2009 (10) TMI 193 - AT - Service Tax

Cenvat credit- Input services- the Appellants are engaged in the manufacture of cement and clinker. It has been alleged that the Appellant availed Cenvat credit on input services viz. business auxiliary services, C&F service and cargo handling service. The original Authority confirmed the demand of and imposed penalty along with interest. He also imposed penalty on the Manager of the Appellant Company. The Commissioner (Appeals) upheld the Adjudication. In the light of the decision of CCE v. Bhillai Auxiliary Industries - in which held that commission agent service is included under business auxiliary service, is admissible for Cenvat credit Held that-demand of tax and penalties are not sustainable, set aside the order and appeal allowed.

Summary

Issues:
1. Disallowance of Cenvat credit on input services.
2. Interpretation of the definition of "input service" under Cenvat Credit Rules, 2004.
3. Applicability of Cenvat credit on services used after the removal of final product.

Analysis:
1. The case involved the disallowance of Cenvat credit on input services availed by the Appellants, who were engaged in the manufacture of cement and clinker. The Adjudicating Authority disallowed the credit on the grounds that the services were used after the removal of the final product from the factory, which was the place of removal. The Commissioner (Appeals) upheld this decision, leading to the imposition of a demand and penalties.

2. The Tribunal referred to the case of ABB Ltd. v. CCE & ST and emphasized that the definition of "input service" should be interpreted based on business requirements and should not be restricted to the factory or depot of manufacturers. The Tribunal held that services availed for outward transportation of final products from the place of removal should be considered as an input service under the Cenvat Credit Rules, 2004.

3. The Tribunal also cited the case of CCE v. Bhillai Auxiliary Industries, where it was established that commission agent services, falling under business auxiliary services, are admissible for Cenvat credit. The Tribunal highlighted that services used in relation to advertisement or sales promotion are covered under the definition of "input service." Therefore, services provided by commission agents for sales promotion should be considered as input services eligible for credit.

4. It was concluded that in the present case, the input services such as business auxiliary services, C&F agent services, and cargo handling services utilized in the depot for managing the delivery of final products were directly related to the business activities and fell within the definition of "input service" under the Cenvat Credit Rules, 2004. Consequently, the demand of tax and penalties imposed were deemed unsustainable, leading to the setting aside of the impugned orders and allowing both Appeals with consequential relief.