2015 (12) TMI 1062 - HC - Service Tax

Availment of CENVAT Credit - Rent-a-Cab , Tour Operators , and Travel Agent service - Nexus with manufacturing activity - Held that - There was no dispute even by the Department on the issue that the assessee had consumed for itself various services at various stages in their manufacturing and business activities. Cost was borne by the assessee which also formed a part of the value of the goods manufactured - Rule 2 (l) of the Cenvat Credit Rules, 2004 defines input service . This definition is couched in means and includes the expression. The definition input service would mean, any service used by the provider of output service, or used by the manufacturer directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal, and would include various services specified in the said definition. Thus, the term input service would mean any service used by the manufacturer directly or indirectly in or in relation to manufacture of final products and clearance of final product from the place of removal - service in question was input service and the service tax paid thereon would be available to the assessee by way of Cenvat Credit. No question of law, therefore, arises - Decided against the revenue.

Issues:
- Whether the Tribunal was right in allowing Cenvat Credit of Service Tax on services like 'Rent-a-cab', 'Tour Operators', and 'Travel Agent' to the respondent for manufacturing and clearances of final products?
- Whether the Tribunal was correct in allowing Cenvat Credit on services as part of the production of goods, despite being independent of valuation provisions?

Analysis:
1. Issue 1 - Cenvat Credit for Services: The primary issue revolved around the respondent claiming Cenvat Credit for Service Tax paid on services such as 'Rent-a-Cab', 'Tour Operators', and 'Travel Agent'. The Revenue contended that these services were not directly related to the manufacturing or clearance of final products. However, the respondent argued that these services were essential for internal movement of employees within the refinery premises and for business-related travels. The adjudicating authority and appellate authority both supported the respondent's claim, emphasizing the nexus between these services and the manufacturing activity.

2. Adjudicating Authority's Decision: The adjudicating authority examined whether the services in question qualified as 'input service' under the Cenvat Credit Rules. It concluded that the services were directly or indirectly related to the respondent's business activities and manufacturing process. The authority found no dispute regarding the availing and consumption of these services by the respondent, with costs borne by them, forming part of the value of goods manufactured. Consequently, the authority ruled in favor of the respondent, allowing Cenvat Credit on all the services.

3. Issue 2 - Interpretation of 'Input Service': The definition of 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004 was crucial in determining the eligibility for Cenvat Credit. The rule defines 'input service' as any service used directly or indirectly by the manufacturer in relation to the manufacture of final products and their clearance. The Tribunal upheld the decisions of the lower authorities, emphasizing that the services in question fell within the ambit of 'input service' as defined. The Tribunal dismissed the appeal, citing precedents and supporting the view that the service tax paid on these services was eligible for Cenvat Credit.

4. Final Decision: The High Court concurred with the lower authorities and the Tribunal, affirming that the services provided by 'Rent-a-Cab', 'Tour Operators', and 'Travel Agent' qualified as 'input services' under the Cenvat Credit Rules. The Court highlighted the broad definition of 'input service' and the direct or indirect usage by the manufacturer in the manufacturing process. Consequently, the Court found no legal issue in allowing the Cenvat Credit on the services in question and dismissed the Tax Appeal filed by the Revenue.

In conclusion, the judgment centered on the eligibility of Cenvat Credit for services utilized by the manufacturer in their business activities and manufacturing process. The Court's analysis emphasized the interpretation of 'input service' under the Cenvat Credit Rules, highlighting the essential connection between the services availed and the manufacturing operations. The decision underscored the importance of considering the broader scope of 'input service' and upheld the allowance of Cenvat Credit on the services provided by 'Rent-a-Cab', 'Tour Operators', and 'Travel Agent'.

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