2015 (4) TMI 704 - HC - Service Tax

Denial of CENVAT Credit - Housekeeping and Landscaping Services - Held that - where an employer spends money to maintain their factory premises in an eco-friendly manner, the tax paid on such services would form part of the cost of the final products and the same would fall within the ambit of input services and, therefore, the assessee is entitled to claim the benefit. This Court is in agreement with the ratio laid down in Millipore India Pvt. Ltd. case (2011 (4) TMI 1122 - KARNATAKA HIGH COURT), which is equally applicable to the case on hand and following the said decision, this appeal is liable to be dismissed. - Decided against Revenue.

Summary

Issues:
- Interpretation of the term 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004.
- Eligibility of availing credit of service tax on housekeeping and gardening services.
- Applicability of the decision in the case of Millipore India Pvt. Ltd. by the Karnataka High Court to the present case.

Analysis:

1. Interpretation of the term 'input service':
The case involved a dispute regarding the interpretation of the term 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant, a manufacturer of power steering systems, availed credit of service tax paid on housekeeping and gardening services. The Deputy Commissioner disallowed the credit, leading to an appeal by the assessee. The Tribunal allowed the appeal based on previous decisions, prompting the appellant to approach the High Court.

2. Eligibility of availing credit on specific services:
The main contention was whether 'Housekeeping and Landscaping Services' could be considered as 'input services' under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant challenged the inclusion of these services as input services, citing precedents and emphasizing the direct or indirect use of services in relation to manufacturing or clearance of final products. The High Court considered the decision of the Karnataka High Court in the Millipore India Pvt. Ltd. case, which held that activities related to business and services rendered in connection therewith could be part of input services. The Court agreed with this interpretation, stating that expenses to maintain factory premises in an eco-friendly manner contribute to the cost of final products, making the service tax on such services eligible for credit.

3. Applicability of Karnataka High Court decision:
The High Court found the facts of the present case similar to the Millipore India Pvt. Ltd. case and upheld the decision's rationale. It emphasized that maintaining factory premises in an eco-friendly manner is essential for the cost and reputation of the final products. Therefore, the Court dismissed the appeal, ruling in favor of the respondent/assessee based on the precedent set by the Karnataka High Court. The judgment highlighted the broad and inclusive nature of the definition of input services, supporting the assessee's entitlement to claim the benefit of service tax paid on housekeeping and gardening services.

In conclusion, the High Court upheld the Tribunal's decision, allowing the appeal of the respondent/assessee regarding the eligibility of availing credit on housekeeping and gardening services as input services under the Cenvat Credit Rules, 2004. The judgment emphasized the importance of maintaining factory premises in an eco-friendly manner and the impact of such expenses on the cost of final products, aligning with the precedent set by the Karnataka High Court in the Millipore India Pvt. Ltd. case.