2013 (11) TMI 407 - AT - Central Excise

CENVAT Credit - Interpretation of definition of input service - Whether the appellant, a manufacturer of lead and zinc and ingots, would be eligible for cenvat credit of service tax paid on the services of the man power supply for maintenance of lawn and green belt around the factory - Held that - expression would cover not only the services which are directly essential for manufacturing operation but would also cover the services which are indirectly essential for manufacturing operation like the services required for compliance with the statutory provisions. Permission given by the Rajasthan State Pollution Control Board to the appellant for operating zinc smelter plant, was subject to the condition of the appellant maintaining 33% of the area as green cover by tree plantation and on their failure to satisfy this condition, the permission granted was liable to be withdrawn. In view this, the service received by the appellant has to be treated as service necessary for compliance with the statutory provisions subject to which the manufacturing activity had been permitted. - Cenvat Credit allowed - decided in favor of assessee.

Summary

Issues:
Whether the appellants are eligible for Cenvat credit of service tax paid on manpower supply service for plantation and maintenance of lawn.
Whether the service in question is covered by the definition of 'input service' under Cenvat Credit Rules, 2004.

Analysis:
The dispute revolved around the eligibility of the appellants, who are manufacturers of zinc and other excisable goods, for Cenvat credit of service tax paid on manpower supply service for plantation and lawn maintenance. The jurisdictional Asstt. Commissioner had denied the Cenvat credit and imposed penalties, a decision upheld by the Commissioner (Appeals) leading to the current appeal.

During the hearing, the appellant's counsel argued that the service in question was essential for compliance with the conditions set by the Rajasthan State Pollution Control Board for operating the zinc smelter plant. It was highlighted that failure to maintain 33% green cover could lead to cancellation of the plant's operation permission. The counsel cited a judgment supporting the eligibility of manpower supply service for plantation activities for Cenvat credit.

On the other hand, the Departmental Representative supported the impugned order, stating that the service lacked nexus with the manufacture of the final product and thus did not fall under the definition of 'input service'.

The judge, after considering both sides' submissions, interpreted the definition of 'input service' under the Cenvat Credit Rules, 2004. The judge emphasized that services indirectly essential for manufacturing operations, including those required for statutory compliance, should be considered under the definition. In this case, the service for maintaining green cover as mandated by the Pollution Control Board was deemed necessary for statutory compliance linked to the manufacturing activity. Therefore, the judge concluded that the service in question fell within the ambit of 'input service' and set aside the impugned order, allowing the appeal in favor of the appellants.