2018 (8) TMI 314 - AT - Central Excise

CENVAT Credit - input services - tour operator services used for transporting workers and staff to the factory - whether the appellant is entitled to credit of the service tax paid on the tour operator service used for transporting their employees from their residence to the factory? - Held that - Once the workers come into the factory their services are used in relation to the manufacture of final products. But bringing workers to the factory or providing accommodation to them outside the factory or providing any other welfare measures for the workers or their families have no nexus with the manufacture of the final products, although they are welfare measures meant for the general well being of the workers who manufacture the goods - thus, the assessee is not entitled to the credit of service tax paid on the buses hired to bring workers to their factory. Credit not allowed - appeal dismissed - decided against appellant.

Summary

Issues:
1. Entitlement to CENVAT credit for service tax paid on 'tour operator services' used for transporting workers to the factory.
2. Finality of earlier Orders-in-Appeal and issuance of subsequent show cause notices.
3. Interpretation of 'input services' in relation to the manufacture of final products.

Analysis:
1. The appeals were filed against Orders-in-Appeal concerning the entitlement to CENVAT credit for service tax paid on 'tour operator services' used for transporting workers to the factory. The appellant argued that the service was related to the manufacture of final products, while the department contended it was merely a welfare measure. Previous Orders-in-Appeal favored the appellant, but subsequent show cause notices sought to recover the CENVAT credit. The lower authority confirmed the demands, but the Commissioner (Appeals) set them aside. However, new show cause notices were issued for subsequent periods, leading to the present appeal challenging the Order-in-Appeal upholding the demands.

2. The appellant challenged the Order-in-Appeal on the grounds of finality of earlier Orders-in-Appeal and the issuance of subsequent show cause notices. They argued that since the department did not appeal against the earlier favorable Orders-in-Appeal, no new notices could be issued. The department, however, asserted that the earlier decisions were not contested on monetary grounds. The Tribunal found no evidence to support either claim, emphasizing that the earlier Orders-in-Appeal were not binding precedents, allowing for an independent decision.

3. The key issue revolved around the interpretation of 'input services' in relation to the manufacture of final products. The Tribunal analyzed whether transporting workers to the factory qualified as an input service. It was determined that activities like bringing workers to the factory, providing welfare measures, or accommodation, did not have a direct nexus with the manufacturing process. Relying on legal precedents, the Tribunal concluded that the appellant was not entitled to the credit of service tax paid on the buses hired for transporting workers, as these activities were not directly related to the manufacturing process. The Tribunal's decision was based on the definition of 'input services' and the lack of a direct connection between the services provided and the manufacturing activities.

In conclusion, the Tribunal rejected the appeals, emphasizing that the transportation of workers to the factory did not qualify as an input service directly related to the manufacture of final products. The decision highlighted the importance of a direct nexus between services utilized and the manufacturing process, ultimately denying the appellant's claim for CENVAT credit on the service tax paid for transporting workers.