2017 (4) TMI 846 - AT - Central Excise

CENVAT credit - input service - garden maintenance service - Held that - gardening would definitely contribute to aesthetic looking of the factory of the manufacture and would also be an eco-friendly activity. However, so long as such activity does not pass the test of usage criteria, or is not enjoined on them by various statutory requirements as discussed, and further such activity is also not barred or excluded by the exclusion provision (A), (B), (BA) and (C) in the second part of the definition of Rule 2 (l) ibid, the same cannot be treated as an eligible input service - demand upheld. Penalty - Held that - it is a fact that there are contrary decisions in respect of the eligibility of the said service. Element of confusion cannot be ruled out - penalty set aside. Appeal disposed off - decided partly in favor of assessee.

Summary

Issues:
Denial of input service credit for garden maintenance service.

Analysis:
The appeals revolve around the denial of input service credit concerning garden maintenance services. The demands were initially confirmed by the Original Authority and subsequently upheld by the Commissioner (Appeals), leading the appellants to challenge the decision before the forum. The primary contention raised by the appellant's advocate was that garden maintenance services qualify as essential and eligible input services under Rule 2(l) of the Cenvat Credit Rules, 2004. The advocate also argued against the imposition of penalties due to the disputed nature of the service's eligibility, citing conflicting decisions on the matter.

During the hearing, the Revenue representative opposed the appellant's stance, asserting that garden maintenance services lack a nexus with manufacturing or business activities. The Revenue relied on the Tribunal's decision in CCE Trichy Vs Sri Rama Vilas Service Ltd. to support their position. Following arguments from both sides and a thorough examination of the case facts, the judge proceeded to analyze the legal precedents cited by the appellant.

The judge noted that while the appellant referenced a judgment by the Madras High Court, it pertained to a period predating an amendment to Rule 2(l), rendering its applicability to the present case questionable. Additionally, the judge scrutinized the other decisions cited by the appellant, emphasizing the necessity for services to meet the usage criteria test outlined in the definition of "input service" under Rule 2(l). The judge concluded that garden maintenance services did not fulfill the requisite criteria to be considered eligible input services, as they did not directly or indirectly contribute to the manufacturing process or product clearance.

Regarding the issue of penalties, the judge acknowledged the conflicting interpretations surrounding the eligibility of garden maintenance services, leading to a valid argument against the imposition of penalties under Rule 15(1). Consequently, the penalties imposed were set aside, while the tax liabilities were upheld. The appeals were partially allowed based on the above considerations, as pronounced in the open court.