2016 (9) TMI 896 - AT - Service Tax

Cenvat credit - Service Tax paid on various services viz. Catering service Commissioning services House Keeping Documentation Service and Conducting written test for Non-Mgt. - utilization of Cenvat credit for discharging the excise duty liability on finished petroleum products cleared from the refinery - period involved is April 2013 to December 2013 - Held that - it is found that disputed input services are not barred or excluded by Rule 2(l) ibid. The catering service availed by the appellant is not in the nature of outdoor catering service used primarily for personal use or consumption of any employee but related to food served in training activities like seminars workshops etc. hence their input services will not fall in the audit of the Exclusion clause (C) of Rule 2(I). With reference to credit on commissioning service appellant has clarified that this relates to project monitoring consultancy charges for FGD and PTU units; hence I hold that this service has indeed been utilised in relation to refining activities and hence not excluded by Rule 2(I). With reference to credit on house Keeping Services it is not the case that these are used for the personal use or consumption of any employee. The appellant is a manufacturer a refinery and if they utilise the services of a service provider to perform housekeeping functions like cleaning etc. such services are very much required for the proper upkeep of premises which in term necessary for the manufacturing activities hence they should be accepted as an input service for the purposes of Rule 2(L) of the Rules. There is also no explicit bar in Rule 2(l) against house keeping services. With reference to credit on Documentation Service it is clear that these relate to certification services rendered in connection with Disaster Management Plan and for Mechanical Engineering services section covering process drawings. There are very much services in relation to the refinery activities and hence do not fall foul of Rule 2(1). With reference to credit on conducting written test for non-management this relates to services of Indian Institute of Psychometry for selection of employees for the refinery; the said input services are for the purpose of recruitment which is specifically included in the sample list of services in Rule 2(l). As trend hereinatore the impugned services are very much input services for the purposes of Rule 2(I). This being so the denial of input credit by the adjudicating authority on these impugned services is not supported by law and hence is set aside. - Decided in favour of appellant with consequential relief

Summary

Issues:
Recovery of allegedly irregular input credit availed during April to December 2013.

Analysis:
The case involved M/s Hindustan Petroleum Corporation Limited appealing against a Service Tax demand by the Department. The Department contended that certain services were not eligible for CENVAT Credit, leading to a recovery proposal. The adjudicating authority partially dropped the recovery proposal but confirmed a demand on specific input services. The appellant argued that the disallowed CENVAT Credit covered valid input services related to manufacturing operations. They cited various judgments supporting the eligibility of these services, such as Hindustan Coca Cola Beverages vs CCE. The Department opposed the appeal, relying on the Tribunal decision in Jubilant Life Sciences case.

The disputed input services included catering, commissioning, housekeeping, documentation, and conducting written tests for non-management employees. The appellant provided detailed contentions for each service, emphasizing the direct relation to manufacturing activities. The appellant cited precedents and argued that the impugned services were valid input services under Rule 2(I) of the CENVAT Credit Rules 2004. The appellant's submissions highlighted the essential nature of these services for refinery operations.

The Tribunal analyzed each disputed service in detail, considering the nature of the services and their relevance to manufacturing activities. The Tribunal found that the services were not excluded by Rule 2(I) and were essential for the manufacturing process. The Tribunal concluded that the denial of input credit by the adjudicating authority was not supported by law. Consequently, the Tribunal allowed the appeal, setting aside the denial of input credit on the disputed services. The judgment was pronounced on 18-08-2016 in open court, granting the appellant consequential benefits as per the law.

This comprehensive analysis of the judgment showcases the legal arguments presented by both parties, the Tribunal's detailed examination of each disputed service, and the final decision in favor of the appellant based on the interpretation of Rule 2(I) of the CENVAT Credit Rules 2004.