2015 (11) TMI 1251 - AT - Service Tax

Disallowance of CENVAT Credit - Various services - Held that - These services are Vehicle Maintenance Service, Group Health Insurance Service, Garden Maintenance and Entertainment Service. As per the submission of the Learned Counsel and the recorded facts in the Order-in-Original, I find that Vehicle Maintenance Services are in respect of vehicles used by the appellant for their factory staff. Therefore, in my view it is clearly covered under the definition of input service as same is used in the relation of the production of the appellant. Group Health Insurance is provided to the factory workers and staff, who are directly engaged in the production activity. As regard Garden Maintenance Service, the Garden is maintained in the factory under the statutory obligation, under the factory Act. This Tribunal in various judgments allowed the Cenvat credit in respect of Garden Maintenance. As regard Entertainment Service, this is hotel service used for conducting meeting among management staff, union leaders and workers for important issues of factory. In my view, this service has nexus with the production activity of the appellant s factory. - Cenvat credit is admissible - Decided in favour of assessee.

Summary

Issues:
- Appeal against Order-in-Appeal partially disallowing Cenvat credit on input services
- Disallowed credit on Vehicle Maintenance, Group Health Insurance, Garden Maintenance, and Entertainment Services
- Nexus between services and manufacturing activity questioned
- Arguments for and against Cenvat credit eligibility
- Judicial precedents cited for supporting claims

Analysis:

The appeal challenged the Order-in-Appeal that partially disallowed Cenvat credit on specific input services, including Vehicle Maintenance, Group Health Insurance, Garden Maintenance, and Entertainment Services. The appellant contended that all these services were utilized in relation to manufacturing activities within the factory. The appellant argued that the disallowance by the Commissioner was unfounded as the services had been adequately explained in the Order-in-Original. Citing judicial precedents, the appellant sought to establish the eligibility of Cenvat credit for the mentioned services.

The appellant's representative emphasized that the Group Health Insurance service was essential for the factory workers directly engaged in production activities. Similarly, Vehicle Maintenance Services were deemed crucial for the vehicles used by the factory staff, directly contributing to the manufacturing process. Garden Maintenance was justified under statutory obligations, ensuring a conducive environment as mandated by the Factory Act. The Entertainment Services were clarified to pertain to hotel expenses for meetings concerning factory operations, highlighting their relevance to production activities. The appellant also asserted that the costs of these services were integrated into the final product's manufacturing cost, referencing a precedent supporting credit allowance in such cases.

On the contrary, the Revenue representative reiterated the findings of the impugned order, emphasizing the lack of demonstrated nexus between the services and the manufacturing process. However, the Member (J) analyzed the submissions from both sides and reviewed the facts recorded in the Order-in-Original. It was observed that all the contested services, namely Vehicle Maintenance, Group Health Insurance, Garden Maintenance, and Entertainment Services, directly contributed to the production activities of the appellant's factory. The Member (J) concluded that these services were integral to the manufacturing process and, therefore, deemed the Cenvat credit admissible for all four services, ultimately allowing the appellant's appeal.

In light of the detailed analysis, judicial precedents, and the established nexus between the services and manufacturing activities, the Appellate Tribunal, through Member (J), upheld the appellant's claim for Cenvat credit on the disputed input services, thereby allowing the appeal against the partial disallowance of credit as per the Order-in-Appeal.