2009 (5) TMI 379 - AT - Service Tax

Cenvat Credit- Input service- The assessee, a manufacturer of beverages, took credit of service tax paid on mediclaim policy, security of deposits, vehicle insurance, car rentals and pest control activities. Show Cause Notice was issued to it denying credit on the ground that all those services were not received in the factory premises of the assessee. Commissioner (Appeals) held that since the services were not used directly or indirectly in or in relation to the manufacture of final products and clearance of final products and clearance of final product from the place of removal, it was not entitled to the credit of same. In the light of the decision of CCE v. GTC Industries Ltd. 2008 -TMI - 31592 - CESTAT MUMBAI, held that all the activities on which credit taken by the assessee is related to the business activity, thus the appeal is allowed.

Issues:
Claim of input service tax credit on various services.

Analysis:
The appeal was filed against an order passed by the Commissioner of Customs & Central Excise-II, Hyderabad, regarding the entitlement of input service tax credit to the appellant on services like mediclaim policy, security at depots, vehicle insurance, car rentals, and pest control activities. The Commissioner (Appeals) had denied the credit, stating that the services were not used directly or indirectly in or in relation to the manufacture of final products. The appellant argued that the Commissioner's interpretation was incorrect, citing decisions that expanded the scope of input services beyond direct manufacturing activities. The Tribunal noted that the Commissioner had gone beyond the show-cause notice's scope and reiterated the principles laid down by the Larger Bench, emphasizing that services related to business activity are eligible for credit. Therefore, the Tribunal held that all the services in question were related to the appellant's business activity and allowed the appeal for claiming service tax credit on these input services.

The Tribunal highlighted that the services like mediclaim insurance, vehicle insurance, car rent, pest control, and security at depots were undeniably linked to the appellant's business activity. Referring to the interpretation provided by the Larger Bench, the Tribunal concluded that the denial of input service tax credit by the Commissioner was unjustified. The Tribunal emphasized that the services need not be directly involved in manufacturing but should be related to the business activity to qualify for the credit. Relying on the principles established by previous decisions, the Tribunal allowed the appeal, granting the appellant the right to claim service tax credit on the mentioned input services. The decision was based on the broader understanding of input services encompassing activities related to business operations, as clarified by the Larger Bench's interpretation.

In conclusion, the Tribunal overturned the Commissioner's decision and allowed the appellant's appeal, stating that the services in question were indeed related to the business activity and hence eligible for input service tax credit. The Tribunal's decision was based on the interpretation provided by the Larger Bench, emphasizing that services associated with business operations are entitled to the credit, irrespective of direct involvement in the manufacturing process. The judgment highlighted the importance of considering the broader scope of input services to facilitate legitimate credit claims for services contributing to overall business activities.

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