2018 (8) TMI 1495 - AT - Central Excise

CENVAT Credit - input services - tour operator services for the period prior to 01.04.2011 - denial on the ground of nexus - whether the service tax paid for services availed for pickup and drop of employees under the head tour operator services is eligible for credit or not? Held that - The period involved is prior to 01.04.2011 when the definition of input services had a wide ambit - the issue is also covered by the decision in the case of Comstar Automotive Technologies Pvt. Ltd. 2017 (6) TMI 910 - MADRAS HIGH COURT , where it was held that availing of such services are necessary to the manufacture and transporting the workers to and fro from the factory is included under input services, in relation to the manufacture of excisable goods - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of Cenvat Credit on service tax paid on tour operator services for the period prior to 01.04.2011.

Analysis:
The appellants, engaged in manufacturing Welding Electrodes and Welding Fluxes, availed Cenvat Credit on duty paid on inputs, capital goods, and service tax paid on input services, including tour operator services. The department disputed the nexus of these services with manufacturing activities, leading to a Show Cause Notice for denial of credit, recovery with interest, and penalties. The original authority and Commissioner (Appeals) upheld the demand. The main contention was whether tour operator services for staff pickup and drop were essential for manufacturing activity, especially considering the pre-2011 definition of "input services" encompassing "activities relating to business."

The appellant's Counsel argued that the tour operator services were crucial for the manufacturing process, emphasizing their necessity for staff transportation. Referring to judgments from the Madras High Court in similar cases, the Counsel contended that the wider pre-2011 definition of "input services" supported their position. On the other hand, the department's representative supported the impugned order's findings.

After hearing both sides, the Tribunal focused on whether service tax paid for staff pickup and drop services by tour operators qualified for credit. Considering the pre-2011 definition and the precedents cited, the Tribunal deemed the denial of credit unjustified. Consequently, the impugned order was set aside, and the appeals were allowed, potentially leading to consequential reliefs for the appellants.

In conclusion, the Tribunal's judgment favored the appellants, allowing them to retain the Cenvat Credit on tour operator services for staff transportation, emphasizing the relevance of such services to the manufacturing process and the broader interpretation of "input services" before 2011.