2016 (1) TMI 18 - AT - Central Excise

Cenvat Credit - Eligible input services - nexus with manufacturing activity - input services such as canteen, construction, courier, vehicle insurance, mobile bill and security services and other services rendered at their units at Chennai, Assam and Uttarkhand - Held that - Cenvat credit on construction and maintenance service and outdoor catering/canteen service, prior to the amendment made to the definitions to input services under Rule 2(l) of the Cenvat Credit Rules, 2004 w.e.f. 01-04-2011, is an eligible input service. The demand being held as ineligible cenvat credit of service tax and the penalty imposed is liable to be set aside. - Decided in favor of assessee.

Issues:
1. Eligibility of cenvat credit on input services such as construction, maintenance, and catering services availed before 1.4.2011.
2. Interpretation of the definition of "input service" under Rule 2(l) of CCR, 2004.
3. Applicability of High Court and Tribunal decisions on allowing cenvat credit for catering services.
4. Consideration of statutory obligations under the Factories Act, 1948 for maintaining a canteen facility.
5. Review of the lower adjudicating authority's order and the imposition of penalties.

Issue 1: Eligibility of Cenvat Credit on Input Services:
The appellant contested the demand for reversing/paying back cenvat credit availed on various input services before 1.4.2011. The appellant argued that services like construction, maintenance, and catering were eligible as input services. The Tribunal referred to precedents, including Varun Industries case, emphasizing that inputs and services used for construction work where service tax liability is discharged cannot be denied. Regarding catering services, the Tribunal acknowledged the statutory obligation under the Factories Act, 1948, to maintain a canteen, allowing the credit for catering services related to the manufacturing process.

Issue 2: Interpretation of "Input Service" Definition:
The definition of "input service" under Rule 2(l) of CCR, 2004 was crucial in determining the eligibility of cenvat credit. The appellant argued that the services availed before 1.4.2011 should be considered as eligible input services. The Tribunal examined the inclusive part of the definition and relied on legal interpretations to support the appellant's claim for construction and catering services as input services.

Issue 3: Applicability of Legal Precedents:
The Tribunal considered various High Court decisions, such as CCE Chennai Vs Visteon Powertrain Control Systems (P) Ltd., to support the appellant's position on allowing cenvat credit for catering services. The Tribunal also referenced the Bombay High Court's ruling in the case of CCE V. Ultratech Cement Ltd. to reinforce the eligibility of cenvat credit on outdoor catering services before 1.4.2011.

Issue 4: Statutory Obligations under Factories Act, 1948:
The Tribunal highlighted the statutory obligation under the Factories Act, 1948, for maintaining a canteen facility for workers within factory premises. The engagement of an outdoor caterer by the appellant to comply with this statutory provision was considered integral to the manufacturing process, justifying the credit for catering services.

Issue 5: Review of Lower Adjudicating Authority's Order:
The Tribunal reviewed the lower adjudicating authority's order and the imposition of penalties. After considering the facts and legal arguments presented, the Tribunal concluded that the demand for ineligible cenvat credit and the penalties imposed should be set aside. The appeal was allowed with consequential relief, if any.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHENNAI highlights the issues surrounding the eligibility of cenvat credit on input services, the interpretation of relevant legal definitions, the application of legal precedents, the consideration of statutory obligations, and the review of the lower adjudicating authority's order.

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