2009 (7) TMI 488 - AT - Service Tax

Cenvat credit of service tax Input service The appellants availed credit on the bass of invoices issued by the input service distributor i.e. the appellant Regional marketing Office at Allahabad. It has been observed that these input services were not related to the business activities as mentioned in the definition of input service. In this case Tri.-(Del.) by considering the decision of Larger Bench of the Tribunal in the case of ABB Ltd. v. CCE & ST., Bangalore, CCE, Mumbai-V v. GTC Industries Ltd., held that input services rendered outside the manufacturing premises would be eligible for credit, if it is related to the business activities, hence Impugned order is set aside. Matters are remanded back. Both the appeals are disposed of. Decision in favor of appellant against the revenue

Summary

Issues:
Cenvat credit denial on various services; Interpretation of "input service" for credit eligibility.

Analysis:
The judgment by the Appellate Tribunal CESTAT, NEW DELHI involved a common issue of Cenvat credit denial on services like Rent-a-Cab, Courier, Air Travel Agent, Maintenance, Repair, and Telephone services due to lack of evidence showing their use in the manufacture of the final product. The Commissioner (Appeals) noted that the credit was based on invoices from the input service distributor, but these services were not considered related to business activities as per the definition of input service. The appellant cited precedent cases like ABB Ltd. v. CCE & ST., Bangalore, and CCE, Mumbai-V v. GTC Industries Ltd., where Larger Bench decisions emphasized interpreting "input service" broadly in line with business requirements beyond manufacturing premises.

The Tribunal referred to the GTC Industries Ltd. case regarding Outdoor Catering service, where it was held that such services are part of the cost of production and thus considered an eligible input service. Similarly, in the ABB Ltd. case, it was established that the definition of "input service" should not be narrowly construed to limit it to factory or depot premises only. The judgment emphasized that input service credit should not be confined to manufacturing or clearance activities but should be based on the service's relevance to business operations, even if outside manufacturing premises.

As a result of the Larger Bench decisions, the Tribunal set aside the impugned orders and remanded the matters to the original authority to allow credit on input services if they were related to business activities, following the broader interpretation of "input service." The judgment concluded by disposing of both appeals in line with the principles established by the Larger Bench decisions, highlighting the importance of considering the service's connection to overall business operations for credit eligibility.