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2017 (8) TMI 705 - AT - Service Tax


Issues:
- Availment of input service tax credit on various services not directly related to the manufacture of final product.
- Interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004.
- Applicability of judicial precedents on similar issues.
- Exclusion clause in Rule 2(l)(A) of CCR.
- Nexus of services with the manufacture of finished goods.

Analysis:

The appeal was filed against the Commissioner (A)'s order rejecting the appellant's appeal and upholding the Order-in-Original, which demanded irregularly availed input service tax credit and imposed penalties. The appellant, a pharmaceutical company, argued that expenses for repair and maintenance work were necessary to comply with manufacturing guidelines. The appellant received various services like repair and maintenance of machinery, which were used in the production of finished goods. The appellant contended that these services were directly related to the manufacture of final products, citing judicial precedents supporting their claim.

The appellant argued that the impugned order misinterpreted Rule 2(l) of CCR, 2004, and that the services availed were not covered by the exclusion clause in Rule 2(l)(A) related to works contract services. The appellant provided detailed invoice-wise information on the input services used for repair and maintenance of machinery. The appellant relied on several Tribunal decisions to support their claim that the impugned services should be considered as 'input services' eligible for CENVAT credit.

The respondent, however, maintained that the services utilized were for construction activities not directly related to the manufacture of finished goods. The respondent argued that the services did not have a nexus with the manufacturing process and thus contravened Rule 2(l), 3, and 9 of CCR, 2004. After hearing both parties and examining the evidence, the Tribunal found that the services were indeed used for repair and maintenance of machinery essential for manufacturing finished goods as per regulatory requirements.

The Tribunal concluded that the appellant was entitled to CENVAT credit for all services except 'outdoor catering service,' which was excluded from the definition of 'input service' during the relevant period. The Tribunal relied on various decisions supporting the inclusion of repair and maintenance services as 'input services' directly related to the manufacture of final products. Consequently, the impugned order was set aside, and the appeal of the appellant was allowed, except for 'outdoor catering service.'

In the operative part of the order pronounced on 12/04/2017, the Tribunal clarified its decision, emphasizing the eligibility of the appellant for CENVAT credit on services directly connected to the manufacturing process, except for 'outdoor catering service.'

 

 

 

 

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