2016 (6) TMI 161 - AT - Service Tax

Entitlement of Cenvat credit - input services - Rule 2(l) of the cenvat credit Rules, 2004 - Financial service - Held that - this service is a covered service under Rule 2 (l) of CVR, 2004. Added to that finance being the necessary input for the purpose of carrying out the manufacturing activity and money is invested to carryout manufacture, credit cannot be denied for such services availed. Clearing and Forwarding and Customs Clearing Services - Held that - these services are integrally connected to the business. Procurement of raw materials and finished goods are essence of business. Therefore, the appellant cannot be denied to avail credit in respect of this service. Insurance Service - Held that - this service protects the raw materials and finished goods in transit as well as the assets of the company, for which credit cannot be denied for availing this service. Auction service - Held that - this service is also integral part of the manufacturing activity since, clearance of the dumped goods having no utility is necessary to be removed in order to store raw materials or finished goods. Therefore, this service cannot be said to be not integrally connected and credit cannot be denied. Legal services - Held that - such services are availed for statutory compliance which is the duty of the assessee to comply and the credit cannot be denied for such services since it has relevancy to the activity of manufacture. Once there is legal obligation and the assessee has to discharge the same irrespective of the manufacture being done but, business to be carried out, cenvat credit of service tax paid on such count is undeniable. Courier service - Held that - such service is considered necessary for the business because without such service, there may not be possibility of movement of documents as well as goods with least cost. Therefore, the appellant is entitled to cenvat credit on this count. Information Technology service - Held that - this is an integral part of the business activity to reduce the paper work and to carryout business efficiently and effectively. Maintenance of software is also integral part of activity of business. Therefore, this service is inseparable from the business activity of the appellant for which appellant cannot be denied cenvat credit. Photography service - Held that - this service is used to issue ID cards to the employees and for other different business activity, which is used in relation to the manufacturing of final products. Therefore credit of service tax on such input service is not deniable. Rent a cab service - Held that - this is found to be essential for the transportation of the employees in the adjudication order itself. When such a service is not found irrelevant to the business or manufacturing activity, credit of input tax cannot be denied since rent a cab service is essential for the movement of the employees to factory and to carry out business activity. Travel booking service - Held that - it is explained in the record that it is attributable to the transportation of the employees to different customer places and for business promotion activities. Therefore credit of service tax on this service cannot be denied. Designing services - Held that - such services pertained to the tools used in the manufacture of finished products, logos, graphics, corporate identity designing etc., This has nexus to the manufacture and clearance of goods for which cenvat credit cannot be denied on these services. Construction service - Held that - it is explained to be used in modernization, renovation and repairs of the factory and for construction of temporary sheds made to store raw materials and other assets of the company. Once there is no evidence found on record demonstrating that such expenses relate to different activity, the appellant is eligible to cenvat credit for this service also. CHA service - Held that - it is also indispensable to carryout clearance of finished goods for which no cenvat credit on this count can be denied. Business Auxiliary Service and Warehouse service - Held that - BAS is explained to be relating to supply of labour service for manufacture and included in the definition of input service as per Rule 2(l) of CCR, 2004, which is relevant to the manufacturing activity and therefore, appellant cannot be denied credit thereon. So far as the warehouse service is concerned, that related to storing of raw materials as well as finished goods either before clearance or after clearance. This itself is indication of its relevance to the manufacturing activity and therefore, credit cannot be denied thereon. All the services pertain to the manufacturing activity and the respective services were input for the said activity for which that was utilised - - Therefore, the decision of the adjudicating authority denying Cenvat Credit on above counts is reversed and the appellants are entitled to cenvat credit on all the services. - Decided in favour of appellant

Summary

Issues:
- Denial of Cenvat Credit on various services related to manufacturing activity.
- Dispute over the eligibility of input tax credit for services listed in the Show Cause Notices.
- Adjudication of Appeal No. E/41529/2014 concerning Business Auxiliary services and warehouse services.

Analysis:

Denial of Cenvat Credit on Various Services:
The appellant argued that all services listed in the Show Cause Notices were essential inputs for their manufacturing activity. The appellant contended that financial services, clearing and forwarding services, insurance services, auction services, courier services, information technology services, photography services, rent a cab services, travel booking services, legal services, CHA services, and rent paid for temporary structure services were all directly related to their manufacturing operations. The Tribunal acknowledged the importance of these services in facilitating the manufacturing process and ruled in favor of the appellant, allowing Cenvat credit for all the mentioned services.

Dispute Over Eligibility of Input Tax Credit:
The Tribunal examined each service listed in the Show Cause Notices individually. It recognized the integral role of financial services, clearing and forwarding services, insurance services, auction services, legal services, courier services, information technology services, photography services, rent a cab services, travel booking services, designing services, construction services, and CHA services in the manufacturing process. The Tribunal emphasized that these services were directly connected to the manufacturing activity and upheld the appellant's right to claim input tax credit for these services.

Adjudication of Appeal No. E/41529/2014:
In Appeal No. E/41529/2014, the dispute revolved around Business Auxiliary services and warehouse services. The appellant argued that Business Auxiliary services involved supplying laborers for manufacturing activities, directly contributing to the manufacturing process. The Tribunal agreed that these services were covered under the definition of input services and allowed the appellant to claim Cenvat credit. Regarding warehouse services, the Tribunal noted their importance in storing raw materials and finished goods, both pre and post-clearance, and ruled in favor of granting Cenvat credit for these services as well.

Conclusion:
After thorough examination and consideration of the arguments presented, the Tribunal reversed the decision of the adjudicating authority and allowed Cenvat credit for all the services in question. The Tribunal concluded that the appellant was entitled to claim input tax credit for the services related to their manufacturing activities. As a result, all four appeals were allowed in favor of the appellant.