2017 (12) TMI 544 - AT - Central Excise

CENVAT credit - garden services - air travel service - denial on account of nexus - Held that - permission to operate factory has been granted subject to the condition that the appellants maintain a green zone. In these circumstances, Cenvat Credit on gardening service is clearly admissible to the appellants as that is mandatory requirements of the manufacturer. Air travel services can be used for various purposes, which are indeed related to manufacturing operations or related to operations covered by the definition of input service. However, it is also possible that air travel services are used to provide air travel and for the purpose on LTC, etc. of the employees. The issue is remanded to the Commissioner (Appeals) to enable the appellants to produce the necessary evidence to show nexus between the services availed and the definition of input service - appeal allowed by way of remand.

Summary

Issues: Denial of Cenvat Credit on garden services and air travel service

Analysis:
1. The appellant, a manufacturing company, appealed against the denial of Cenvat Credit on garden services and air travel service. The appellant argued that due to the nature of their operations, which include maintaining a green zone within the factory premises as mandated by the Maharashtra Pollution Control Board, they are entitled to the Cenvat Credit for gardening services. Additionally, they claimed that air travel is essential for various purposes related to their business activities such as obtaining orders, sales promotion, and research.

2. The Assistant Commissioner (AR) relied on the impugned order which denied the Cenvat Credit. However, the Member (Technical) noted that the permission to operate the factory was subject to the condition of maintaining a green zone, making the Cenvat Credit on gardening services admissible to the appellants as it was a mandatory requirement for the manufacturer. The impugned order did not deny the credit for air travel services in principle but raised concerns about establishing the nexus between the services utilized and the definition of input service.

3. The Member (Technical) acknowledged that air travel services could be utilized for various purposes related to manufacturing operations or covered by the definition of input service. However, it was also noted that air travel services could be used for non-business purposes such as providing travel for employees on LTC. As a result, the Commissioner (Appeals) was directed to reexamine the issue and allow the appellants to produce evidence demonstrating the nexus between the air travel services availed and the definition of input service.

4. In conclusion, the appeal was partly allowed, emphasizing the importance of establishing a clear nexus between the services availed and the definition of input service. The case was remanded to the Commissioner (Appeals) for further examination in this regard.