2017 (5) TMI 1184 - AT - Central Excise

CENVAT credit - input services - pipelines exclusively used for transport of water - denial on account of nexus - Held that - subject input service is having sufficient nexus with the manufacturing process of the appellant and is covered by the definition of input service under Rule 2(l) of CCR, 2004 - service tax paid on such services is eligible to be claimed as Cenvat Credit by the appellant-assessee - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Cenvat credit eligibility for Service Tax paid on technical inspection and certification services for pipelines supplying water to mines.

Analysis:
The appellant, M/s. Hindustan Zinc, appealed against an order by the Commissioner of Central Excise (Appeals), Jaipur, regarding the cenvat credit of Service Tax paid on technical inspection and certification services for pipelines supplying water to the Dariba Mines. The Tribunal considered the appellant's case in light of their previous decision where it was established that services related to laying, inspecting, and certifying pipelines for water transportation to the manufacturing unit are eligible for service tax credit. The Tribunal referred to Rule 3(1) which allows manufacturers to take credit of Service Tax paid on input services received, emphasizing that the definition of 'input service' is broad and covers services used directly or indirectly in the manufacturing process. The Tribunal rejected the lower authorities' reasoning that the services were not connected with manufacturing, stating that the location of factory premises is not the sole criteria for eligibility. The Tribunal highlighted a High Court decision emphasizing the comprehensive nature of the definition of 'input service' and ruled in favor of the appellant, allowing the claim for Cenvat Credit on the service tax paid for the relevant services.

The Tribunal's decision was based on the interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004, which defines 'input service' broadly to include any services used directly or indirectly in relation to the manufacture of final products. The Tribunal emphasized that the restriction on the location of the factory premises does not apply to input services, unlike for input or capital goods. The Tribunal criticized the lower authorities for their narrow interpretation of the definition of 'input service' and highlighted that the services in question, related to pipelines for water transportation essential to the manufacturing process, clearly fall within the ambit of 'input service' as per the rules. By following its previous decision and the legal provisions, the Tribunal concluded that the service tax paid on the technical inspection and certification services for the pipelines supplying water to the mines is eligible for Cenvat Credit. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant, granting any consequential relief.

In conclusion, the Tribunal's decision reaffirms the broad interpretation of 'input service' under the Cenvat Credit Rules, emphasizing that services directly or indirectly related to the manufacturing process are eligible for Cenvat Credit. The ruling provides clarity on the eligibility of service tax credit for technical inspection and certification services for essential infrastructure like pipelines, establishing a clear nexus with the manufacturing activities of the appellant.