat Credit Rules.

2. The Counsel for Appellants argued that construction service for factory renovation and housekeeping service for maintenance within factory premises directly related to the final product's manufacture, justifying the credit. He emphasized a strong case on limitation due to timely credit availing and return filing. In contrast, the ld. SDR cited a Supreme Court decision requiring a clear nexus between input services and final product, doubting the relevance of factory renovation and upkeeping activities to manufacturing.

3. The Tribunal considered both arguments, finding the renovation of the factory and housekeeping services prima facie linked to the final product. While maintenance was not explicitly listed in the definition of "input services," it was deemed necessary for uninterrupted manufacturing operations. Consequently, a waiver of pre-deposit of dues from the impugned order was granted, with a stay on collection during the appeal's pendency, acknowledging the Appellants' prima facie case in their favor.

4. The judgment reflects a nuanced analysis of the nexus between availed services and final product manufacturing, balancing legal interpretations and practical implications. It underscores the importance of establishing a direct connection between input services and production processes to justify Cenvat credit claims, while also considering the broader operational context and industry practices.