2016 (5) TMI 906 - AT - Service Tax

Availment of Cenvat credit - Telephone/mobile phone, courier services and construction and repair services (pertaining to staff quarters) - period involved is April 2011 to December 2012 - Appellant contended that all the services availed by them for olr inside the factory premises, threfore, comes under the definition of input service under Rule 2(l) of the Cenvat Credit Rules 2004 - Held that - with regard to the credit availed in respect of Telephone/mobile phone and courier services, the judgement in the case of Servall Engineering Works Pvt Ltd vs. CCE 2016 (5) TMI 889 - CESTAT CHENNAI cited supra is squarely applicable to the appellant s case, wherein it was held that the services related to cell phone , courier agency, it is quite possible as to the use of those services for the purpose of manufacturing and commercial activity of the appellant and therefore, Cenvat credit claimed in respect of service tax paid thereon was allowed.Therefore, by following the same, the credit availed on the Telephone/mobile phone and courier services are allowed. With respect to the repair and maintenance service pertaining to the appellants staff quarters, it is found that the services are in the nature of welfare activity and from 01.04.2011 onwards the credit availed on such welfare activities are not eligible for the credit under Rule 2(l) of the CCR 2004. Since the credit is held to be eligible on Telephone/mobile phone and courier services, penalty is set aside and with regard to the repair and maintenance service in view of the fact that the issue involved is interpretative in nature and the appellants were under the bonafide belief, penalty is set aside. - Appeal disposed of

Summary

Issues:
1. Denial of Cenvat credit on telephone/mobile phone, courier services, and construction and repair services.
2. Applicability of input service definition under Rule 2(l) of the Cenvat Credit Rules 2004.
3. Interpretation of whether services used directly or indirectly in relation to the manufacture of final products are eligible for credit.
4. Eligibility of credit on repair and maintenance services for staff quarters under the input service definition exclusion clause.

Analysis:
The case involved M/s India Cements Ltd appealing against the denial of Cenvat credit on telephone/mobile phone, courier services, and construction and repair services for the period between April 2011 to July 2013. The Adjudicating authority and the Commissioner (Appeals) had both denied the credit initially, leading to the appeal by the appellants.

The appellant contended that as per the definition of input service under Rule 2(l) of the Cenvat Credit Rules 2004, services used directly or indirectly in or in relation to the manufacture of final products are eligible for credit. They argued that courier services for official communications and purchase orders, telephone/mobile services within the factory premises, and repair services for staff quarters were all essential for their manufacturing activity. They cited a judgment in Servall Engineering Works Pvt Ltd vs. CCE to support their claim.

On the other hand, the Departmental Representative reiterated the findings of the Commissioner (Appeals) and argued against the eligibility of credit on repair and maintenance services for staff quarters, citing exclusion from the input service definition clause.

The main issue to be decided was the eligibility of the appellants for the credit availed on telephone/mobile phone, courier services, and construction and repair services for staff quarters. The judgment in the case of Servall Engineering Works Pvt Ltd was considered applicable to the appellant's case, allowing the credit on telephone/mobile phone and courier services. However, the repair and maintenance services for staff quarters were deemed ineligible for credit under Rule 2(l) of the CCR 2004 as they were considered welfare activities.

Ultimately, the appeals were disposed of with the credit allowed for telephone/mobile phone and courier services, while the credit for repair and maintenance services for staff quarters was deemed ineligible. Penalties were set aside due to the interpretative nature of the issue and the appellants' bonafide belief.

In conclusion, the judgment favored the appellants on the issue of telephone/mobile phone and courier services but denied the credit for repair and maintenance services for staff quarters.