2016 (7) TMI 1066 - AT - Central Excise

Cenvat Credit - input services - nexus with manufacturing activity - repair and maintenance service and erection and commissioning services with reference to water pipe line laid by the appellant to obtain water from Sharda OCM Plant situated away from the manufacturing facility of the appellant. - Held that - In this context, it is to be seen that for the appellant, water is one of the main input items used in the manufacture of paper. Admittedly, water is being transported from outside by a pipe line laid and maintained by the appellant. Input Services to be eligible for credit is not linked to any location for receipt of such services. - Credit allowed.

Summary

Issues:
Dispute over eligibility for service tax credit on repair and maintenance services and erection and commissioning services related to water pipe line laid outside the factory premises.

Analysis:
The appeal addressed the eligibility of the appellant for service tax credit on services related to a water pipe line used to transport water to the factory. The definition of "input services" under Rule 2(l) of Cenvat Credit Rules, 2004 was crucial in determining the eligibility for credit. The services received were not excluded, and the main issue was whether the pipe line services had a nexus with the manufacturing activity. The appellant argued that water, transported through the pipe line, was a significant input for paper manufacturing. The Bombay High Court's judgment emphasized the broad interpretation of "input services," stating that services used directly or indirectly in or in relation to the manufacture of final products are eligible for credit.

The Tribunal cited precedents to support the appellant's case. In the case of Welspun Maxsteel Ltd., the Tribunal allowed credit for security services related to a pump house outside the factory premises. Similarly, in the case of ZF Steering Gear (India) Ltd., credit for maintenance of windmills outside the factory premises was upheld. These cases demonstrated that services utilized outside the factory premises could still be eligible for credit if they were directly or indirectly related to the manufacturing process. The Tribunal found no justification for denying credit to the appellant in this case and set aside the impugned order, allowing the appeal accordingly.