2015 (10) TMI 2219 - AT - Service Tax

Denial of CENVAT Credit - input services - construction of dormitory - nexus with manufacturing activity - Held that - Though the issue involved in the said decided case was with regard to establishing the nexus between the services rendered and the business carried on by the assessee, but the phrase activities relating to business as contained in the definition clause of input service has not been discussed therein, while arriving at the conclusion that the appellant is not entitled to cenvat credit on the construction services. The Hon ble Bombay High Court in the case of CCE vs Ultratech Cement Ltd., reported in 2010 (10) TMI 13 - BOMBAY HIGH COURT , upon analysis of the inclusive part of the definition of input service , have held that the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product. In the present case, construction of dormitory adjacent to the factory premises was the necessity because of the location of the factory in a remote area, where if the accommodation is not provided to the staff/workers, the continuous manufacturing activity will hamper. Further, the cost towards such construction has also been taken into consideration in the books of accounts of the appellant. Thus, I am of the opinion that such construction activity is in relation to the business of the appellant, and therefore, service tax paid for accomplishing the purpose of business, will merit consideration as input service for the purpose of Cenvat benefit. - Impugned order is set aside - Decision in the case of assessee s own previous case followed 2015 (9) TMI 1223 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues:
Denial of cenvat credit on disputed services for construction of dormitory in factory premises.

Analysis:
The appeal challenged the order denying cenvat credit on services for constructing a dormitory in the factory premises. The appellant's advocate argued that a similar issue had been previously decided in favor of the appellant by the Tribunal. The respondent's representative relied on a judgment from the Bombay High Court to support the denial of credit for services related to dormitory construction.

The tribunal found that the issue in the present appeal had already been settled in a previous decision by the same bench. The tribunal distinguished the Bombay High Court judgment cited by the respondent, emphasizing that it did not discuss the specific phrase "activities relating to business" in the definition of input service. The tribunal referred to another Bombay High Court judgment, which clarified that the definition of input service extends to all services used in relation to the business of manufacturing the final product, not just those directly involved in manufacturing. In this case, the construction of the dormitory was deemed necessary for the continuous manufacturing activity due to the factory's remote location. The cost of construction was also accounted for in the appellant's books, establishing a clear link to the business operations.

Consequently, the tribunal held that the construction activity was indeed related to the appellant's business and therefore qualified as an "input service" for cenvat benefit. Given the settled nature of the issue, the tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant.