2009 (3) TMI 34 - AT - Service Tax

Credit of service tax paid on air-tickets for the company officials denied on ground that said activity is in no way connected with the manufacture and clearance of their final product and as such it is not coming within the scope of the input service, as defined in Rule 2(1)(ii) of CCR 2004 Commissioner (Appeals) has observed that the appellants could not place on record the nature of work for which the journey was undertaken - entire issue needs to be reconsidered by Commissioner (Appeals)

Summary

Issues Involved:
1. Denial of credit for service tax paid on air-tickets.
2. Interpretation of the definition of input service under Rule 2(1)(ii) of the Cenvat Credit Rules, 2004.
3. Need for reconsideration of the issue by the Commissioner (Appeals).

Analysis:

Issue 1: Denial of credit for service tax paid on air-tickets
The appellant's credit of service tax paid on air-tickets for company officials was denied on the basis that it was not connected with the manufacture and clearance of their final product, thus falling outside the scope of input service. The appellant argued that the booking of air-line tickets for company officials was an activity relating to business, which should be considered as part of input service. Reference was made to a Tribunal's Larger Bench decision to support this argument.

Issue 2: Interpretation of the definition of input service
The Commissioner (Appeals) was criticized for not considering the entire definition of input service under Rule 2(1)(ii) of the Cenvat Credit Rules, 2004. The appellant contended that the services used in relation to activities relating to the business should also be included in the definition of input service. It was highlighted that the Commissioner (Appeals) only focused on the initial part of the definition and failed to consider the broader scope of services used in business activities.

Issue 3: Need for reconsideration by the Commissioner (Appeals)
The learned SDR argued that the nature of work for which the journey was undertaken was not adequately presented by the appellants before the Commissioner (Appeals). Therefore, it was suggested that the entire issue needed to be reconsidered by the Commissioner (Appeals) to ensure a fair assessment of the appellant's claim regarding the services availed in relation to business activities.

In conclusion, the impugned order was set aside, and the matter was remanded to the appellate authority for a fresh decision. The Commissioner (Appeals) was directed to consider the appellant's claim that the services availed were indeed related to business activities, as reflected in their books of accounts and considered as part of the cost of their final product. The stay petition and appeal were disposed of accordingly.