2009 (8) TMI 62 - AT - Service Tax

Cenvat Credit Input Service - The appellant take Cenvat credit of the duty paid on the goods and input services, which is utilized towards payment of service tax on their output service. The Department, however, while treating their entire services consisting of operation and maintenance of the power plant as repair and maintenance services and charging service tax on this basis on the gross amount being charged by the appellant for their services, seeks to deny Cenvat credit in respect of certain input services, which according to the Department, pertain only to the operation and not to maintenance held that - having treated the appellant s activity as one composite service, the Department cannot split it into plant operation and plant maintenance for the purpose of permitting Cenvat credit and deny Cenvat credit in respect of input goods and services used for plant operation Cenvat credit allowed.

Summary

Issues:
1. Denial of Cenvat credit in respect of input services for plant operation and maintenance.
2. Interpretation of the agreement between the parties.
3. Taxability of services provided by the appellant.
4. Eligibility for Cenvat credit in relation to plant operation.

Analysis:
1. The appeals were filed against an order denying Cenvat credit for input services like coal unloading, GTA Services, Mobile Phones, Advertisement and Publicity, Equipment Rent, Vehicle Rent, Security Guard Services, and Group Insurance. The Department treated the services of operation and maintenance of a power plant as 'repair and maintenance services' and charged service tax on the entire amount received by the appellant. The Department sought to deny Cenvat credit for certain input services related to plant operation. The orders-in-original confirmed the Cenvat credit demands and imposed penalties. On appeal, the Commissioner (Appeals) partially allowed input credit but upheld the demand for the remaining amount, leading to the filing of these appeals.

2. The appellant argued that the Department treated both operation and maintenance activities as 'repair and maintenance' for service tax purposes, making it unjust to split the activities for Cenvat credit purposes. The Departmental Representative contended that the agreement specified separate charges for operation and maintenance, making only maintenance services taxable. However, the appellant's activity was considered one composite service by the Department, making it improper to deny Cenvat credit for input goods and services used in plant operation.

3. The service provided by the appellant to the client involved operation and maintenance of a captive power plant. Despite the agreement mentioning separate charges for plant operation and maintenance, the Department classified the entire service as 'repair and maintenance service' for tax purposes. The Tribunal held that since the Department treated the activity as a single composite service, it could not then deny Cenvat credit for input goods and services used in plant operation. Consequently, the impugned order was set aside, and the appeals were allowed.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the denial of Cenvat credit for input services related to plant operation and maintenance.