2016 (9) TMI 538 - AT - Service Tax

Cenvat credit - Service Tax paid on input services - Commissioning and installation service - Held that - the said services are employed only to install the final product at the premises of the customer and only upon such installation, the final product would become operational and purpose of manufacture would fructify. Therefore, the appellant cannot be faulted with and the order of the Learned Additional Commissioner in appellant s own case whereby the learned adjudicating authority has allowed the credit on Commissioning and installation services also strengthens their case. Cenvat credit - Housekeeping services - Held that - it is found that the said services are employed by the appellants only in compliance of Environmental laws and in particular the Factories Act, 1948, and when money is spent for the purposes of maintaining the factory premises clean and tidy, and the same is includible in the value of the final product, following the decision of the Hon ble Madras High Court in the case of C.Ex & ST, LTU Chennai Vs Rane TRW Steering Systems 2015 (4) TMI 704 - MADRAS HIGH COURT as well as decision in the case of Hinduja Foundries Ltd. Vs CCE, Chennai-I 2016 (4) TMI 326 - CESTAT CHENNAI , I hold that credit of Service Tax paid on such services cannot be denied. Cenvat credit - Air travel services - Held that - when it is not in dispute that the said services were employed only for the company s executives to travel to achieve the business objective and the same has not been used for the employee s personal needs, credit of Service Tax paid on such services cannot be denied in view of the decision in the cases of Arkema Paroxides India Pvt Ltd. Vs CCE, Pondicherry 2016 (9) TMI 435 - CESTAT CHENNAI , Goodluck Steel Tubes Ltd. Vs Commissioner of C.Ex, Noida 2014 (1) TMI 37 - CESTAT NEW DELHI and Innovasynth Technologies (I) Ltd. Vs CCE, Raigad 2015 (3) TMI 127 - CESTAT MUMBAI . Cenvat credit - Rent-a-cab service - services employed only for the employees to travel to the customer s site in order to install the goods and without such installation, the product cannot be functional and such services are not used for the personal consumption of the employees - Held that - the nature of the business of the appellants is such that employees need to travel to the customer s site to install the products and only on such installation the products would become operational. The very purpose of manufacture of such products is only to benefit the customer for whom it is made and that being the case, cab operator s services used for the transport of employees to the customer s site is an integral part to the manufacture of the final products and credit on the same cannot be denied. Therefore, by respectfully following the ratio laid down by the Hon ble High Courts as mentioned above, I allow the assessees appeal in respect of Cenvat credit on input services, such as, commissioning and installation, housekeeping services, air travel services and rent-a-cab services. The penalty is also set aside. - Decided in favour of appellant

Summary

Issues:
- Availment of cenvat credit for excise duty paid on inputs and capital goods
- Availment of cenvat credit for Service Tax paid on input services
- Disallowance of credit on input services by the Additional Commissioner
- Upholding of the order by the Commissioner (Appeals) to a certain extent
- Arguments regarding the eligibility of input services by the appellant
- Nexus of input services with the manufacture of the final product
- Eligibility of input services like commissioning and installation, housekeeping, air travel, and rent-a-cab services
- Adjudication on the eligibility of cenvat credit for various input services

Analysis:
The appellant, engaged in manufacturing steel furniture, availed cenvat credit for excise duty on inputs and capital goods, as well as Service Tax on input services. The dispute arose when the Additional Commissioner disallowed credit on certain input services and imposed a penalty. The Commissioner (Appeals) upheld part of the disallowance and the penalty. The appellant argued that input services like commissioning and installation, housekeeping, air travel, and rent-a-cab services were essential for their operations and eligible for cenvat credit.

The appellant contended that commissioning and installation services were crucial for completing the manufacturing process, as the final product needed to be installed at the customer's premises. They cited previous decisions to support their claim. Similarly, for housekeeping services, the appellant highlighted their statutory obligation under the Factories Act to maintain cleanliness, linking it to the value of the final product. The appellant also justified air travel services for business purposes and rent-a-cab services for employee transportation to customer sites.

The Adjudicating Authority found that expenses on factory premises services were eligible as input services. Regarding commissioning, installation, and housekeeping services, the Authority agreed with the appellant's arguments, emphasizing the necessity and nexus of these services with manufacturing activities. The Authority cited relevant court decisions to support the eligibility of these services for cenvat credit. Additionally, for air travel and rent-a-cab services, the Authority acknowledged their integral role in the manufacturing process and customer service, allowing cenvat credit for these services as well.

Ultimately, the Tribunal allowed the appeal, overturning the disallowance of cenvat credit on various input services and setting aside the penalty. The Tribunal's decision was based on the essential nature of the input services for the manufacturing process and the precedents cited by the appellant. The judgment emphasized the nexus between the input services and the manufacture of the final products, ensuring the eligibility of the appellant for cenvat credit on the disputed services.