2015 (12) TMI 207 - AT - Service Tax

Denial of CENVAT Credit - maintenance and repair service - consultancy service - no nexus with the manufacturing activities - services on which the credit has been denied by the original authority are not related either directly or indirectly to the manufacture of final products - Held that - Repair and Maintenance Service has been utilised by the appellant for the residential complex provided to its employees, which is situated outside the factory premises. Further, the services in relation to consultancy has been availed by the appellant not for its manufacturing unit, but for its another unit, which is located outside the factory of manufacture of excisable goods. The Cenvat Credit Rules permit the manufacturer to take Cenvat credit of the service tax paid on the input services, which have direct/indirect nexus with the manufacture of the final product. In the present case, it is an admitted fact that the disputed services have not been used by the appellant for the intended purpose, i.e., in or in relation to manufacture of final product and also not related to the business activity of the appellant. Thus, I am of the considered view that the said services will not qualify as input service for the purpose of taking Cenvat credit. - Decided against assessee.

Summary

Issues:
1. Disallowance of input credit on maintenance and repair service.
2. Disallowance of input credit on consultancy service for setting up another unit.
3. Nexus of services with manufacturing activities.
4. Admissibility of service tax credit.

Analysis:
The appeal challenged the order disallowing input credit on maintenance and repair service and consultancy service for setting up another unit. The Appellate Tribunal considered whether the services had a nexus with the manufacturing activities to determine the admissibility of service tax credit. The appellant availed service tax credit on repair and maintenance service for staff quarters and consultancy service for a new unit. The original authority disallowed the credit, stating the services were not related to manufacturing activities. The Appellate Commissioner upheld the disallowance, leading to the appeal.

Upon review, the Tribunal noted that the repair and maintenance service was for residential complexes outside the factory premises, and the consultancy service was for a unit separate from the manufacturing facility. The Cenvat Credit Rules allow credit for services directly or indirectly related to manufacturing. In this case, the disputed services were not used for manufacturing or business activities, rendering them ineligible as "input services" for Cenvat credit. Consequently, the Tribunal dismissed the appeal, upholding the impugned order.

The Tribunal's decision emphasized the necessity of a direct or indirect nexus between services and manufacturing activities for service tax credit eligibility. The ruling clarified that services unrelated to manufacturing or business operations do not qualify as input services under the Cenvat Credit Rules. By analyzing the specific use of services and their connection to manufacturing, the Tribunal concluded that the appellant's claimed credits were inadmissible. This judgment underscores the importance of establishing a clear relationship between services availed and the core manufacturing processes to claim service tax credits successfully.