2009 (5) TMI 77 - AT - Service Tax

Input Service rule 2(l) Cenvat credit - . credit of duty availed on input service utilized for maintenance of staff colony, plantation and ILTD held that - If the department was not satisfied with the submissions of the appellants they could have gone into some verification. Simply discussing their averment is not acceptable. The appellant s contention that no one to one correlation is required to be shown wider the Cenvat Credit Scheme to claim the credit is correct. It is not necessary that the farmers should sell their entire products to the appellants in order to claim the input service credit by the assessce. In our view, all input services enumerated are activities relating to business. The ratio of the Tribunal s decision in Manikgarh Cement s case is also squarely applicable to the present case. If a service or activity is relating to business, then it should be treated as an input service in the light of the definition of input service .

Summary

Issues Involved:
1. Service tax credit availed on input services for maintenance of staff colony, plantation, and ILTD.
2. Interpretation of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004.
3. Nexus between input services and manufacturing activity.

Issue-wise Detailed Analysis:

1. Service Tax Credit on Input Services:
The appellants availed service tax credit on input services utilized for the maintenance of a staff colony, plantation activities, and ILTD. The period of dispute is from October 2005 to January 2007. The Order-in-Original confirmed the recovery of the credit, and the Commissioner (Appeals) upheld this decision but dropped the penalty. The appellants contested this, arguing that the services in question were essential for their business operations, given the remote location of their factory and the legal restrictions on land acquisition for employees.

2. Interpretation of "Input Service" under Rule 2(l):
The appellants argued that the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004, is broad and includes services used "directly or indirectly, in or in relation to the manufacture of final products." They cited various judgments to support their interpretation that the term "used" should not be narrowly construed as "consumed" and that services indirectly related to manufacturing should qualify for credit. The Tribunal noted that the definition of "input service" encompasses a wide range of services, including those related to business activities, and is not limited to services directly involved in the manufacturing process.

3. Nexus Between Input Services and Manufacturing Activity:
The appellants maintained that the services for maintaining the staff colony and plantation activities were integral to their manufacturing operations. They highlighted the remote location of their factory and the legal prohibitions on land transactions, which necessitated the provision of residential accommodation for employees. The Tribunal agreed with this argument, emphasizing that the factual situation and the broad definition of "input service" should be considered. The Tribunal noted that the maintenance of the colony and the plantation activities had a clear nexus with the manufacturing activity, as they were essential for the smooth functioning of the factory and the availability of raw materials.

Conclusion:
The Tribunal concluded that the appellants were entitled to the input service credit. It emphasized that the definition of "input service" is broad and includes services indirectly related to manufacturing and business activities. The Tribunal found that the services in question were necessary for the appellants' business operations and had a clear nexus with the manufacturing activity. Therefore, the appeals were allowed with consequential relief.